Strange times, aren’t they? We were worried about atomic war in Europe at the beginning of last week. Thursday, the Saudis claimed the Iranians were going to strike targets in the Kingdom, and the North Koreans continued to fire rockets to ocean areas around their cousins to the South. Naturally that sort of news may have other purposes, like distraction. There appears to be some stuff that has been going on for a while, background stuff in the perpetual noise machine. But some of it has the potential to bite us in the buttocks pretty hard when we get around to the execution phase.

Those challenges represent the potential for swift and dramatic change in the nature of the relationship of citizens and government. We forgot to include the “non-citizens,” but of course they are just one of the more visible and expensive components of a policy made in some office in Washington that slowly- and permanently- changes some fundamental (and expensive) issues.

Here is an example. The U.S. and France are the only two major industrial nations that have fixed thirty-year mortgages. Most nations, take the UK for an example, will permit the adjustment of interest rates to affect future changes. That could be either up or down, of course. In Britain, that period is around two years. With “official’ inflation rates currently over 8%, and reality running higher, you could expect a dramatic increase in your mortgage payments amounting to 17% with each renewal period.

That is one reason the Chairman still has a bit of a grim smile in the morning after his first cup of Chock-Full-O-Nuts. He got a VA loan at 2.75% to refinance The Farm last year, and that rate is good for three decades, which is, in effect, a lower value of the monthly payment against inflated currency for as long as he is likely to be alive. This week, the average mortgage rate is 7.25%, and many of the Old Salts recall getting a first loan at 12%. Hence the grim smile.

We took a poll by the Fire Ring, and the results indicate the group hopes we make it through this patch of odd times. But some significant things have happened in the background of government in the noise-level of thousands of pages of administrivia not in the news. Remember, the Members have never seen most of the laws they pass, much less discussed them. The legislation is so vast that it covers multiple jurisdictional lines and no one is personally responsible for anything.

‘Changes to Banking’ was an old one that contained a time bomb. That changed law dates back to 2010 and is on the books now. We haven’t felt the full implications yet. It was passed in the aftermath of the disastrous real estate melt down of 2008. The “Dodd-Frank Wall Street Reform and Consumer Protection Act” starts with the principal that the titles of many of our new laws are the direct opposite of their effects. Examples of that include the “Affordable Care Act,” which isn’t, and this year’s “Inflation Reduction Act” which doesn’t. It actually is mostly about the climate. Maybe Congress will someday pass a Climate Bill that will actually deal with inflation.

It makes a certain sense, since the 2008 crisis came from policy decisions that didn’t get much light. What it amounted to was the Federal direction to be “fair” about lending practice. The practical consequence of being “fair” amounted to loaning cash to people who could not repay the home loans issued to them. Since standards were eliminated, the loans were often used for multiple home purchases in order to flip them for a profit. There was a lot of money in it, and plenty of fairness. “Too Big to Fail” resulted in all taxpayers bailing out the large banks.

It was one of the reasons Dodd-Frank was passed. It gives the power to the banks to sequester depositor funds, rather than beg Congress to bail them out. Congress turned it around to make it a “bail-in” in the event of financial dislocation like the one in 2008. Or, 2023.

That will give the rest of the world time to get smacked with regular increasing household bills for the duration of the inflation crisis. There is speculation that it will cause a global meltdown that will eventually make our fixed-rate mortgages in the U.S. and France irrelevant to a global problem.

There are many more of these sorts of issues buried in the masses of legislation carefully crafted by Lobbyists and supported by Congressional Members whose campaign funds were rewarded by them. But let’s take a glance at one whose direct impact is on wallets and purses around the nation.

The HAMILTON is what some are calling the Big New Idea. We have heard about crypto-currency and some people may actually understand it. We don’t claim to have much more than a vague idea of the dimensions of the proposal. The scheme has some practical applications. There is a lot of cash floating around not under control of the government. It is much touted by folks in finance and government who want to change the US paper dollar into something more useful that will make some quite wealthy. The term sounds both modern and historic, two useful features in selling it. It is a similar strategy used to name the huge Omnibus bills. The smart folks who use it harness the reputation of a figure long dead to represent a current opportunity.

Appropriating the heritage of Alexander Hamilton, first US Treasury Secretary, is a great strategy. He thought up the newly created financial system for a new nation. He also is viewed as a champion of a strong central government for America that can apply improbable names to all sorts of things.

There are some advantages to the concept of “smart money,” of course. But as usual, there are undiscussed implications to “changing the form” of America’s currency. Here is something closer to what it really means.

The “gray” economy, the one conducted with cash and without being reporting to the government, is worth something like $2.5 Trillion dollars per year. Digital funds can be tracked by following the Hamiltons across all transactions, for goods or services. It can be a basis for credit systems in commerce and small enough to be implanted under the human epidermis to be carried everywhere. The Swedes have already done it and goodness knows what the Chinese are up to. With that technology, all financial transactions can be itemized and tracked. That would make our lives and activities completely transparent to the issuer of the new Hamiltons. It also has some significant issues if you wish to spend cash on something not approved by the smarter people who are determined to make us better people. Whether we like it or not.

One immediate effect of that is simple. Hamilton currency would shine a bright light on an invisible (and non-taxable) component of our $28 Trillion Gross Domestic Product. So, it is a sudden intrusion into your relations with the kid on the block who cuts your grass for a modest cash payment. Have you withheld the kid’s Social Security contribution? We counted the number of 1099 filings to run The Farm the way it is currently structured and stopped at five before getting into transactions that might- technically- violate current law.

Imagine the thrills in a new tax season enforced by the 87,000 new (and armed) IRS agents. That is a partisan meme involved in the current election furor. It is not exactly the proposal as expressed by the IRS, so let us insert the actual way it was floated, from the Revenue Service itself:

See? It isn’t 87,000 armed special agents to examine all those Hamiltons and where they have been. It is actually $80 Billion dollars, which are only the precursors to Hamiltons. We suspect there is also a provision for automatic increases to the IRS budget based on inflation. You know, to modernize antiquated systems and punish only the rich.

So, it is just like all our new laws passed by our Congress. That could change after next week’s election, of course. They didn’t mention any of the qualifications for the “new specialized enforcement staff,” or whether they have to pass firearms qualifications to process all those Hamilton transactions. On everything- everything- you might wish to do with them.

We thought about a stirring summary to this little morning observation. One that would summarize some of the basic changes that have been made to how our nation is governed. The problem with that approach is that it also means not saying anything disapproving about what has already happened, since that is now contained on an eternal digital record and could be resurrected under penalty of new omnibus legislation.

Accordingly, we will express our complete public support for the people who knowingly did all this without much public discussion. We will have to figure out what we can use instead of Hamiltons, though, in case we feel a need to do something about it. Maybe we could start by renaming it as something “Affordable.”

Copyright 2022 Vic Socotra
www.vicsocotra.com