Two paths: Get out or beat them at their own game

I recently wrote about what I consider to be the multinational industrial complex.

President Eisenhower warned of the military industrial complex, essentially fascism with a capitalist twist.

But over the years, the bought politicians and their corporate cronies have expanded the concept to be something far more insidious and far more damaging to average Americans.

Here’s the way the government works it. Let’s use the tobacco industry for example.

Liberal politicians wanted smokers to stop and didn’t want a new generation of smokers to start (which hasn’t really worked since smoking is on the rise again in the U.S.). So they resorted to social engineering, limiting use of tobacco products by state and federal mandate; a historic lawsuit and other legislation that looked to individuals like the government cared about the safety and well being of citizens.

That’s all well and good, but behind the scenes something else was going on. For the big tobacco firms to suck all this up, the politicians did something that would actually help Big Tobacco consolidate what was left of the industry by passing laws that only mattered to little farmers’ livelihood.

You see, one of the hottest trends in tobacco was “roll your own,” and small production operations like American Spirit. They were the micro brew revolutions of the tobacco industry.

And just like laws are conveniently structured for big firms to buy out their smaller competitors in the brewing sector, so it is in tobacco. The only difference is, in tobacco, they basically ground the small competitors out of business, with the help of Washington pols.

Laws were passed to raise the taxes on loose tobacco 300 percent, but didn’t raise the taxes on finished tobacco products. That meant small tobacco farmers were taxed for selling loose tobacco to RYO sellers, but cigarette makers (Big Tobacco) were not taxed. This squeezed the little guys out of their small businesses, which meant either knuckle under and sell your crop to Big Tobacco at its price or sell the family farm.

Right now in the beer industry, the two largest companies SAB Miller and Anheuser-Busch InBev are looking to merge. This has significant implications for the renaissance in small breweries opening up around America.

Distribution is what’s crucial for the beer industry. The broader your distribution, the more money you can make. These two big brewers dominate beer distribution across the country. You want to expand your market beyond your city or town? You have to go through us. You don’t want to play ball? Good luck expanding your territory.

This is what I’m talking about when I say the multinational industrial complex.

A recent article reinforces the sinking feeling we continue to have about our economy, because these are the facts that individual Americans live with every day, and Wall Street and Capitol Hill are indifferent to.

Standard & Poor’s, you know, the ratings agency that missed all the flashing lights to the last massive financial crisis, has recently reported that the default rate on its speculative-grade corporate debt is up to 4.1 percent, the highest rate since December 2010. In January it was 2.8 percent.

That means there are a lot of smaller companies that are twisting in the wind and collapsing. Not big firms that are refinancing their outstanding loans with ultra-low, government subsidized debt. They’re fine — for now.

Small firms are being squeezed out of the debt markets.

Want more proof?

A recent article in Barron’s notes that IPOs are at their lowest in years.  Here’s an interesting quote:

“The IPO market has become more institutional, because most individual investors and their advisors are buying indexed products,” says Kathleen Smith, principal at Renaissance Capital.

“They are not in there flipping IPOs. The individual investor participation, which tends to be the easy money, is not there, and it’s very unlikely to come back.”

Individual investors make up little of direct stock ownership. Institutions run the show. That means institutions are now buying start-ups without taking them to market.

It’s like Big Tobacco keeping small farmers under heel.

It’s like the big brewers intimidating small brewers.

And this game was rigged with the help of the politicians in Washington, D.C. With their help passing the laws and regulations that make it harder for individuals to manage businesses that actually make things, they finish the job being done to the American people.

There are two paths here: Get out of the system or use it to your advantage.

If you plan on getting out, start by taking delivery of gold and silver, either in bullion or coins with low premiums. You can also use other collectibles like art or antiques or vehicles that will maintain a value beyond a market collapse. Learn how to work with your hands; learn a trade, plant a garden, raise honey bees; get some chickens.

If you want to stay in the system and ride it, like the big boys do, then right now stick with the companies that are all in on “too big to fail.” The government has told you they’re not going to let them collapse. Look at big financials, essential services providers like big utilities and the big energy companies.

There’s a handful of other opportunities out there but they’re more specific. Aside from that, these companies are the ways to play the game to your advantage.

— GS Early

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