[Editor’s Note: This article was written by Sovereign Research team member Joe Jarvis, who lives in Puerto Rico.]
Last week, Hurricane Fiona hit Puerto Rico, knocking out power to the entire island.
Over a week later, nearly 25% of the island is still without power, including dozens of local hospitals.
Puerto Rico’s power grid has been notoriously unreliable for years; in fact when Hurricane Maria blasted the island in 2017, the electrical grid was down for months.
This prompted the US federal government to shovel more than $30 billion in aid to Puerto Rico, which is a prodigious sum for an island of just 3 million people— it works out to be $10,000 for every man, woman, and child in Puerto Rico.
And out of that $30 billion, $12.8 billion was specifically set aside to fix the electrical infrastructure.
To put that figure in context, $12.8 billion should have been enough money to build new power plants, from scratch, that would have had enough capacity to power the entire island.
And yet, five years later, the electrical grid is even more unreliable and precarious thanks to endless government incompetence and widespread corruption.
To talk about incompetence and corruption in Puerto Rico is not hyperbole, or even remotely controversial. It’s common knowledge.
Just last month, for example, the previous governor of Puerto Rico was arrested and charged with bribery, along with a former FBI agent who helped facilitate the bribes. And the previous governor before that had to resign in disgrace after a series of major ethical scandals.
And with respect to the electrical grid, the president of the former state power company was arrested in 2019, along with a US federal government official, in connection with a $1.8 billion bribery scheme.
Everybody in Puerto Rico knows their government is rotten to the core.
Like our founder, I also live in Puerto Rico. Yes, there are problems. But there are also some really great things happening on the island. It’s a wonderful community. And the unparalleled tax incentives are incredible.
But at the same time I have no illusions that the Puerto Rican government is going to save me from a crisis.
When Hurricane Fiona came last week, I had my backup solar power ready to go, so that I could keep the essentials up and running.
I also used Elon Musk’s satellite Internet service, Starlink, to maintain communications. He seemed like a much safter bet than my local government.
Plus I have a propane grill, and enough food and water to survive for months if necessary.
(Extended living without electricity isn’t part of the plan, though, which is why I book a refundable flight out of town as an extra insurance policy whenever a hurricane pops up on the horizon.)
This is just an example of a larger point that governments do not solve crises. More often than not they engineer crises. But they rarely solve them. Puerto Rico is just a case study of a much larger trend.
Across the world we can see examples of abject government failure.
In the United States, the Federal Reserve completely failed to anticipate that their infinite money printing over the past decade (and especially in 2020) would spark inflation.
Then when inflation reared its ugly head in early 2021, they denied it. Then they rolled out the tiresome trope of inflation being “transitory”.
All along the way they kept insisting that they have everything under control and there’s nothing to worry about.
Today, however, their entire tone has changed. They’re engaging in extremely panicky monetary policy, desperately trying to raise rates as fast as they can and causing all sorts of havoc and destruction along the way.
They caused the inflation problem. They failed to fix it. And at the moment they’re making things worse by spreading fear and paranoia.
Social Security is another obvious example.
In its annual report each year, the Social Security Board of Trustees admits that the program is losing money and its financial reserves will “become fully depleted in 2034”.
In other words, the biggest retirement trust fund in the world, which helps pay benefits to tens of millions of people every month, is going to run out of money in 12 years.
These aren’t fringe economists spreading wild conspiracy theories or disinformation. These statements are published by the Board of Trustees for the Social Security program, which includes the Treasury Secretary of the United States, the Secretary of Labor, and more.
Once again, politicians caused the problem through endless fiscal mismanagement. They failed to do anything to fix it. And they’re making it worse every year.
Despite such utter incompetence, however, government still tends to view its citizens as helpless children.
Bureaucrats and politicians believe we are incapable of taking care of ourselves without their constant direction and meddling in our health, careers, finances, retirement, and even the education of our children.
This is a completely idiotic point of view. An institution with such a horrendous track record should have minimal influence and control over our lives. And we have all the tools we need to solve these problems.
We know, for example, that Social Security’s trust funds will run out of money in the early 2030s. After that, retirement benefits will either be drastically reduced, or may not even be there at all.
But (as we have discussed many times before) there are plenty of ways to solve this problem yourself— you can set aside a lot more money for retirement, invest in a wider range of asset classes, AND slash your taxes at the same time, using a Solo 401(k) structure.
I’m also not waiting for the Federal Reserve to ride to the rescue when it comes to inflation. We all have options protect wealth from inflation— even something as simple as “Series I” savings bonds which currently yield 9.62%.”
This is ultimately what a Plan B mentality is all about. You’re in charge of you. Not the government. And there are mountains of resources and solutions at our fingertips to solve the problems that they create.