Investing in a World Gone “Covidious”

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How do you invest in a world gone covidiously cuckoo?

In Agora founder Bill Bonner’s take: wandering through life facelessly suspended “between six feet apart and six feet under?”

In a country that locks down its healthy and productive citizens, while refusing even to bother, let alone lock up, crazed mobs of masked arsonists and burglars in the streets?

How do you soldier on without despair in the throes of the doomsday Adventist cult of COVID-19, with its high priest Anthony Fauci on Tuesday trumpeting a “Second Coming” of the virus, as a scourge for sinners in the hands of an angry doctor?

He probably means you and me, folks.

Indignant at Southern and Western states that have apparently unleashed vicious “surges” of viral YouTube porn after opening up their economies, the reverend doctor stormed: “Just look at some of the film clips that you’ve seen! Of people congregating! Often without masks!”

Don’t deny it, you yourself may have taken a dirty peek or two at the shocking scenes of happy faces.

Some of the celebrants are adopting strange new and kinky positions: “Of being in crowds… and jumping over, avoiding, and not paying attention to the guidelines that we very carefully put out.”

Predicting hundreds of thousands of infections a day unless the misbehavior stops, the Doctor seemed shaken by the guideline-scoffers: “We’re going to continue to be in a lot of trouble. And there’s going to be a lot of hurt.”

Don’t say he didn’t warn you!

Much Lower Fatality Rates Than New York

Meanwhile, with the all-cause death rate in this decade still the lowest of the century, death rates plummet around the world, while the spikes and surges affect only test-rates and media spins.

In the index of COVID death rates per thousand people, the Southern and Western rebels remain an order of magnitude behind the lock downers in New York.

Texas’s per capita COVID death rate is just 6% of the death rate of New York; Arizona’s is 16%. William Briggs and David Stockman are both on top of the data.

Intelligent investors will ignore the pandemonium and seek the signal in the noise.

They are always ready to invest in the midst of what economist Joseph Schumpeter called “gales of creative destruction.”

And in the future, they will take solace from understanding the message of time-prices, which gained impressive new momentum and authority with recent research from the anti-doomsday voices of economists Marian Tupy and Gale Pooley.

Time-Price Theory Meets COVID-19

Time-prices are the only true prices. They gauge the number of hours and minutes you have to work in order to buy goods and services.

An index of economic progress, they combine in one number both the rise of incomes and the drop in prices resulting from the advance of innovation.

In the past, Pooley and Tupy have confined their measurements and observations to the relatively halcyon years between 1980 and 2018.

During this period, while world population increased 73%, the prices of 50 key commodities of life, measured in the work hours to buy them, dropped 71% and their abundance grew 518%.

Nowhere was evidence of “peak commodities” or unsustainable resources. As population grew, commodities grew yet more abundant per capita. Human populations do not burden the planet; they proliferate its bounties.

Although an exciting breakthrough in economic statistics, this evidence of surging economic growth and progress fails to offer guidance to investors for a time of economic and social catastrophe such as today.

As Steven Pinker of MIT has documented in several books, the era between 1980 and 2018 has been a time of unprecedented peace, productivity, and increasing longevity.

But now Tupy and Pooley have uncovered a new series of commodity prices going back to 1960 (World Bank).

For the U.S., they also compiled time-prices going back to 1919 (U.S. Bureau of Labor Statistics), 1900 (Canadian economist Davis S. Jacks) and even 1850 (also Jacks).

Since the U.S. was what we now would call a Third World country in 1850, its 19th century ascent is suggestive of the global trend.

This new data covers the U.S. Civil War, the First World War, the Spanish Flu, the Great Depression and World War II. The Spanish Flu in 1918 had a death rate roughly ten times COVID-19 today.

What Pooley and Tupy found was that innovation proceeded with little disturbance through all these disasters. In my Information Theory of Economics, with wealth measured as knowledge, growth as learning, and money as time, wars and plagues could buffet but not balk the process of growth and innovation.

The current and recent COVID-19 lockdowns represent the most egregious public policy blunder of all time, ravaging economies around the world, causing a UN estimated (and probably exaggerated) 260 million starvation deaths in the Third World, with no detectable improvement in healthcare outcomes.

The carnage perpetrated by a clueless political class and its sanctimonious experts is possibly unprecedented in world history. But as long as the human heroics of invention, learning, and creativity are allowed to continue, the prospects for the world economy remain better than ever.

Better and Better

Our time-price chroniclers show that innovation has been accelerating ever since 1850. In the early period in the U.S., time-prices improved on average around two percent a year as workers had to spend ever less time to gain the crucial commodities of life.

Through wars and plagues, time-prices continued to improve, dropping some 3.4% per year compounded through the most recent period.

Innovation is a process of learning, accomplished through falsifiable business and technological experimentation — business projects that can fail and thus yield knowledge regardless of outcome.

The key metric is the learning curve — the tendency of costs to drop between 20-30% with every doubling of unit sales — the most widely documented data in business history.

Tupy and Pooley’s most recent data opens up wide global horizons for investors that dwarf the political botches and blunders of 2020.

What investors have to do is find the most innovative and creative entrepreneurs and support them.

Don’t let the lockdown control freaks control you.


George Gilder
for The Daily Reckoning

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Time Is on Our Side

This post Time Is on Our Side appeared first on Daily Reckoning.

What are we afraid of? In recent weeks, I have been traveling around the globe and observing the rapid emptying of airports. Does this mean that most people are in a panic over a new form of highly infectious flu?

It called to mind my studies long ago with the great economist and game theorist Thomas Schelling, who won the Nobel Prize in economics in 2005 mostly for his theories of “micromotives and macrobehavior.”

His book by that title showed that such phenomena as empty airports or traffic-jammed freeways or even segregated communities could reflect only the slightest changes in  attitude. Small changes in people’s minds, oriented in the same direction, can effect massive changes in people’s collective behavior.

“Though a society can resist epidemics of physical disease,” as I paraphrase philosopher-psychologist Karl Jung in Wealth&Poverty, “it is defenseless against diseases of the mind. Against ‘psychic epidemics’ our laws and medicines and great factories and fortunes are virtually helpless.”

Many of us certainly feel helpless these days, locked down by the ridiculous and unnecessary order of politicians. With the world wilting before our eyes, we will have to wait ‘till doomsday for the politicians and media pundits to admit the egregious mistake of quarantining the healthy in order to protect the frail from at most a marginal 0.5% global rise in current historically low rates of mortality.

Oh well, life limps on…

But in response to these depressing times, my friend and tireless blogger John Mauldin quotes Thomas Babington Macaulay, writing in 1830 in reply to pessimists of his day:

“We cannot absolutely prove that those are in error who tell us that society has reached a turning point — that we have seen our best days. But so said all who came before us, and with just as much apparent reason… On what principle is it that, when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?’’

Good question, John. Mauldin also cites the theory of time-prices, which demonstrates that the world is getting richer all the time because it takes less and less hours of work to obtain more and more goods.

John quotes from a famous essay by Nobel Laureate William Nordhaus of Yale. He got his Nobel in 2018 for a pandering poison ivy paper on climate change and carbon taxes. But in 1993, before his Nobel mistake, he made a true breakthrough. In a paper titled, “Do Real Income and real Wage Measures Capture Reality? The History of Lighting Suggests Not.”

“Real world GDP, after inflation, is up over 15X since [Macaulay] wrote that. The cost of a candle in 1800 that would let you read, however dimly, for one hour, was six hours of labor. Today that same amount of light costs about 3/10 of a second of human labor.”

Real GDP up a mere fifteen fold. Or measured by time-prices — the number of hours and minutes a person has to work to earn the money to buy goods and services — real output is up some 72,000 times.

John says it’s a transformation: “The current crisis won’t slow down the Age of Transformation. The crisis usually has the potential, if not the probable likelihood, to actually accelerate transformation.”

John continues: “As my dad used to say, ‘Necessity is the mother of invention.’ Or innovation.”

Your Dad was right. The current insanity will pass and will be followed by a stream of law suits. Then the innovations will begin to crowd in.

In order to anticipate the innovations, I recommend, sight unseen, the new book, Innovation, by Matt Ridley coming out any day now. Apart from his world-leading critiques of climate change angst, his two previous books, The Rational Optimist and The Evolution of Everything were both masterpieces of economic history and analysis.

Ridley has long been on to time-prices. But as the readers of my prophecies know the current virtuosos of time-price data are economists Marian Tupy and Gale Pooley, who demonstrate that Nordhaus’s insight on the cost of lighting can be duplicated across the entire range of new technologies.

Time-prices show that real economic growth is several-fold faster than economists measure with their Consumer Price Indices, Purchasing Power Parities, Hedonic adjustments, and other federal deflators.

This means that real interest rates, adjusted for time-price gains, are normal rather than near zero as our debauched monetary indices depict. This means that after the politicians end their destructive siege of economic self-abuse in the name of increased power for politicians and humiliation of the public, we will return to the rates of economic growth usual under capitalist freedom.

That’s why over the next decade or so we will have self-driving trucks (first driven from home as a new Swedish invention enables!) and then self-driving cars and self-driving planes. We will have giant integrated circuits on wafers that perform machine learning in seconds.

We will have an array of new vaccines obviating the need to get sick in order to get immune. We will have Strategic Investment Conferences in virtual reality zoom. And maybe we will have real life encounters again, as we escape Agora founder Bill Bonner’s wandering regime of life lived between six feet apart and six feet under.

What we won’t have, I will prophesy, is a world beyond carbon. In order to achieve real artificial intelligence, we will enter a new carbon economy consisting of carbon-based chips. Escaping the ugly self-inflated fiasco of COVID-19, we will not close down the economy again for a fake crisis of climate. Greta Thunberg as Time’s person of the year in 2020 will signify the last great triumph of the climate cranks and weather bores.

We are in a pit today, but as Macaulay points out, we have been in such pits for most of human history and we will soon escape. Until then there are books to read and investments to contemplate in a world of transformation measured by time-prices still accelerating progress and, as Pooley shows, declining inequality everywhere.

Time is on our side.


George Gilder
for The Daily Reckoning

The post Time Is on Our Side appeared first on Daily Reckoning.

We’re Sacrificing the Economy for Nothing

This post We’re Sacrificing the Economy for Nothing appeared first on Daily Reckoning.

Dr. Anthony Fauci recently warned the Senate of the possibility of “suffering and death” if the U.S. ended its lockdowns too soon.

For all his acclaimed brilliance, Fauci confessed that the reason for shutting down and locking in the economy and society was not the proven effects of COVID-19 but the possible “worst-case” impact.

As a doctor, above all, he does not want the patient to die. Any extreme measure is justifiable. But prescriptions tenable for individual patients are outrageously inappropriate for entire societies.

Human beings have evolved for millions of years with viruses and bacteria. If they could wipe us out, there would not be 8 billion of us around.

If enterprise were governed by worst-case possibilities, the Wright brothers’ plane could have never taken off, let alone an industrial or biotech revolution.

In that same vein, the so-called Green New Deal would close down the U.S. energy economy in the name of a theoretical peril of climate.

Author Jared Diamond regards overpopulation as the ultimate threat and would halt population growth and thus imperil economic expansion and support for the aged.

And Dr. Fauci would close the economy down for COVID-19 and any other possible plague.

But addressing all possibly extreme threats at once would cripple the economy that is the source of the wealth necessary to remedy any actual threat that occurs.

Dictating a repeated dictatorial response to speculative perils, the cautionary principle is a death sentence for the capitalism and freedom that have made it possible for the planet to support a global population of 8 billion people.

Today, lockdowns threaten starvation for an estimated 260 million people in the Third World who can least afford them.

Closures are ravaging the economy of India and wreaking mass starvation there, for example. The United Nations World Food Program estimates that by the end of the year 260 million people will face starvation.

Michael Levitt, professor of structural biology at Stanford Medical School and winner of the 2013 Nobel Prize in chemistry, says, “There is no doubt in my mind that when we come to look back on this, the damage done by lockdown will exceed any saving of lives by a huge factor.”

I’m not arguing that COVID-19 is not dangerous to the old and those with underlying conditions like heart disease, hypertension, asthma, diabetes and other conditions. Yes, it can be fatal to these people, unfortunately. And even if they live, those with severe cases may have lasting damage.

But we can protect the vulnerable while the overwhelming majority who aren’t vulnerable can get back to their lives.

So please, don’t say I’m insensitive to the people who have suffered and died. I’m not. And let’s just say my own age places me at risk, so I’m not being cavalier about it. But we have to look at the situation in its entirety.

The egregious blunder of the current lockdown illustrates the crippling flaws of bureaucratic management of economics and society.

As I wrote in Wealth and Poverty some 40 years ago, “Modern civilization is hopelessly contingent and problematical, subject to destruction any day by possible climatic reversals, astrophysical mishaps, genetic plagues, nuclear explosions, geological convulsions and atmospheric transformations — all conceivable catastrophes originating beyond the ken of plausible remedy or control.”

If we try to battle all these threats at once, we will end up wasting all our wealth on windmills, strewing them across the environment or tilting with them like Don Quixote. We will resort to ever more stifling controls that will suppress the unexpected benefits of creativity that have always been the source of our prosperity and success.

We will invest in problems rather than in opportunities and end up without either wealth or freedom. The human race has prevailed against the plagues and scarcities of its past, not through regulation or lockdown but through creativity and faith.

State planning killed close to a billion people in the 20th century. Led by the banning of DDT, the resurgence of malaria, the suppression of nuclear power and the retardation of global growth, environmentalist excesses have already killed more people than environmental pollution ever did.

Now the expert response to the coronavirus is on track to exceed even environmentalism in its vast damage of our civilization.

In the name of fighting COVID-19, we are destroying the monetary underpinnings of capitalist markets with untold trillions of dollars of wanton spending and crony bailouts.

We are closing down much of the economy for months on end. We are jeopardizing food supplies and other medical services.

We are giving up world leadership in technology to communists in China. We are condoning a devastating blow to the economies of third-world countries that unlike the U.S. cannot merely print dollars and expect people to take them.

It’s time to end the madness.

Below, I show you 25 findings on the coronavirus from the independent nonprofit Swiss Policy Research. It’s further evidence that the lockdown is far more destructive than the virus. Read on.


George Gilder
for The Daily Reckoning

The post We’re Sacrificing the Economy for Nothing appeared first on Daily Reckoning.

Government Won’t Solve This Crisis

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I’m not a medical expert. But having watched scores of experts’ YouTube videos and blog posts on the COVID-19 crisis, I feel ready to draw some important conclusions.

I believe the truth on the coronavirus will become obvious fairly soon. That is, the crisis of the epidemic will be over, and it will become merely our chronic political crisis. It will become a crisis of narrative rather than a crisis of knowledge.

The Experts Weigh in

The two experts I have found most knowledgeable and convincing are William “Matt” Briggs, who earned a PhD in statistics from Cornell and taught there, and Rockefeller University and German epidemiologist Knut Wittkowski.

These are two voices in the wilderness shouting against the prevailing wisdom.

I drew ten conclusions. Since I am neither statistician nor epidemiologist nor professor nor politician, I can oversimplify their arguments without violating any academic or professional norms. Here they are:

    1. COVID–19 is basically another respiratory virus like many others. Yes, it can be fatal to the elderly and those with serious health risks. No doubt. But fearsome death rates are largely a function of testing biased toward acute cases. The tests are flawed by false positives and false negatives. Asymptomatic spread is speculative in the absence of antibody surveys that measure immunity.
    2. All respiratory viruses end through herd immunity, whether through direct exposure or artificial vaccination.
    3. Social distancing, closed schools, and obsessive masking prolong the epidemic and ensure a second peak comparable to the first. By flattening the curve, they widen it and thus render it more menacing to more people.
    4. The more that young people get exposed, the better. They are the vessel of herd immunity. Closing schools delays the immunity and tends to expose vulnerably old and frail grandparents in the home.
    5. By delaying herd immunity and assuring secondary peaks in the fall, school closings and other lockdowns will increase the number of deaths among the population of vulnerable and old people.
    6. As Briggs writes: “The H1N1 virus responsible for many deaths is still with us. The 2020 data from the Center for Disease Control (CDC) affirms, “Nationally, influenza A(H1N1) pdm09 viruses are now the most commonly reported influenza viruses this season.”
    7. Given the ease with which coronavirus spreads, it’s reasonable to suppose variants of COVID–19, like common colds and other respiratory distresses, including deadly pneumonia, will be with us for years to come.
    8. Briggs and Wittkowski agree that most testing is unreliable because of false positives, especially in initial testing. Fewer are misclassifications of deaths due to the bug but there is a tendency to suppose that deaths with the virus are caused by it.
    9. The conclusion, says Briggs, “is that it’s nuts to implement large–scale testing on a population. It will lead to huge numbers of false positives — which will be everywhere painted as true positives — and more panic.”
    10. Although closing down the private economy may seem plausible to physicians and politicians, it is an extreme overreaction to viruses that we will always have with us and provides a dreadful precedent for future crises.

Wrong Predictions

The worst projections turned out to be woefully wrong. We were told hundreds of thousands would die even with lockdowns and radical social distancing measures.

The Italians scared everybody with their haphazard health system and one of the oldest populations on the planet.

The crammed-together New Yorkers in subways and tenements registered a brief blip of extreme cases. Intubations and ventilators turned out not to help (80% died), sowing fear and frustration among medical personnel.

But the latest figures on overall death rates from all causes show no increase at all. Deaths are lower than in 2019, 2018, 2017, and 2015, slightly higher than in 2016.

I won’t make light of anyone’s death from this or any other disease, but deaths have been far below initial projections.

It was these wild projections that prompted the panicked lockdown. But it would have been an outrage even if the assumptions were not wildly wrong.

People Need to Get Outside

Flattening the curve was always a fool’s errand that only widened the damage.

In fact, by impeding herd immunity, particularly among students and other young people, the lockdown has prolonged and exacerbated the medical problem. As Briggs concludes, “People need to get out into virus–killing sunshine and germicidal air.”

This flu like all previous viral flus will give way only to herd immunity, whether through natural propagation of an extremely infectious pathogen, or through the success of one of the hundreds of vaccine projects.

Meanwhile, we all heard from politicians about a so–called “ventilator crisis.”

Governor Andrew Cuomo got $80 million worth of the contraptions and suggested he needed $800 million worth.

“More Money Is Always the Answer”

But that’s how governments think. More money is always the answer. More of the same. But what we need is entrepreneurial thinking.

Economist Gale Pooley of BYU in Honolulu and The Discovery Institute alerts me to the development in India of a new $200 smartphone–based ventilator system that fits in the palm of your hand.

Bypassing healthcare professionals, it uses machine learning to adapt to the rhythms of breathing and to adjust air flow to the lung conditions of patients.

It replaces the $2 million manually managed machines that have been widely deployed (ineffectively) to fight acute cases of lung failure from the coronavirus. According to urgent testimony from the front, these costly ventilators may have actually been killing patients as much as saving them.

Besides, the increasing recognition of herd immunity as the key to overcoming viral epidemics represents a huge advance over closing down businesses, schools, and economies.

We can’t leave the big decisions to government. The real solutions will come from the private sector.

The Private Sector Is the Answer

Wealth is knowledge and growth is learning. Learning accelerates in crises. Creativity always comes as a surprise to us. It is the result of free enterprise, which responds more quickly in the face of urgent needs than government.

Government guarantees tend to thwart the surprises of learning and growth. For example, if the government guarantees $2 million ventilators, there is no push to develop $200 devices like the one I mentioned.

The ventilator makers get rich, but no one else really benefits. It only deters innovation rather than spurs it.

On the optimistic side, the coronavirus crisis can well emerge as a time of new learning and economic growth rather than depression and paralysis.

Nassim Taleb’s theme of “anti–fragility” means crisis does not break free economies. It strengthens them, spurring invention and inspiring entrepreneurs.

The key is to leave open as many paths of learning and entrepreneurship as possible. Shutdowns and closures only inhibit the surprises of creativity and experiment that have saved humanity over the centuries of the capitalist miracle.

It’s possible that the economy, and your investments, will ultimately be enhanced by this crisis if we let the private sector work its magic.


George Gilder
for The Daily Reckoning

The post Government Won’t Solve This Crisis appeared first on Daily Reckoning.

A Disease of the Mind

This post A Disease of the Mind appeared first on Daily Reckoning.

What are we afraid of? In recent weeks, I have been travelling around the globe and observing the rapid emptying of airports.

Does this mean that most people are in a panic over a new form of highly infectious flu?

It called to mind my studies long ago with the great economist and game theorist Thomas Schelling, who won the Nobel Prize in economics in 2005 mostly for his theories of “micromotives and macrobehavior.”

His book by that title showed that such phenomena as empty airports or traffic-jammed freeways or even segregated communities could reflect only the slightest changes in mindset.

Even small changes in people’s minds, oriented in the same direction, can effect massive changes in people’s collective behavior.

“Though a society can resist epidemics of physical disease,” as I paraphrase philosopher-psychologist Karl Jung in Wealth & Poverty

“It is defenseless against diseases of the mind. Against ‘psychic epidemics’ our laws and medicines and great factories and fortunes are virtually helpless.”

We’re currently facing a disease of the mind as well as a disease of the body.

Before my weekend break, my publisher interviewed me on the impact of the coronavirus.

Hey, I also have views on Tom Brady, quantum computing, President Trump, artificial intelligence, Bernie Sanders, integrated circuits, Pope Francis, 5G, Ronan Farrow, Wi-Fi 6, Kobe Bryant, the electromagnetic spectrum and Harvey Weinstein, among others.

I also have views on women that are too salacious to divulge at my age.

I share with most other commentators a lack of any relevant expertise or knowledge on the subject of the virus.

I suppose that under duress I could tell you the difference between bacteria and viruses. I am not altogether clear why a virus is harder for the immune system to combat, though I suppose it has something to do with the virus hitchhiking on other cells, using its Trojan horse strategy.

You get the picture, an ignoramus with the usual smattering of conventional knowledge — what the great Spanish philosopher José Ortega y Gasset called a “barbarian of specialization.”

I parlay my knowledge of certain particular fields into opinions on subjects on which I know little.

The barbarians are invading everywhere these days, using their confidence as actors, or microchip experts, or lawyers, or doctors of philosophy, or politicians to express confident opinions on subjects they know nothing about, such as God or CV-19.

I have a brilliant daughter who is a physician at a refugee camp in Thailand and may be in charge of its response. She believes anti-malarial drugs may be effective. I have a son who works for American Airlines and a daughter-in-law who works for JetBlue.

They can comment on the impact on the travel industry. It is understandably dire, but air travel is not going to go away.

I’ve had the flu from time to time and I’ve been to China, Italy and London.

Diamonds Form Under Pressure

What I do know something about is capitalism and markets. The barbarians today seem to believe that a crisis is abnormal in a capitalist economy and requires major government intervention to address.

This is an advantage for all of you who know that capitalism, in Nassim Taleb’s coinage, is “anti-fragile.” It gets stronger under pressure.

A crisis is a buying opportunity. It also is a learning process. Since real economic growth is learning, you can learn as you buy. Crises tend to accelerate long-term growth.

As Andy Kessler observes in The Wall Street Journal, crises like this are also inflection points.

“The current market turmoil tells me a new era is breaking, so question everything. Will cable, energy, mobile and social media ever come back? And if not, what’s next?”

Crises change economic leaders, filter out vulnerable companies, strengthen the survivors and open the way to new industries.

I’m involved with a number of biotech companies started by my young genius pal Matt Scholz.

He has many interesting views on the crisis and one of his companies may have already developed a vaccine. And so have various rivals. But the issue is how quickly vaccines can be produced in volume. I think I heard something like a year.

As an alternative, Matt points to existing anti-malarial drugs, which have been shown to mitigate the effects of the virus:

If I were running the country, I’d squeeze a big pharma and pay them to make tons of this stuff tomorrow. Then I’d start giving it to every geriatric person who can safely take it if they have been anywhere near a SARS-CoV-2-positive person as post-exposure prophylaxis!

After that, I’d start giving it to younger patients who test positive and have worsening symptoms. It’s admittedly a bit of a swing for the fences, but small-molecule drug manufacturing is scalable and cheap — health care providers and critical care infrastructure are neither. Even with a modest effect size, keeping the most vulnerable patients healthy could be life or death for the health care system itself. It would also allow younger people to get back to work without undue risk and give us a shot at preventing an economic catastrophe of epic proportions. We already know these drugs are well-tolerated; we’ve given them to healthy travelers on their way to malaria-endemic regions for decades.

It’s true that we don’t yet have proper large double-blind placebo-controlled trials proving they work for this purpose, but by the time we do, we’ll have lost many thousands of lives and billions of dollars.

That’s the problem not developing solutions but mobilizing to manufacture them in a country that the climate cranks, weather bores and chemophobes have rendered direly hostile to manufacturing and chemical companies.

Also, the problem is the health care burden on infrastructure.

Paraphrasing Anton Waldman, giving numbers to a previous judgment from contrarian John Tamny at Forbes, we’re sacrificing trillions of dollars of wealth and income in order to avoid a few billions of dollars on new hospital facilities.

Wealth is actually knowledge, which is the answer to this crisis. And knowledge can accelerate during a crisis.

Technology, for example, rapidly accelerates during wartime. You might not want to, but just look at the atomic bomb.

This crisis will provide many opportunities to invest in the future. Remember, the Chinese character for crisis supposedly consists of danger and opportunity.

Perhaps the crisis will even lead the world back to sound money…

Today, under our perpetually growing government and bloated system of finance, we couldn’t imagine any economic solution for recovering from WWII other than more money manipulation to make it worse.

In our current economic morass, we appear hapless to recover from a dip in markets at all-time highs.

Under my theory, money is time made tangible. True prices are not the nominal paper printed by central banks but the number of hours it takes to earn the money to buy something.

When the Fed cranks out more money without a commensurate increase in production, it takes more time to buy the same goods.

In my book Life After Google, I show that the gold standard was essentially created by Isaac Newton in the early 18th century when he was master of the mint in Britain and when his alchemy proved that gold was “unhackable” from inferior metals.

It still is. And a return to a gold standard would replace the phony, debt-addicted system that’s currently breaking down before our eyes.


George Gilder
for The Daily Reckoning

The post A Disease of the Mind appeared first on Daily Reckoning.

The Real China Story

This post The Real China Story appeared first on Daily Reckoning.

With China grabbing all the negative headlines lately, I thought it would be a good idea to step back and look at the big picture, highlighting the great triumphs of this country.

Some of my readers worry that I am “soft” on China, too optimistic about the prospects for freedom there and unwary of the Chinese threat to the U.S.

As one reader recently wrote, “At the end of the day China is still a communist country” that “does not recognize the right to private property” and therefore can steal our intellectual property without any twinge of conscience.

I love this comment because it gets us right to the heart of things: Is China still a communist country?

Not: Does China have lots of politicians who ritually declare themselves communists? (It does.)

Or even a few who deep in their hearts still yearn for the good old days of Mao? (They exist.)

But is China a communist country, a nation of 1.4 billion people living under anything we would recognize as communism?

My answer is: “By their fruits, you shall know them.”

Let me explain…

Not Your Average “Communist” Country

What China has achieved over the past three decades could not have been accomplished by a communist nation.

My reader makes clear in the rest of his letter that he grasps the economic power and moral imperatives of capitalism. He knows that genuinely communist regimes have always and everywhere impoverished their people, that command and control economies fail miserably and murderously, destroying more wealth than they create.

Every long-standing communist regime has survived only by tolerating some free market activity, even if only the black markets that sprout up everywhere when real free markets are suppressed.

Yet here we have China, for several decades now the fastest-growing economy in the world and now the second-largest economy, and certainly the most innovative of any large economy. (Tiny Israel dominates the welterweights.)

Wealth That Cannot Be Stolen

Chinese insurance companies are bringing diagnostic tools powered by artificial intelligence (AI) to tiny Chinese medical clinics around the country, setting up same-day appointments with medical specialists in a country in which previously many people went a lifetime without ever meeting a real doctor.

Furthermore, the Chinese internet and social media companies combine every offering of Facebook, Google, Amazon, Spotify and more and do all of them better.

Are these conceivably the fruits of communism?

American politicians love to accuse China of stealing our technology. They attribute Chinese economic growth not to the growth of freedom but the rewards of larceny.

But as upholders of capitalist morality, they should know that in the hands of a thief, all gold turns to lead and all diamonds revert to the coal from which they came.

Technological leadership is not a static thing to be stolen and hoarded. Innovation can never be completed — or the innovators allowed to rest on their laurels — for the same reason innovation can never be planned: It always comes as a surprise.

The Chinese have surely benefited from the explosion of learning in the capitalist world sparked by the invention of the transistor at Bell Labs in 1947.

Yet all the crucial advances flowing from that moment have been thoroughly documented in prestigious journals and textbooks, debated in industry conferences open to the world and pitched by sales forces whose job is not to conceal technological advances but to reveal their wonders.

That interchange of ideas — and the furious competition it powered — was not a threat to American prosperity but rather its very source.

Now come the Chinese, suddenly more free than anyone of my generation ever expected. And because they are more free, because capitalism (and Christianity) are on the rise in China and communism in any genuine sense in general retreat, the Chinese have become powerful competitors — and great innovators.

And as innovators, the Chinese are a blessing to America, challenging American companies to adopt Chinese innovations and surpass them.

This sudden, astounding change in the plot of the story — China free and rich, rather than poor, enslaved and angry — is a blessing almost beyond imagining. China enriched will enrich America and the world.

Should we regret how much China has changed in three decades or pray that the change continues?

To me, the answer is clear.

But one dynamic to worry about with U.S.-China relations is the so-called “Thucydides trap.”

Beware the “Thucydides Trap”

That’s when an established power fears that a rival is gaining in power and will soon overtake it. War is often the result.

Among the earliest of historians, Thucydides wrote 2,500 years ago about the Peloponnesian War between Athens and Sparta and the events that finally doomed both of these powers.

Harvard’s Graham Allison sums up the concept: “It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.”

He considers 16 instances over the last 500 years in which a hegemonic power such as the U.S. was confronted by a rising power such as China. War resulted 75% of the time.

In the case of Britain and the U.S. after World War II, no conflict erupted. Therefore, Allison has some hope that war avoidance is possible in this predicament. But he sees China and the U.S. on a collision course.

Chinese Influence Is Inevitable

In reality, Chinese influence in the South China Sea is as inevitable as U.S. influence in the Gulf of Mexico. To flaunt American naval power in the region is needlessly provocative and gratuitous.

Last year in the academic journal Humanitas, Villanova political science professor Lowell Gustafson explained the real “trap” depicted by Thucydides in his account of the Peloponnesian wars:

It may be that great powers do indeed desire to rule, but they learn to restrain themselves by accurate calculation of their own power and that of others. They do not engage in wishful thinking and grandiosity. Pluralism, not domination, is the proper end of power politics since power is always distributed to some degree. The trap that Thucydides worries about is not a rear-end collision, but that a great power deludes itself into seeking domination of all others.

Both China and the U.S. should take note.

Gustafson continues: “Graham Allison and American policymakers need to be as self-reflective about America as they are about the rise of China…

“If there is to be real American greatness, it needs to be drawn from the vision of an international system of free independent nations who peacefully trade with each other, learn from each other’s cultures and show restraint.”

My rule is that real threats to the U.S. come from failed states with nothing to lose, not from an ascendant country such as China with huge trading interests around the globe.

If we didn’t constantly harass the Chinese over their Uighur Islamist problem (over 1,000 incidents, 500 dead), they might well be our allies against real terrorist threats.

The best strategy for Americans is to support capitalist companies in China, not needless adventurism in the South China Sea.

I’m in China right now looking for investment opportunities — and innovations American companies can learn from.


George Gilder
for The Daily Reckoning

The post The Real China Story appeared first on Daily Reckoning.

U.S. Risks Becoming a Technological Runner-up

This post U.S. Risks Becoming a Technological Runner-up appeared first on Daily Reckoning.

Editor’s note: America’s no.1 futurist George Gilder, fears the U.S. has lost its technological and entrepreneurial edge. China has instead emerged as the next global technological leader. Today Mr. Gilder defends a controversial Chinese company against accusations by The Wall Street Journal, and shows you why the U.S. is in no position to complain.

Dear Reader,

On Christmas day, overflowing with holiday cheer and bursting with goodwill for all men, I decided I could let pass the latest Wall Street Journal resentful essay against China’s emergence as a global leader in technology.

There it sat on the front page, one more egregious slander, this time in the form of a “special report” portraying the telecommunications giant Huawei as a dependency of the Chinese government.

Ah, but it was Christmas and to the intrepid — and far as I knew, merry — gentlemen of the Journal I was content to wish God’s rest and the good tidings of the day.

Now, after winging my way back to China, I am feeling a tad less noble about letting the Journal get away with one more entry in a propaganda campaign as absurd as it is dangerous for the U.S.

The basis of the latest charge is a bold venture in investigative journalism — the reporters read Huawei’s annual reports and a few other public documents.

Much Ado About Nothing

They came away with the breathtaking conclusion that Huawei received some $1.8 billion in Chinese government grants since 2008 or about $180 million a year on average

For 2019, Huawei’s revenues look to come in at around $122 billion. I wonder what they would have done without that $180 million per year.

China, like the U.S., does make grants to firms making progress in key technologies. I would be unsurprised to discover Chinese bureaucrats — who tend to be actual scientists and engineers — do a better job at rewarding actual merit than we do.

Also gravely suspicious to the Journal’s merry men were substantial local subsidies in the form of discounted real estate, tax breaks, and even government-built housing for Huawei employees, offered by municipal governments desperate to get one of the world’s great companies to locate in their region.

This would never happen in the U.S. where state and local governments exhibit a pristine indifference to where, oh, say, Amazon decides to put down new roots.

But consider the facts. Part of the private sector, Huawei rose to the top by outperforming all the state-owned enterprises, such as ZTE, that previously dominated China’s telecom sector.

Its accountants at Price Waterhouse show no exceptional debt or government subsidies. Under staunch entrepreneurial leadership from Ren Zhengfei, son of a “capitalist roader,” Huawei is probably more independent than most. It is a multinational with operations in 170 countries and about a third of its executives are non-Chinese.

The U.S. Does the Same Thing

It’s a different world. Twenty years ago, I spent most of my time celebrating the entrepreneurial break-throughs of American technology leaders.

I was regularly beset by advocates of central planning buzzing in my ear about how the real credit belonged to DARPA (Defense Advanced Research Projects Agency) which “really” created the technology.

Meanwhile, carped the critics Texas Instruments, which manufactured the first reliable silicon transistors or, Fairchild Semiconductor.

Which in turn invented the integrated circuit and would have gone broke without massive military “subsidies.”

That’s exactly how they portrayed the military’s purchase of never-before-possible electronics that could sustain the stress of flying in jets or rumbling around in tanks.

Certainly, the U.S. military’s desperate need for a solid-state helped power the fledgling U.S. semiconductor industry. Entrepreneurs need customers, and well-funded customers demanding levels of previously unavailable levels of performance can be a great spur to creativity.

Nevertheless — in terms of actual products that made it to market or manufacturing processes as fantastic as the devices themselves — the contribution of the U.S. government to the semi-conductor industry was trivial at best and possibly negative.

The Anti-capitalist Chorale

The anti-capitalist chorale is always with us. In those same old days, the American press and politicians convinced themselves that Japanese government planners were the reason that nation had joined the first rank of industrial powers.

Their solution: we needed more politicians of our own, were we ever to regain our competitive edge. And yet in those years one barely heard a peep from the politicians about China, then still a dreadful tyranny holding the world’s record for murders of its people.

Only as China has become capitalist have U.S. politicos and media concluded it is it not a partner in wealth creation but an implacable enemy.

Even my conservative friends — lifelong defenders of capitalism and deriders of central planning — seem to suddenly have decided that in China, central planning and government subsidies work, and brilliant firms like Hua Wei owe all their success to government-controlled banks and bureaucracies.

Critics say the current Chinese model is self-defeating. Less-deserving companies receive most of the financing and opportunities. The staggering misallocation of capital is only worsening, they say.

But the misallocation of capital in the U.S. is far greater. We are subsidizing useless wind mills across the country in a demented campaign against delusions of climate change. We have devastated and paralyzed our companies with lawsuits. We suppress manufacturing with lawyers and luddites. We are now moving on to tie down our social networks and high-tech goliaths with regulatory chains.

By contrast, the Chinese built 106 new cities, most of them viable. They continue to open new “free zones,” such as the 13,000-square mile island of Hainan in the South. They are favoring an efflorescence of high-tech ventures and promoting new industries such as AI and blockchain.

Unlike in China, where IPOs and high technology startups have boomed, the government sector in the U.S. has been growing far faster than has the private sector. U.S. politicians and journalists should halt their increasingly outlandish efforts to blame China for the effects of our own mistaken socialism, mercantilist trade war, educational and monetary manipulations.

The U.S. Risks Becoming a Technology Runner-up

Meanwhile, I’ve been focusing on the titanic and widely underestimated technical challenge of 5G networks. High-frequency transmissions at high power across a range of competing channels are the nightmare of telecom engineers — and the absolute requirement of 5G.

Neither this challenge, nor that of realizing artificial intelligence’s full potential, or creating the inherently secure internet, can be fully met by the U.S. alone. We need all the brains and all the entrepreneurial energy in the world.

U.S. politicians without the slightest grasp of this challenge are trying to isolate China from the rest of the world. As the world realizes that it needs China more than it needs us, it is the U.S. that may be cut off.

And it’s the U.S. that risks being reduced to a technology runner-up.


George Gilder
for The Daily Reckoning

Does any of this matter? Unfortunately, yes.

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The Key to Fixing Two Broken Paradigms

This post The Key to Fixing Two Broken Paradigms appeared first on Daily Reckoning.

Dear Reader,

Our financial system has been corrupted.

U.S. equity markets have become a hollow shell of their former selves, with 80% of demand fueled by companies buying their own shares with zero-real-interest-rate loans ultimately from the government.

Silicon Valley is now full of bloated “unicorns” — 88 at last count — with venture capitalists capturing most of the profits. And the number of public companies in the U.S. has plummeted 50% in 20 years.

One way out of this mess is to look abroad.

For Americans with a global view, the range of investment opportunities is expanding massively.

Given the limited upside in Silicon Valley — with its soaring price earnings ratios, misplaced environmentalism, and crony capitalist creep — opportunities abroad are beginning to outpace innovative companies in the states.

You might not know it, but Israel’s startup riches remain unparalleled. And did you know that Japanese and Chinese investors are now massively funding Israeli innovation?

Sony has just created a new $100-million fund with an Israeli target. And CTech reports: “In the first half of 2019, Japanese investors backed 34 Israeli companies, up from 28 companies during the entire year 2018.”

It’s incredibly easy to invest in Israel, too. You have direct access to 70 Israeli companies already available on the NASDAQ. And there are many new Israeli IPOs in preparation.

Also, I know everyone’s supposed to hate China these days. But opportunities in China are expanding dramatically today, with world leading initial public offerings, vast new stock markets, and relatively low valuations.

China is formally a communist nation. But in many ways it’s more free market than the U.S. And China has a rich capitalist culture.

In fact, visit China, as I have in recent months, and you will discover that Marx is far less influential there than he is in American universities.

While I am banned from most U.S. campuses for questioning climate change and challenging political correctness, I speak freely before enthusiastic audiences in many of the most prestigious Universities in China. There may well be fewer real Marxists in China than in the U.S.

In a pithy and topical new 2019 book, Charles and Louis-Vincent Gave, the father-son team at Hong Kong’s GaveKal Research, observe: “Japan is a culturally socialist country on which capitalism was imposed, while China is a culturally capitalist country on which socialism was imposed.”

The Gaves now observe that both countries are reverting to earlier cultural tendencies — China to capitalism, Japan (with its aging population) to socialist old age home.

And the Chinese are opening their capital markets increasingly to the West. Also auspicious for tech investments is Xi’s strong endorsement of tech innovation, venture capital, and initial public offerings.

Anticipating this new opening and inclusion of a thousand Chinese stocks on emerging market indexes, some $6.3 billion flowed into mainland Chinese equities in early June.

The bottom line is, the U.S. needs to wake up to restore American capitalism and innovation. Basically, we need new paradigms to replace the old, dying ones.

The way you can identify a broken paradigm is that the problem gets worse the more money you spend on it.

Case in point: Internet security.

We’ve experienced a billion data breaches on the net this year. And we’re seeing paranoia everywhere about “fake news,” spy chips, and fake hate.

Spending on security patches and poultices rises some 20% every year. Yet the number of hacks of private data rose to an all-time record of a billion breaches in 2018.

What I call “the Cryptocosm” (a new internet with the blockchain at its core) will provide a way out of this mess, as it opens the way to an internet architecture based on provable timestamped facts and immutable records.

It will supply a new architecture for the internet and, indeed, ultimately a new architecture for the entire world economy. And it involves troves of new knowledge surrounding bitcoin and the blockchain.

I truly believe blockchain will eventually become the proper foundation for what the internet’s really become — a huge commercial database to connect transactions all over the world. But this time around, with complete security.

You see, the ability to keep a record of every transaction, fully distributed, will instantly add a bulletproof layer of security to the internet. Why?

Because centralization is the biggest threat to internet security that exists today. Currently, all of our login information and credit card details are kept within walled gardens of various companies — Facebook, Amazon, Google, etc.

The problem is, these walled gardens are beacons for hackers. It’s telling them exactly where the important information is being held.

The blockchain, however, distributes all the personal information across the network, just as human intelligence is distributed across the world. It’s not agglomerated in giant data clumps. It provides a timestamped, immutable record of all transactions.

In other words, it’s decentralized. And that is absolutely key to why blockchain will be the foundation for the Internet Reboot.

That’s what I mean when I talk about a new paradigm. Blockchain can provide it.

Then there’s the scandal of global money.

Our misplaced faith in the power of the Federal Reserve to order growth into being by manipulating its monopoly money has led to the capture of Wall Street by Washington and the consequent starvation of Main Street.

The more money that is printed by central banks — and shuffled on international currency exchanges — the less growth and trade we get from it. Even some $17 trillion of negative interest rate securities doesn’t make a dent.

Big banks and financial players now push around some $5.1 trillion every day. That’s roughly 25 times global GDP and over 70 times global trade in real goods and services.

And what does this colossal floating currency game accomplish?

It only enables grasping politicians and toady central banks to steal from the future — your kids and grandkids — in order to pay off favored constituents and politically correct causes in the present.

The blockchain offers a much more honest, efficient monetary system.

Clearly, internet security and the global scandal of money are two of the world’s most obvious broken paradigms. The blockchain offers a way to fix them.

That’s why I’m so tuned in to advancements of the blockchain, and why I believe the heart of most wealth creation over the next 10 years will be the Cryptocosm.

Go here to learn just how big the opportunity is, and how investing in it now can transform your life in the years ahead.


George Gilder
for The Daily Reckoning

The post The Key to Fixing Two Broken Paradigms appeared first on Daily Reckoning.

Three Steps to Save America from Collapse

This post Three Steps to Save America from Collapse appeared first on Daily Reckoning.

Our monetary system is broken. It’s given us low growth, a shrinking job force, inequality beyond what a healthy economy would produce, inefficiency, and the unnatural growth of finance as a portion of the economy.

Our aging Federal Reserve System starves both small businesses and Silicon Valley of the capital needed to grow jobs and wages.

Fed policy translates into zero-interest-rate loans for the government and its cronies, and little or nothing for savers or small businesses. And it has transformed Wall Street from an engine of innovation into a servant of government power.

But I believe America can be set on the right path towards a robust and broadly shared capitalism again with just three steps. 

Step 1: Abolish Capital Gains Tax on Currencies 

This country already allows gold currency. The Treasury mints millions of one-ounce silver eagle dollars that are worth more than twenty dollars apiece and one-ounce gold eagle fifty-dollar pieces that are worth $1,150 apiece. 

Virtually all of these are hoarded. 

Though it has been legal since 1987 to use them at their metallic value, that route leads to a capital gains tax on their appreciation. 

Since the appreciation of a gold or silver piece is by reasonable definition all inflation, the tax is simple confiscation (like all capital gains taxes on spurious inflationary profits). 

The move of gold and silver coins into circulation would offer a corrective of constitutional money for any dollar debauchery by the Fed. 

Step 2: Remove Obstacles to Alternative Forms of Money

Despite imprudent governmental interference, the internet remains a bastion of American power, with U.S. companies such as Apple, Google, Amazon, Microsoft, Facebook, eBay, Cisco, Qualcomm, and scores of others capturing the bulk of all internet revenues. 

The internet plays a central role in the American economy. But there is a profound flaw in its architecture, as I have explained before. It was designed for communications, not transactions.

Around the globe, transactions are shifting toward the internet. Although online purchases remain between 6-7% of all commerce, internet trade is expanding rapidly. 

But to buy something on the Internet, you often have to give the supplier sufficient information — credit card number, expiration date, address, security code, mother’s maiden name, and so on — to defraud you or even to steal your identity. 

This information therefore has to be protected at high cost in firewalled central repositories and private networks, which are irresistible targets for hackers. 

With transactional overhead dominated by offline financial infrastructure, micropayments are uneconomic, and the internet fills with fake offers, bogus contracts, and pop-up hustles. Some 36% of web pages are bogus, emitted by bots to snare information from unwary surfers. 

The internet today desperately needs a new trusted and secure payment method that conforms to the shape and reach of global networking and commerce. 

It should eliminate the constant exchanges of floating currencies, more volatile than the global economy that they supposedly measure. It should be capable of transactions of all sizes. And it should partake of the same monetary sources of stable value that characterize gold. 

The new system should be distributed as far as internet devices are distributed: a dispersed organization based on peer-to-peer links between users, rather than a centralized hierarchy based on national financial institutions. 

Fortunately such a payment system has already been invented. It is set to become a new facet of internet infrastructure. 

It is called the bitcoin blockchain. 

The bitcoin blockchain is already in place. It functions peer-to-peer without the need for outside trusted third parties. And it follows theorist Nick Szabo’s precursor, bitgold. Its value, like gold’s, is ultimately based on the scarcity of time. 

Even if bitcoin proves flawed, scores of companies are developing alternatives based on the essential blockchain innovation that can serve as a successful transactions medium for digital commerce. The existence of such a system would enable sellers on the internet, such as content producers, to name their own prices and collect their funds directly. 

And the very process that validates the transaction would prohibit spam. There would be no hassle of bartering content for advertising revenues at some aggregator such as Google. Aggregators with advertising clout would merely add inefficiency to an automated system that minimize transaction costs. 

The internet would have a money system of its own.

With a low market price for goods and services — Google and other players could charge millicents for their services and still make a mint — the internet economy would transcend its current den of thieves and hustlers. 

It could attain its promise as a frictionless facilitator of human creativity rather than as a channel of chicanery. Its markets would impel the world toward new realms of knowledge and wealth. 

But the success of a new global standard of value on the internet entails a ban on taxation of internet currencies. If only government currencies escape taxation, alternative currencies such as bitcoin will always be relegated to niches.

Step 3: Fix the Dollar 

That brings us to the third step: fixing the U.S. dollar.

How do we do this? 

Monetary scholar Judy Shelton already devised a play. The chief instrument would be the creation of Treasury Trust Bonds — five-year Treasuries redeemable in either dollars or gold. They could be enacted either through legislation or as a Treasury initiative.

Legislation would specifically authorize the issuance of five-year Treasury securities that pay no interest, but provide for payment of principal at maturity in either ounces of gold or the face value of the security, at the option of the holder. 

The instrument would be an obligation of the U.S. government to redeem the nominal value (“face value”) in terms of a precise weight of gold stipulated in advance or the dollar amount established as the monetary equivalent. The rate of convertibility (in gold grams) is permanent throughout the life of the bond; it defines the gold value of the dollar.

As Alan Greenspan declared in the Wall Street Journal during the previous era of monetary turmoil, in 1981: 

In years past a desire to return to a monetary system based on gold was perceived as nostalgia for an era when times were simpler, problems less complex and the world not threatened with nuclear annihilation. But after a decade of destabilizing inflation and economic stagnation, the restoration of a gold standard has become an issue that is clearly rising on the economic policy agenda.”

In fact, Greenspan suggested that “Shelton bonds” would pave the path to the future…

“The degree of success of restoring long-term fiscal confidence will show up clearly in the yield spreads between gold and fiat dollar obligations of the same maturities. Full convertibility would require that the yield spread for all maturities virtually disappear.”

Of course, as Fed chairman, Greenspan went on to become a major maestro of monopoly money at the Fed. And in his subsequent books he expressed many regrets and misgivings about the nature and role of central banks. 

But in an era of new monetary turmoil, Shelton bonds still have traction. In addition, as bitcoin blockchain innovations spread through the internet, borrowers could also issue bonds with a bitcoin payoff. So new systems based on gold and blockchain innovations can evolve into a new world monetary infrastructure.

These are the three steps that can restore integrity to the monetary system. 

As I explained yesterday, this is how we can save Main Street from the menace of monopoly money, transcend the dismal science of stagnation and decline, and restore the American mission and dream.


George Gilder
for The Daily Reckoning

The post Three Steps to Save America from Collapse appeared first on Daily Reckoning.