Recently by Gary North: Anti-Tax Video Humor That Helps Undermine the Establishment

A growing minority of the American public is beginning to catch on to the meaning of the Federal government’s deficits and the Federal Reserve’s QE2. The voters did not understand QE1 in October 2008.

We are beginning to see videos lampooning tax rates. This humor is spreading to Europe. Some choice ones are here.

Yet we know that people prefer to sit tight, hoping for the best, even when the evidence screams: “Things will not get better; they will get worse.”

This raises a question: What are signs that it’s time to move out?

FORECASTING WHEN IT’S TIME TO MOVE

Here are a series of scenarios. They are all based on historical examples.

It is Christmas Eve 1773. You live in Boston. The tea party is over. You own a prosperous trading firm. You deal with imports from Great Britain. You tell your wife that you will sell your establishment to your rival before spring. You say that the British will retaliate. You don’t want to get caught in the crossfire.

You could take the money and move inland. But that would require that you learn new skills. You are a city person.

Or you could move to New York City or Philadelphia. You could even move to Charleston, South Carolina. All are port cities. But you are afraid that this conflict could turn into war. You favor the British Empire. Now what? Could the colonists win? Then what would happen to you?

You decide to move to Canada. You could also choose New Orleans, but you don’t speak French, Spanish, or Creole. You sell your home and move north. You leave behind friends and family. Your wife will gripe all the way to Canada.

Then, a few months later, when the British fleet closes Boston harbor, sending New England into recession, she quits griping about your having sold the business. When the war breaks out in 1775 in Boston, she quits griping that you sold her home out from under her. When Lord Cornwallis surrenders in 1781, she quits griping that you moved to Canada. When 100,000 Loyalists move to Canada, and a few of them start renting from you, she thinks you were a man of great wisdom. Or, quite possibly, she dies of homesickness in 1777, and you remarry a Canadian woman twenty years your junior. After all, you have money. Money covers a multitude of wrinkles. You sold out in time and got out in time. You both live happily ever after. Pretty good, eh?

It is 1862. You are a colonel in the Confederacy. You have been discharged honorably from the army because of an injury. You return home to Atlanta. After the fall of Vicksburg on July 4, 1863, you look at a map. You see that there is a straight shot down the rail lines from Chattanooga to Atlanta. You figure that the Yankees will move west into Tennessee to get in control over the rails in Nashville: the South’s hub. They will head for Chattanooga. So, you sell your home in Atlanta. Your wife owns ancestral land in between Atlanta and Savannah. You again look at the map. If the Yankees take Atlanta, they can march to the sea, and from there up to South Carolina, gaining control of the coast. You persuade her to sell her land in 1864. You take the money and buy land — thousands of acres — in south Georgia, almost at the Florida line. You figure the Yankees will not get there until very late. You pack up your things and move.

In September 1864, Sherman burns Atlanta. Then he marches to the sea, burning and pillaging all the way. The Yankees arrive in your town after Lee’s surrender.

Your wife dies in 1866. You remarry. Your name is Henry Holliday. Your son is named John. You can afford to send him to dental school in Baltimore, because you have lots of land money. He gets tuberculosis and heads west for his health. He moves to Dodge. Then he gets out of Dodge. He heads for Tombstone. He survived to get out of Dodge because his father got out of Atlanta.

Lesson: if you can read a map and draw conclusions, you can do quite well in bad times.

You are a Jewish photographer in Germany in 1935. Hitler has been in power for two years. You decide to get out while the getting is good. You cannot take any money out of the country. The government has imposed capital controls on Jewish emigrants. So, you stuff a suitcase full of old photographs that you have collected, and emigrate to the United States. You keep collecting photographs. In 1981, you sell your collection. In 1995, Bill Gates buys it and moves it underground into a salt cave to preserve it. You die in 1998, knowing that have left behind the greatest single privately owned photo collection on earth. Your name is Otto Bettmann.

You are a Japanese farmer in California. You have just heard about Pearl Harbor. You decide that it’s time to move inland, far away from anti-Japanese sentiment in California. You sell your little farm, get into your car, and head for Austin, Texas. The climate will not be too bad. Austin has the University of Texas. Your kids can attend a good school.

A year later, every Japanese person on the West Coast is rounded up and sent to a concentration camp. Their farms and businesses are sold for pittances. Politically connected people buy them. But Japanese living east of Idaho are left alone.

Lesson: when the going gets tough, the wise get going before there is no more going at all.

MOVE TO, DON’T FLEE FROM

The refugee leaves from. He gets out, but only when the roads are clogged and the market for property is depressed. He takes what he can put onto a cart.

In contrast, the emigrant plans an escape route before his peers think there is anything seriously wrong. They can see that there is something wrong, but they assume that it can’t get worse. They are wrong in some cases. Things get much worse.

The hard part is to accurately forecast how much worse, and then accurately forecast where things won’t get worse. Then the forecaster must put his money where his mouth is. Well, not really. He keeps his mouth shut. He puts his money where his preferred spot on the map is. Then he sells, moves, rents, and then buys.

The early bird gets the worm. Conclusion: don’t be a worm above ground at sunrise.

When was it time to sell a home in California, Phoenix, Las Vegas, and Miami? In late 2006. At the latest, mid-2007. How many people did? Not many. How many took the money, moved to Texas, and bought a lovely primary home for cash, bought two multiple rent houses for cash, and paid a low capital gains tax only on the secondary houses? Even fewer.

Looking around at your situation, and making forecasts about what the future is for the United States, where else would you go? Unless you are very rich, probably nowhere outside the United States. But inside the United States, there are many places to go. The climates vary, the cultures vary, and state taxes vary.

For most people, moving out is not an acceptable option. Relatives are nearby. Jobs are not transferable easily. People stay put. They put up with things as they are.

This is why, for a few, there is a market to sell into.

Most people will not get out of the way in time. They are rooted in place. They look at their roots and conclude: “It’s too expensive for me to move. So, I will assume that things will not get any worse.” They filter information based on this original assumption.

They don’t move to. They don’t move from. They sit tight.

Yet Americans move all the time. They are the most mobile large population in history — or were until the rural Chinese started heading for cities in the late 1980s. Every year, millions of Americans move. Half of these moves are across state lines. We change jobs every 7 years — the highest turnover on earth. It’s over 11 years in Japan. So, we respond to incentives: moving to. This is wise. But the incentives are conventional: a better job down the road, a nicer home for the money, a more leisurely pace. The moves are not moves out as much as moves to. I think this is wise.

The question is this: What will be the incentives in five years, after another $7 trillion get added to the Federal government’s on-budget budget? What happens if there is QE3 and even QE4? How will the real estate market be doing where you are today compared to where you would like to be then?

Have you done what Henry Holliday did in 1863? Have you looked at a map?

It won’t be Sherman marching to the sea. It will be Bernanke marching into the sea of debt.

AHEAD OF THE CURVE

You are already way ahead of the curve. You have read my reports and reports like it. You regularly read materials that your peers and relatives rarely see and would not believe if they did read them. But it is clear that, over the last three years, far more people are reading such materials than before.

This makes you aware of what your situation is likely to be in five years. How much thought have you given to the details of what your situation could be?

People think about things in general before they think about things in particular. You have thought about things in general with greater perception than your peers. But this only raises questions regarding specifics. People resist thinking about the specifics. Here are a few specifics to think about.

What will rising long-term interest rates do to housing in my town? What will the job market be like in my industry? How well will people in my age bracket be doing employment-wise in my industry five years from now? What is the likelihood that my pension program will still be in force and also growing? How well will urban real estate do in comparison to small town real estate? What will be the effect on urban government budgets in a time of rising interest rates? How solvent is the state government where I now reside? Will the government impose new taxes, especially a VAT sales tax, to cover the budget? What likelihood is there that my state will default on its bonds? In terms of safety, will my location be reasonable? What climate would I want to live in if energy costs triple? How dependent am I on income generated in my region? If I could generate 80% of my income from the Web, would I still want to live where I live today? Is there a better location socially where my children would be safer? If I were starting out today, would I move here? In terms of my pre-adult children, does my present location offer them the best opportunities? Is the cost of living significantly lower elsewhere? Is the lifestyle that I really want what I will have in five years? What is the main liability geographically where I live now? How much money will it take over the next five years to overcome this liability?

The average Joe has never sat down and asked these questions. He has surely not put pencil to paper, jotting down first-response answers. He prefers to drift along. He prefers ignorance. He fears responsibility. He thinks he can defer it. He thinks he can kick the can.

He is pretty much like Congress. Congress is what it is because voters are what they are.

CONCLUSION

I don’t think most people who live in wealthy first-world nations should move to foreign nations. I do not think there will be a repeat of the pre-War tyrannies. Why not? Because the Web will keep dictators from ever getting into a position to impose tyranny. It might happen in a national emergency such as a biological attack. But such an attack would not honor borders. It would spread.

So, I am partial to a strategy of moving inside the nation. It is cheaper to do this financially and legally than to move to a different country. It is also cheaper culturally. Reduce the cost of the move. When the cost of anything falls, more is demanded.

There is no national leader who commands the charisma of a Hitler, a Churchill, or a Roosevelt. The Web makes it unlikely that anyone like those men will appear again. If they do, the Web will take them down several notches. The Web pops messianic bubbles very fast. The economy pops any who survive the Web’s assault. This is positive.

Get out your map. Get out a pencil and a sheet of paper. Go through the exercise of Map-n-Go.

Before you do, read this.

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2011 Gary North