Recently, the U.S. Commerce Department announced significant support for the Taiwan Semiconductor Manufacturing Company (TSMC) by granting them a $6.6 billion subsidy through the CHIPS Act to help build computer microchip manufacturing facilities in Phoenix, Arizona. Additionally, TSMC will receive up to $5 billion in favorable government loans.
In exchange, TSMC plans to increase its investment from $40 billion to $65 billion and will establish a third production facility in Arizona by 2030. The company intends to begin producing cutting-edge 2 nanometer technology at its second site starting in 2028.
The Commerce Department projects this venture will generate 6,000 permanent manufacturing positions and 20,000 temporary construction jobs. As the race for AI technology intensifies, having semiconductor fabrication within the U.S. is becoming increasingly crucial. However, funding a foreign company with taxpayer money raises long-term economic concerns.
This case exemplifies a broader trend in which the U.S. economy seems increasingly detached from the principles of free exchange and more influenced by governmental intervention.
Policymakers, including members of Congress, often endorse ludicrous spending proposals that entangle the American populace in a cycle of debt. The resultant contracts, wasteful expenditure, production subsidies, and social payments contribute significantly to the national debt.
For instance, the recently passed $1.2 trillion spending bill spans over 1,000 pages and includes substantial allocations for various governmental agencies such as Defense, Homeland Security, and Education.
But are these expenditures truly benefiting the public?
Not Capitalism
The impacts of extensive government spending distort the economy in unpredictable ways. Money is siphoned from those who have earned it through valuable goods and services, only to be funneled into government agencies and contractors that otherwise would struggle without this support.
It’s important to clarify that this system diverges significantly from capitalism. Instead, it resembles a centrally controlled economy that exploits the achievements of capitalism while undermining individual freedoms.
Whether it’s termed cronyism, fascism, or tyranny, it is essential not to conflate your current discomfort with the failures of free market capitalism.
Major government spending bills have no relation to free market principles. Instead, they exacerbate rising consumer prices, illustrating deeper systemic issues.
While your Congressional representatives distribute funds carelessly, another group of central planners, notably the Federal Reserve System, continues to siphon value from the public’s labor to benefit major banks.
This central banking system provides significant advantages to large financial institutions. During economic upswings, banks reap considerable profits. Conversely, when downturns occur—often the result of their reckless lending practices—the Fed bails them out with money created out of thin air, transferring the burden to taxpayers.
Since 2000, the U.S. government has accumulated an astounding $29 trillion in new debt. How is this possible, particularly at such low interest rates?
The answer lies primarily in the expansion of the Fed’s balance sheet.
Currency Debasement
There are no free lunches in economics. Even in a fiat currency system, the creation of new money is not without limitations.
The extensive money printing triggered by the pandemic led to a surge in consumer price inflation, reaching 40-year highs in mid-2022, a trend that continues today. The repercussions of this inflation have created significant hardship for many.
This week’s CPI report highlighted a 0.4 percent increase in consumer prices in March and a 3.5 percent increase over the previous year. This 3.5 percent annual rise is 75 percent higher than the Federal Reserve’s specified target of 2 percent inflation.
However, viewing just the past year provides an incomplete perspective on the inflationary trend. The 3.5 percent increase must be considered alongside prior years to fully grasp the extent of currency devaluation.
Since the onset of the pandemic in March 2020, the CPI has escalated from 258.115 to 312.332, representing a 21 percent rise. Has your income kept pace with this inflation over the last four years?
If not, this doesn’t reflect any personal failing; instead, it highlights the impact of a planning group intent on undermining the currency. Consequently, you may find yourself worse off than you were four years ago.
Furthermore, the statistics provided by the Bureau of Labor Statistics are likely understated to mask the government’s inefficiencies. It is estimated that prices have inflated by approximately 40 percent over the past four years, rather than the figures reported by the BLS.
Gold Is Doing Its Job
The surge in consumer prices stems from both the Federal Reserve and the Treasury’s expansive money printing endeavors. Essentially, rising prices are indicative of an economy heavily reliant on artificial stimuli. The integrity of this economic structure hinges on the continuation of such practices—removing this support could lead to a collapse.
Central bankers, such as Fed Chair Jerome Powell, recognize that they face only two paths: either continue inflating the dollar until it loses all value, resulting in societal chaos, or halt this expansion and face a total credit collapse reminiscent of the 1930s Depression.
Neither scenario is appealing. Yet, as we observe, the Fed has chosen inflation, hoping to delay a complete economic breakdown until an older generation has departed, leaving younger individuals to bear the aftermath.
Meanwhile, signs of turmoil are already pervasive: soaring consumer prices, unsustainable debt, growing income inequality, urban homelessness, and border disarray.
These issues arise from misguided fiscal and monetary policies, compounded by corruption. However, individuals can take measures to protect themselves.
Historically, physical gold—and silver—has served as a reliable means of wealth preservation during chaotic times. It is expected to continue fulfilling this role as the repercussions of extensive currency debasement and corruption unfold in America.
So far this year, gold has appreciated by over 15 percent in dollar terms, while silver has increased by about 20 percent.
Indeed, gold and silver are performing their intended functions. Was there ever any doubt they would?
[Editor’s note: It’s remarkable how a few strategic decisions can lead to transformative wealth. At present, I am preparing to make another pivotal decision. >> I would like to show you how to do the same.]
Sincerely,
MN Gordon
for Economic Prism
