NESARA and the Magic Formula

September 10, 2006

The Magic Formula I am referring to is this: low taxes, stable money. This is a tried-and-true, proven method for virtually any country to enjoy rapid economic progress. By "low taxes," something like a "flat-tax" system with rates below 20% would work, as has worked brilliantly for Hong Kong and is now working brilliantly for anyone else who tries it, which now includes much of Eastern Europe. In the extreme case, it means no taxes at all, which was largely the case for the U.S. pre-1913 (the Federal Government was almost entirely funded by a tariff), or Japan pre-1913 (the central government was almost entirely funded by a modest property tax, and a tax on alcohol). It is possible to have "low taxes" even with high tax rates, if those rates impinge on very high incomes while the great majority of people have light taxes. This was the case in Germany after World War II, for example, when the top tax rate was 50% but applied to incomes equivalent to millions of dollars today -- while capital gains were tax-free.

The "stable money" aspect is what my book Hard Money is mostly about, and means a currency stable in value, with the gold standard the best solution in this regard. (I also have a good chapter on "low taxes.") The result of stable money is low interest rates and a minimum of disruptive exchange rate fluctuations, which allows commerce to flourish.

One could cite a few other things necessary for a properly functioning capitalist economy, such as reliable legal system and basis of private property ownership. However, you might find that not even this is quite necessary, as neither Russia nor China (two powerhouses today) can claim great success in that regard, although both have low taxes and stable money. I find that countries that manage to maintain low taxes and stable money create an environment where it is politically easy and desirable to also form a sound legal structure and advantageous regulatory environment. Thus, these issues tend to fix themselves once the big picture -- low taxes, stable money -- is in place.

I honestly believe that it is possible to parachute into a despair-ridden locality -- a Haiti, Sierra Leone, or Laos -- and turn it into a successful developing economy, on the path of becoming a Singapore or Dubai, within a decade or so, by applying these principles. The main problem of such a plan would be to be able to maintain political stability long enough to put it into place. One thing that happens -- it is happening now in Russia -- is that, when taxes are low and money is stable, people discover that it is easier to achieve security and success by following the laws than by breaking them. Thus, people tend to become law-abiders, which in turn solves all manner of other problems.

When a person fully understands the Magic Formula -- I am talking about you, dear reader -- it dawns upon then that they now hold the secrets of economic success and failure.

Thus, I was most intrigued when reading about something called the National Economic Recovery and Stabilization Act, or NESARA. There are a lot of phony NESARAs out there (a bit of obfuscating propoganda it appears). The one I am referring to can be see at http://www.NESARA.org/.

What is NESARA's proposal? Would you believe, a gold standard for the US dollar (stable money), and a single sales tax, with a modest rate, to provide all government revenue (low taxes)! In other words, the Magic Formula, done in first-class style! (There are some oddities in NESARA, such as provisions for the repayments of debt, but I can overlook a bit of "originality" on this front.)

All of this may become a lot more relevant over the next twenty-four months or so, as an economic downturn pops the present bubble of complacency and begins the search for new solutions.

Hooray for NESARA! It is sooooo rare to see any economic proposal that gets so close to the true solution.