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In 1970, the people of Chile voted in the first Marxist president in Latin America by popular vote, Salvador Allende. This delusional moron proceeded to crash Chile’s economy by nationalizing banks, mining, education, and healthcare, seizing and redistributing land, and enacting things like price controls, free college, 12 weeks paid leave for pregnant women, and all kinds of other things that give left-wingers boners, but tend to destroy economies in the long-term.
-By Caleb Jones
However, just two years later, Chile was slammed with a recession. (Big shock, I know.) There was mass capital flight, private investment plummeted, everyone withdrew their cash from Chilean banks, and inflation of Chilean currency (the escudo) was at 140%.
By 1973, the people had enough. The Chilean military (aided by the CIA under the criminal Richard Nixon) staged a coup, and Allende shot himself in the face with an AK-47. Nice.
This brought the murderous Pinochet into power, and Chile suffered horribly for a few decades. (As usual, the revolutionaries quickly become as bad as or worse than the people they overthrow.)
Isn’t big government nice?
Finally, after a few horrible decades, Chile started embracing small government and pro-business reforms, more so than any other country in South America. Today, Chile is the most successful nation in South America and among the least bad in the world. To quote Wikipedia:
[Chile] leads Latin American nations in rankings of human development, competitiveness, income per capita, globalization, state of peace, economic freedom, and low perception of corruption.
It’s such a good place today that it’s on my short list of countries to possibly move to in 2025.
Small government works.
In 1997, South Korea suffered a massive economic crisis. Due to massive debt, over aggressive corporate expansion, and the Asian financial crisis that was hitting all of Asia at that time, South Korea’s economy got smashed, hard. Their credit rating crashed from A1 all the way down to B2 (which was probably too conservative; it should have been lower). Their stock market fell by double digit percentage points. Everyone freaked out.
The government bailed out... wait for it... virtually no one. They allowed companies to close, go under, or merge with other companies. They left the free market to do its job (more or less). Hyundai took over Kia. GM took over Daewoo. Lots of companies lost of money. Samsung lost $5 billion, as just one example. (To be fair, the IMF lent South Korea $58 billion, though they only actually used a small fraction of that. It was peanuts compared to the money that their banks and corporations lost.)
It was a nightmare. People and businesses went bankrupt everywhere.
Today, South Korea is one of the most successful countries in the world. They’ve tripled their GDP since then, and are doing great.
Letting recessions take their course, works.
In the early 1990s, Scandinavia experienced a huge real estate collapse. People everywhere lost their homes. Since no one could bail them out, no one bailed them out. People everywhere went bankrupt and Scandinavia had a really horrible three years.
They recovered. In the last 15 years, the three countries in Scandinavia have been among the least bad economies of Europe, even despite their worship of socialism and the usual suicidal European immigration polices. To be fair, much of this is because of Norway’s oil, but the lesson is still clear.
Letting recessions take their course, works.
Here’s the way recessions are supposed to work: When bad times hit, people go bankrupt. Successful people who know what they’re doing take over the assets and the less successful, more incompetent (or corrupt) people lose them. The more successful people reorganize, start over, and eventually everything gets back to prosperity again. It’s very painful during this transition, but it works after a few years.
When the government doesn't allow people to go bankrupt and lose their asses, it perpetuates the incompetent (or corrupt) people and the recession simply lingers forever. The economy never gets a chance to get back to prosperity.
Case in point: Japan. They collapsed in the early 90s, but they wouldn’t let anyone fail. 20 years later they have still not recovered. They’ve experienced two lost decades, where the economy is in a weird, grey limbo, where everything sucks but without being super horrible. (Sound familiar, Americans?)
Compared to the success stories of Chile, South Korea, Scandinavia, and other countries that let people fail (more or less), Japan’s stock market today is 75% less than it was in 1990(!).
This is what happens when you bail out banks. This is what happens when you bail out incompetent or corrupt people.
Since the bank bailouts of 2008-09, America has entered this Japanese limbo, and will likely continue like this for a very, very long time. As long as our government won’t let banks and corporations fail so we can return to prosperity, this limbo will be our perpetual state (until our collapse, that is).
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CrabRangoon 2016-11-14 08:00:19
Our government in the US just loves to keep kicking that can down the road. Conservatives proved they're no better when Bush handed out bailouts showing his Corporatism. Huge shock that Obama went right along suit. The anemic interest rate they won't raise and all the QE/money printing they've done keeps us in that limbo you mentioned. Liberals truly believe in many cases the feds "create" money from thin air. It's dangerous thinking and I'm skeptical that Trump will do much different. He already backed off going after Hillary so I'm assuming his bombastic nature was just to get him attention. He won't make any big changes, although there's a chance he might. With Hillary, we were guaranteed more of the same insane spending and taxing, Obama Term 3 essentially. But you know how it is these days...we have to make everyone "feel" good over making smart decisions.
Kurt 2016-11-14 15:01:16
I was dumbfounded when they did the bank bailouts in 2008. It was so obvious that it was the wrong thing to do and all the 'too big to fail' talk was just corporatist self-justification. The only thing in the last 20 years that pissed me off more was watching the build up to and invasion of Iraq on what were blatantly false premises. I remember literally standing up in a room and yelling at people over their compliance with the media regurgitation of the Cheney/Bush rationalization because the actual facts being reported that were there for everyone to see contradicted it. I concluded then that facts really don't matter in our society anymore and that we are therefore doomed to collapse. That still hasn't made living in it and watching it any better. Yeah, South America is my destination now. I'm under no illusions it will be a better society but I think you can at least find countries there where most people actually think about national policy and are engaged and thoughtful about it in a rational way.
Gil Galad 2016-11-15 08:08:32
Just proofreading here "Lots of companies lots of money", you mean "lots of companies *lost* lots of money" right ? Yeah it sounds like a bad pun, lol. Question CJ: I recently discovered (I'm very much a lay person in this area) that universal basic income actually exists in certain libertarian concepts (as long as its value isn't ridiculously high like the proposition in Switzerland the other day, for example). It just seems to me that if this is doable without letting the taxes go crazy, it would make the necessary recessions less harsh to handle for the little guy, who has some margin to go on, while the income is still low (500, 700 monthly bucks?) enough to incenticize him to get off his ass and find a job. It just seems to me that a prosperous enough society could pride itself in making extreme poverty impossible for its citizens, while still steering clear of socialism. What do you think ? If my comment reflects ignorance then by all means fire away, I'm here to learn.
Caleb Jones 2016-11-15 10:19:22
Just proofreading hereFixed. Thank you.
I recently discovered (I’m very much a lay person in this area) that universal basic income actually exists in certain libertarian conceptsNo. A minimum, government-guaranteed income is the not a libertarian concept. It's the opposite.
It just seems to me that if this is doable without letting the taxes go crazyHow?
it would make the necessary recessions less harsh to handle for the little guy, who has some margin to go on, while the income is still low (500, 700 monthly bucks?) enough to incenticize him to get off his ass and find a job.Incorrect. There are millions of losers out there who would be satisfied with $700 a month. I know several of them personally.
What do you think ?I am 100% opposed to the govermnet providing a minimum income for citizens, because: 1. It would be a boondoggle of massive proportions, and cost way, WAY more than what the government promised. 2. The amount of money the jobless would receive would grow and grow forever. 3. It would incentivize too many people to sit on their asses. 4. You can help the working poor by other means, like stop printing all this damn money and cut taxes and regulations on employers. Hypothetically, if the US government stopped wasting all of its money (end all the wars, bring all the troops home, stop printing trillions and giving it to bankers, get out of healthcare so it can be cheap again, stop giving money to poor people who clearly don't want to work, etc), and still the working poor couldn't make a living, then, at that point, I'd be willing to have a conversation with the left-wingers regarding a minimum income. But we're not even close to having that conversation. Stop wasting my money before you come up with new ideas on how to spend it.
Gil Galad 2016-11-15 11:49:26
"There are millions of losers out there who would be satisfied with $700 a month." haha, good point. "Hypothetically [...] But we’re not even close to having that conversation." Yes, I understand your view. Basically it's complete madness to talk about guaranteeing prosperity for every single person when given the current reality, such a measure would also guarantee an even quicker economic collapse.
Kurt 2016-11-15 13:38:10
uugh. Universal basic income? I have a lot of views that many would consider extremely liberal, but I think even most liberals would agree history has proved time and again that any attempt to make life 'fair' by the government is always an unmitigated and colossal failure.
Caleb Jones 2016-11-15 15:34:31
I think even most liberals would agree history has proved time and again that any attempt to make life ‘fair’ by the government is always an unmitigated and colossal failure.I disagree completely. If the US instituted a universal basic income, I think more than 50% of left-wingers here would be very happy with it and celebrate. When it comes to basic economics, left-wingers don't exist in the real world.
Hello Everyone 2016-11-18 06:40:16
I am looking for somewhere to spend half of the year sailing. After your comments, I looked at Chiles weather. It doesn't look very pleasant. Does anyone have any locations in mind, with a solid government and society?
Caleb Jones 2016-11-18 11:22:02
Can't help you there. If it's about weather for you, just hit Wikipedia and do some research. That's easy to determine.
Steve 2016-11-18 11:59:28
I've been researching this "UBI" since I live in Ontario and the government here is actually going to do a " basic income pilot" experiment next year. Like Gil Galad mentioned, I was surprised to find some libertarian support for this idea. Milton Friedman himself was a proponent for a "negative income tax": https://www.youtube.com/watch?v=xtpgkX588nM I've also been watching some stuff from the Silicon Valley guys. A lot of them are warning us that the UBI will be the only thing to protect us from the oncoming destruction of the job market due to the rapid arrival of the large-scale automation of jobs . Particularly self driving cars, which are just around the corner. https://www.youtube.com/watch?v=2FpPWg24WTE http://futurism.com/elon-musk-theres-a-pretty-good-chance-well-end-up-with-universal-basic-income/ These aren't your typical far left morons. These are people like Ray Kurzweil, Peter Diamandis Elon Musk, and many others. Men far more intelligent than I'll ever be. I admit that the idea of any Government just giving everyone money no matter what, does sound like a potential disaster.But after looking into it, I'm not really sure what to think anymore?
Caleb Jones 2016-11-19 10:49:53
I was surprised to find some libertarian support for this idea.Correct, there is. As you said, Milton Friedman has was talking about this decades ago.
These aren’t your typical far left morons. These are people like Ray Kurzweil, Peter Diamandis Elon Musk, and many others. Men far more intelligent than I’ll ever be. I admit that the idea of any Government just giving everyone money no matter what, does sound like a potential disaster.But after looking into it, I’m not really sure what to think anymore?The world is full, FULL of very intelligent, high IQ, extremely educated socialists, communists, and leftists, who think big government is a fantastic idea that will always work out great. Universities are brimming with these people. That doesn't mean they're right. Never fall into the trap of "well they must be smart, so they must be right." That's how entities like the Soviet Union came about. Smart people can often be dead wrong. And often are. I've seen incredibly smart people say the dumbest things, do the dumbest things, and hold the dumbest opinions imaginable. Again, the most balanced opinion (in my opinion at least) is to say that leftists need to stop blowing trillions of taxpayer dollars on stupid shit first, then we can sit down and have a discussion about how the government might help the Can't Poor, but not until then.
Steve 2016-11-19 18:27:48
I get your point Caleb, but are all of them wrong about automation being on the brink of eliminating the job market? Is that not an entirely different scenario? Regardless of whether or not we agree or disagree on government redistribution? What are we going to do with the millions of truck drivers all over North America, who have no idea they're about to be obsolete? What solutions would you propose instead of UBI, or something similar?
Caleb Jones 2016-11-19 21:31:11
I get your point Caleb, but are all of them wrong about automation being on the brink of eliminating the job market?No, but what you're not getting is that if automation is so advanced that it eliminates the entire blue collar job market, our society will radically change in ways you currently don't see or understand. I have a blog post going up on Monday that touches on this, but if we have automation in society to that degree, than you'd be able to build a house out in the desert for $1000 that would be completely self-powered by solar energy and have food provided by autonomous farms out there that cost even less. It will transform the way we think about "jobs" and "pay" and "bills." I already address this a little here: https://calebjonesblog.com/technology-might-save-us/ Saying "automation will change the job market, therefore we need a minimum income" means that you think advanced automation will completely change one thing (the job market) but have no effect on anything else (like the cost of living). It's simply untrue, or at least very unlikely. Wait until Monday; I'll have more to say about his then.
Steve 2016-11-20 11:35:44
Yes, like you I've read "Abundance" by Peter Diamandis . I'm aware of the 3D printing,water, food, and energy technologies that are on the way. However, since this technology is not here yet, is there not a concern that there will be a potentially catastrophic gap between the destruction of the job market and the eventual arrival of these technologies? Especially with how unstable people are getting already. I'm also skeptical that the elites that control the energy corporations are just going to suddenly let us all have "free energy"? Especially when you consider that Tesla supposedly invented it decades ago, and it has been (allegedly) suppressed. I'm looking forward to your upcoming article Caleb. I believe that this issue is fundamental to your "Alpha 2.0 " lifestyle design.
Caleb Jones 2016-11-20 11:50:05
However, since this technology is not here yet, is there not a concern that there will be a potentially catastrophic gap between the destruction of the job market and the eventual arrival of these technologies?I'm sure the transition will be painful, yes. Transitions like this always are, even if the end result is hugely positive. There's no avoiding that. But after the transition is over, I don't think it will be the catastrophe that you think it will be. I will also go back to my original argument: socialism doesn't work long-term, period, and won't suddenly start working because robots. Even if you're right (and I don't think you are) we're going to have to find a different solution other than communistic government income for one third of the population forever.
I’m also skeptical that the elites that control the energy corporations are just going to suddenly let us all have “free energy”? Especially when you consider that Tesla supposedly invented it decades ago, and it has been (allegedly) suppressed.I agree completely. The elites will work to delay much of this as much as humanly possible, but they can't stop it. Just look at Bitcoin.
I believe that this issue is fundamental to your “Alpha 2.0 ” lifestyle design.Incorrect. Alpha 2.0 lifestyle has nothing to do with blue collar jobs, and everything to do with detaching from the system so things just like this don't affect you, or have minimal effect.
Gil Galad 2016-11-20 16:43:41
"Tesla supposedly invented it decades ago, and it has been (allegedly) suppressed" Guys, this kind of conspirationism seriously needs to die. I'll give you credit for putting it hypothetically at least. One look at how technological advancement happens, and you'll see that there is virtually never a big invention that occurs in a vacuum (possibly the closest we ever came to this was when Einstein created relativity from his armchair so to speak, and even that is an exaggeration): all "geniuses" did what they did because they had the tremendous leg up of all the accumulated knowledge of the past. The likelihood that Tesla "found something" that was suppressed and would save us today is vanishingly small. People have no idea how much knowledge has improved, the brightest geniuses from a century ago were hilariously outmached compared to what is feasible today. This reminds me of the old *20000 leagues under the sea* movie (1954), where it is hinted that Captain Nemo had discovered fission one century early. These things are just entertaining fantasies.
Steve 2016-11-21 19:08:30
"I’m sure the transition will be painful, yes. Transitions like this always are, even if the end result is hugely positive. There’s no avoiding that. But after the transition is over, I don’t think it will be the catastrophe that you think it will be." To be clear, this is not really my opinion. I'm not smart enough to know one way or the other. However, this does seems to be the consensus coming from the Silicon Valley guys, who are the smartest guys in the world. Am I wrong about that? "Incorrect. Alpha 2.0 lifestyle has nothing to do with blue collar jobs, and everything to do with detaching from the system so things just like this don’t affect you, or have minimal effect." I don't know about you, but if a large percentage of people suddenly find themselves unemployed, my business is going to suffer. Anyway thanks for taking the time to answer me Caleb. I see you made a new article related to this topic, so I'll go check that out. @Gil Galad Bro, it was the Illuminati lizard people that suppressed Tesla!
Caleb Jones 2016-11-21 19:37:58
this does seems to be the consensus coming from the Silicon Valley guys, who are the smartest guys in the world. Am I wrong about that?Consensus? I don't know about that. A few really smart guys there? Yes. And remember what I said about trusting smart guys just because they're smart.
I don’t know about you, but if a large percentage of people suddenly find themselves unemployed, my business is going to suffer.That depends on if you're Alpha 2.0 or not. It depends on which countries you're selling to, which markets you're selling to, which niches you're in, and how diversified your businesses are. If you have only only one business, and sell to normal lower-middle-class Americans, when suddenly the robots make 30% of them unemployed, then yeah, you're in big trouble. But if you're following an Alpha 2.0 business structure and have, for example, one business that sells to affluent Chinese in China, another business that sells business services in South America, and a third business that sells information products online to the entire English speaking world, you might experience a little bump or two, but you'll be just fine.
Fernando 2016-11-28 12:04:34
This fear of automation is something that keeps coming once in a while. Like the fact Robots and technology start producing goods and services for a cheap price would be bad for society. Everybody thought that would happen since the industrial revolution. Imagine if a peasant on the 1800s heard about the technology in agriculture nowadays. He would be terrified, where would all the rural workers go? they would starve to death! Or not, they just start working in different areas. Dont mix losing jobs to foreign companies because some socialist government dictate a minimum wage that is too high or too many taxes against the employers. Thats a different thing. What we are talking about is suddenlly making living in this world much cheaper and easier because of technology. When this happens, yes a lot of blue collar jobs will disappear and yes, it will take some adaptation, but society will greatly improve and jobs will adapt. People will probably work less, and differently (Just look at how much the working environment changed with the internet technology). I dont know how, but the way to go is services. People wont be work on agriculture as much as in the 1800s, or industry as much as the early 1900s. They will probably be working on services to satisfy the futile needs of the lazy 10-to-15 average worker. 150 years ago werent the people working 16hours daily just to be able to buy food? It just keeps getting better... Thats kind of sucks because technology keeps bailing out socialism. It gives the impression that socialists societies are developing through time, when in fact they are developing orders of magnitude less than it would in a laissez-faire reality.