Senior Managing Editor of The Freeport Society
Welcome to another edition of Sunday reads. This week let’s dig into the potential Californication of the U.S., the pending insolvency of Social Security, the potential for the “Big Short 2.0”, and another take on a world with central backed digital currencies.
Before we dig in, please remember that sometimes the articles we find valuable are behind paywalls. We make every effort to share with you pieces that don’t require a subscription, but we also don’t want to ignore those that do require one. Please understand that there might be some articles you won’t be able to read unless you’re a subscriber to that particular source. For this we apologize and hope you find as much value in those that are freely available.
With that said, here’s what we found to be the most valuable reads this week…
Californication Personified
Gavin Newsom has staked his political future, which includes presidential aspirations, on being a climate change policy revolutionary. He’s the patron saint of the climate lobby that hopes his attacks on “big oil” and a push toward renewables and EVs will spark policy mandates that would sweep the nation and the world.
This is decidedly NOT something we want to see happen.
Imagine joining Californians in the pain they feel when they get gas or pay their power bill. The state has some of the highest energy costs in the country. It can keep those, thank you very much. And that’s just for starters.
Frankly, Newsom’s shadow bid for the presidency – which is yet to be made public – would be catastrophic. We explain why, and how to protect yourself in the event that he is successful, in this video.
Considering this looming crisis, we found this article from Politico particularly insightful. It details Newsom’s inspiration, his (and the climate lobby’s) aspirations, and the skepticism many have of the climate catastrophism argument.
It’s a great summary of his platform, with a headline that says all we need to know:
Gavin Newsom Is Coming For Your Car, and he Wants You to Know it
Speaking of the climate lobby…
Its basic premise is that our species will be extinct in the coming decades if we don’t stop driving, flying, eating meat, using gas stoves, etc.
In other words, we have to reduce our standard of living and prevent poorer countries from increasing theirs, implying, ironically, that we have to stop living. However there are some practical, economic and even moral tradeoffs that have to be confronted in this debate. This essay from the Wall Street Journal provides a sober critique of policies derived from the climate catastrophism argument, and the need to focus on innovation and investment, rather than on the cancellation of fossil fuels.
Here at The Freeport Society, we support free markets and freedom of innovation… and the profit and prosperity that flows from these ideals.
This essay very aptly conveys our feelings on this subject (note: this is behind a paywall).
When the Only Problem Was Climate Change
For even further evidence of hope, even left-leaning the Liberal Patriot (a policy critique blog) recognizes that only “all of the above” energy policies have a chance of being successful (here’s hoping!), but only if climate zealots like Newsom don’t get in the way.
The Partisan Chasm of Energy Policies
Entitlements insolvency
Good news: Thanks to economic growth, the funding horizon for Social Security and Medicare has been extended beyond previous expectations.
Bad news: The insolvency date for Social Security has only been pushed back by one year, to 2035, while Medicare is projected to run out of funding in 2036.
Here’s an overview from Politico:
Economic Growth Boosts Social Security and Medicare but Funding Crisis Still Looms
Worse news: Neither political party is prepared to address the issue. Granted, when you provide an entitlement, it will never be popular to take away. Nevertheless, there is no way to address the federal debt bomb without addressing entitlements, which in 2023 were 50% of the federal budget…
And they’re projected to reach 62% in 2029 if nothing is done.
We can all see the freight train speeding toward us through this tunnel.
It will take incredible political capital (and likely a generational political talent) to address the entitlements problem. Unfortunately neither of our Presidential candidates appear to be up to the task.
So the shuffle and grift continues, as detailed in this writeup in Reason:
Social Security and Medicare Are Going Insolvent. Neither Biden nor Trump Has a Plan for It
Until this issue is addressed, the growth potential of our portfolios is constrained, inflation could head out of control, our currency is debased, and the threat that the dollar is no longer the world’s default currency looms. We need more from our political leadership on this issue.
For the policy wonks out there, here are some additional details and hard truths from the Committee for A Responsible Budget.
The Big Short 2.0
Something we will be keeping our eye on is a recent development involving Freddie Mac (FHLMC, which stands for Federal Home Loan Mortgage Corporation).
In April, it applied to get into the home equity line of credit market (referred to as HELOC) in order to increase liquidity access for homeowners.
Put us on record: This is a terrible idea.
The injection of more liquidity into an economy that was artificially overstimulated in response to the pandemic in the form of more consumer debt to consumers who are already tapping out on their credit card balances will not end well.
More inflation will result, and potentially home foreclosures as well. This feels like another “buy now pay later” policy that would intend to maintain the resiliency of the American consumer, but we all know where the road paved with the good intentions of policy makers leads to…
This was the central issue of The Big Short, Michael Lewis’ account of the housing crisis and subsequent financial crisis of 2008. Freddie Mac was a central player in that story as well.
This article from Zero Hedge and Thoughtful Money is a good discussion of this story and whether it portends a “Big Short 2.0” scenario.
Inevitable CBDCs?
Our Freeport Society Chief Investment Strategist Charles Sizemore highlighted in his recent Empire Killer video that central backed digital currencies would present a threat to our liberties.
The following piece in Reason details how the government would intend to use CBDCs to monitor all financial transactions… and would outlaw tools that would enable crypto currencies to be traded anonymously.
The Government Fears This Privacy Tool
And this ZeroHedge and Schiff Gold article makes the case that CBDCs are inevitable, in that they provide all the control over the financial system that the government could want.
It also makes the case for gold as a key investing opportunity in light of this potential reality… something Charles and Freeport Investors are already taking advantage of.
What Will CBDCs Mean For Gold?
That’s all for this week.
Let us know if you enjoy today’s reading list and what you’ve read of late. You can reach us at [email protected].
Until next time…
To life, liberty, and the pursuit of wealth.