Tuesday, November 29, 2011

How will this economic calamity end?

It will end with a whimper, not a bang.

I like all the recent blather from the Fed (reference: the Dec FOMC minutes) about how we may have reached the limit of monetary policy's ability to deal with the crises we face.

Baloney I say. The Fed is bluffing.

After all, we reached that same monetary policy limit in Sept of 2008, and yet the TARP still went through, and the Fed still ballooned its balance sheet, all just to save Hank Paulson's Alama Mater, Goldman Sachs.

But enough of what's in the past- bygones, water under the bridge, etc.

Let's talk about 80x leverage in the global dollar marketplace, and weigh that against the only source of ALL US dollar credit for a moment.

Yup, sure as hell, that leverage factor says that the debt is completely unpayable (aka odious), and that the process of deleveraging means catastrophic deflation... No argument from me.

But wait! what about interest rates?

When primary dealer banks can create whatever capital reserve level they need to be at by borrowing from the Fed for 0.25%, and they then can use this credit to purchase US Treasuries that yield ANYTHING better than 0.25%, then there is still plenty of room for this game to continue...

BUT, of course, there is the threat of rising Treasury yields due to a global Treasury demand collapse. Ignoring such a scenario, (or dismissing it out of some misplaced patriotic duty) firmly places one in the same camp that was reading (and believing) Dow 36000 in March of 2000.

Global US Treasury demand COULD collapse this afternoon, or it MIGHT NOT ever collapse (or at least not until all of us are dead).

If Treasury demand in the open market does collapse, forcing upwrd pressure on yields, and  making it harder for the Treasury to issue successful auctions; then the best bet on that day (if/when it comes to pass) will be to simply stand back and watch as the Primary dealer banks buy the rising yield Treasuries, still using newly issued Fed credit that might drift as low as 0.0000125% (or even 0.000000000000000000000125%) ... creating a dollar carry trade that makes Japan's look bush league.
 Meanwhile, the Treasury will need to make sure that all this new issuance can keep the US balance sheet from tipping over, so Congress will raise the debt ceiling (either in continuously increasing increments that rise exponentially; or maybe they will get really smart and just throw a nuclear number at it like 250 Quadrillion dollars) and we will all witness a bout of odious debt creation that will make every tsunami that Mother Nature has ever concocted look tame by comparison.

You may one day see the guys on Myth Busters sailing a boat around the world made out of US Dollars and Duct Tape, just to prove that the dollar still floats globally.

Why is this the most logical outcome, you ask? Simple- hyper inflation NEVER occurs in militarily significant economies. The only way you topple military giants is via internal political upheaval.

You can repudiate our currency, but you can not collect on the debt we owe you, unless you can kick our ass. This is the final lesson the Romans HAD to be taught the hard way by the Huns and the Visigoths, and so too, I fear, it will be for the USA.

Sad, but true, if history is a reputable guide.

The US has a very long (decades as I see it) episode of internal and political degradation to endure before the cyclical lessons of history once again assert their mastery over human hubris and arrogance.
Ergo, global US dollar supply will not be shrinking over any horizon measured in years, or even in decades.

The US dollar is not cooked. The US dollar is merely cooking, but the heat under the pot will never rise above a simmer. The water will boil, but not until we get bored of watching it.

In the meantime, there will be all kinds of crazy currency gyrations, and all kinds of new International Reserve Credit currency ideas that will (again) attempt to willfully ignore what is a basic, fundamental, unavoidable, and inescapable truth:

ALL money is a claim on future production. All of it- credit based money, or hard commodity money- it is all nothing more than a representation of the stored value of work that was done yesterday, but is intended to be exchanged for the results of some other work that will not be done until tomorrow.
Therefore, the ability to borrow work from the future will never go to zero, unless the aggregate value of ALL work ever done prior to today also goes to zero.

The fallacy that deflation destroys value is a myth. Deflation negatively impacts the desire to work (since it creates the perception that work is valueless, and therefore meaningless)- this is the persistent nag that inspired Ben Bernanke to crank out his famous Helicopter Manifesto in 2002.

If you understand the value of work as it pertains to your own psyche (pride, accomplishment, achievement, etc) then you will successfully endure EVERY possible future that this diseased system of political and financial corruption might lay out in front of you...

Saturday, August 6, 2011

An Epiphany For Me.... Eureka

** Preface- After finishing and re-reading this work, I consider it my Magnum Opus on gold, money and the value of labor- I will demonstrate below how the immutable laws of physics interact with the subjective and perceptive aspects of economcs and money in a realtively simple, elegent sense; but it is pretty deep. Prepare yourself **

Gold is money, gold is not money, blah blah blah... the arguments in financial journals bore me to death.

One fact that is inescapable: Gold represents the real work necessary to produce it. I've written about this before.

Gold has been mined and refined continuously for nearly 6000 years, yet all the above-ground Gold in existence would barely fill 3 Olympic sized swimming pools. That's an awful lot of labor for very little end product, dontcha think? Consider this compared to how many swimming pools worth of oil have been extracted, refined, and wasted playing in dune buggies on Southern California sand dunes in just the past ten years.

Originally, gold was sought after by bronze age metal crafters due to it's density and softness- while it was too soft to forge weapons, it was easy to shape, and its yellow color added pretty decoration to shields, sword guards/pommels, and helmets. Because of gold's scarcity and the fact that it was more easily aquired via the theft/death of it's previous owner then it was by mining and refining it, Gold usually ended up adorning implements of the strongest and most powerful warriors, and the more Gold a man displayed on his wares, the more powerful and noteworthy his personal prestige and social status became- Any man who dared to parade around accesorized by Gold was simultaneously demonstrating that he had the skills/means to aquire it, as well as the skills necessary to defend it. Gold was a glaring symbol for all to see that the wearer was not to be messed with...

In other words, Gold moved rapidly from a utilitarian metal to a symbol of perceived wealth and power.

It is only natural that gold would begin to demonstrate its utility as money next. Eventually, the tough guys had so much gold that they and their women could not possibly wear it all (it is quite heavy after all), and there were plenty of people who would gladly trade work, or oxen, or wheat for a few scraps of gold.

(That this sentiment would give rise to the erroneous concept of social class structure, the emergence of Kings, and the common "haves versus have-nots" social dynamic is duly noted; but that is another essay for another day. Today we are focusing on value.)

So, the genesis of gold as the longest lasting, most enduring symbol of money in human history, was anchored by:

1) Its durability and permanence- gold does not react, oxidize(rust) or dissolve as easily as other elements.
2) Its scarcity- gold could only be aquired via work- whether that work was noble and scrupulous:
  • Digging, sifting, and refining it, or
  • Growing wheat, or cattle to trade for it, or 
  • Trading your skills as a craftsman in exchange for it.
or unscrupulous:
  • Murdering, robbing, and plundering
  • Cheating in games of chance where gold was the wager 
3) Its divisibility- gold is soft, and can be cut into different sized peices, making it easy to denominate into different sized pieces to "lubricate" the negotiation process ("I'll do the job for 3 drams" - "Blashemy you say- Cornwallace has already offered to do it for 2 drams, so it's 2 drams or nothing"
4) Its portability- Cattle have enormous value for the amount of food calories they provide, but they are not easily transported from town to town (and they are nearly impossible to hide- the cattle farmer has no choice but to display his wealth in full view of every cattle rustler in the area)

So, I've been typing for 20 minutes and all I have covered is a brief history lesson. So, on to my epiphany:

Go back up and read number 2 again, and if you haven't already, bo back and read the other post I linked to above.... Now, start thinking about the present day.

Gold (any valid money, actually) is a stored-value proxy for work. When workers/laborers are in scarce supply (low unemployment levels), the proxy value of "money for work" falls. When there is more work to be done than there are workers available to do it, then people willingly trade the value of their work for less real monetary value, and they also save less in both a monetary sense, and in a value sense:

"Since there will still be plenty of work for me tomorrow, why should I worry about earning any more today than I need for today?"

- In other words, during low unemployment periods, the psychological value of money and work typically fall together.

During inverse periods, when there is less work to be done, and there is a preponderance of available labor to do it (aka high unemployment), the value of work (for those who do not have it) soars, as does the value of money (since the future is less stable, people save more, and they look for storage methods that will preserve as much of the original value of their labor as possible for as long into the future as possible)

So, that's my epiphany- the real value of labor, and the real value of money are not inverse to each other, as common sense would suggest. At a very macro, societal level, and over very long timelines, these values rise and fall together as economic employment opportunities concurrently rise and fall.

Employment will always be more IMPORTANT than money- easily demonstrated by the fact that if you ask an unemployed person whether they would prefer to have a job, or a free unemployment check, any rational minded person would choose the job. (The fable that if you give a man a fish you feed them for a day, while if you teach a man to fish you feed him for life, is apt), but the importance or priority of a job over money does not change the direction of the psychological value curve related to each, it only changes the ratio by which they exchange for one-another.

Back to today. For the past 40 years, money has only been printed paper, and over the past 20 years, money has evoloved into nothing but data. Well, paper is easily grown, and data is VERY easily conjured into existence, but up until recently, employment has been readily available, so people have been happy to trade their work output for these low-value intruments of exchange (The future's so bright, I gotta wear shades). Things were orderly, stable, and everything balanced out nearly perfectly. Even the global anchor of all this "wealth", oil, seemed to be pouring out of the ground easily enough to keep people from worrying about where their next meal would come from, or where the next tank of gas would come from, or how much long term purchasing value their monetary savings was maintaining.

And then the roof caved in in 2002, and the money printers rushed in and threw up a bunch of monetary scaffolds and temporary supports and the party resumed... and then the roof caved in again in 2008, and the money printers rushed in again and threw up even MORE paper and digital monetary support under the system; and here we are today, where the common faith among many is that the system is gearing up for yet another epic fail...


Well, by the early 2000's, everyone endeared to the "oil is wealth and paper is money" concept was getting rich by shuffling paper, and buying bigger houses, and partying. The system seemed perfectly balanced and perpetual, but anyone (the few) who understood the immutable laws of physics was getting REALLY nervous...

The second law of thermodynamics states that entropy (the relationship of order to chaos in any system) must always INCREASE (favor chaos) over time. This is to say that all orderly systems must fail, and all well formed structures must disintegrate into less stable states- this is unavoidable, and the more orderly the system is, the higher the probability that it will succomb to the laws of entropy. This concept is easy to see in old buildings that collapse and disintegrate into dust over time, and in fruit that gradually rots into soil, and in beautiful sand castles that degenerate into disordered mounds of sand grains. Even paper disintegrates into dust over time.

Are we seeing the same thing in the global economic/monetary system? Is the global fiat money system succombing to the forces of entropy? History tells us that every paper money system ever tried, has failed, and that all measures of social status and wealth (houses, cars, rolexes, etc) degrade and succomb to the forces of entropy over time.

Now, please go back up and read number 1 above. There is only ONE class of monetary instrument that denies the law of entropy from doing it's nefarious deed: High density precious metals. (I concede that this point is refutable when applied to cosmically huge timescales, for even gold will slowly degrade into Platinum as the Universe continues cooling, but we're talking Trillions of Trillions of Trillions of centuries for that to happen, and I freely admit that I am not so concerned with preserving the purchasing power of my labor for quite THAT long :-)

Iron rusts. Pure Sodium actually "burns" in the prescence of air. Even the highest quality stainless steel degrades to powder when left in the ocean for a few years, but pieces of gold and silver can sit at the bottom of the ocean for THOUSANDS of decades, and will come back up still preserving their original weight, shape, and composition.

Ok, enough on entropy and the permanence of wealth. Back to the present times.

So, we are now firmly entrenched in a period in which employment (the availability of jobs) is low, so the psychological value of work is high and rising, and therefore the psychological value of money should also be rising, and yet the paper money system in place is showing structural cracks in the foundation...

So, how will this all play out? I think the answer lies in Africa.

Wait, AFRICA? What in the hell are you talking about, Robert?

In the global economic boom of the past 60 years, Africa has clearly been the loser. Even with a growing population that demonstrated that it valued work very highly, prosperity just never took hold on the original human continent; and now we are at a point in time where the global economy is contracting, and the perceived value of work and money (to those who have neither) is rising world-wide. This has very interesting (if not sad) repercussions for Africa.... unless some method of increasing the wealth of the African continent can be found that will employ the abundance of African labor, and leverage it to produce items that are rapidly increasing in psychological value world-wide. But, we've all seen the pictures of Africa... there's nothing there but Kilimonjaro and dirt.

Do you see where I'm heading with this? What forms of wealth arise by working the land?

Oil, corn, wheat, cattle, gems... and metals.

Suddenly, everything I've read in Adam Smith's The Wealth of Nations makes even more sense to me than before (as do many of the works of Murray Rothbard and Ludwig von Mises), and even though I signed off long ago on Mises' premise that money is a proxy for the stored value of work, I never fully realized that these values, from a global psychological perspective, must rise and fall in unison like a long, wide amplitude sine wave, based on the general employment level.
Unemployment raises the perceived value of work, and it increases the personal need (demand) for more valuable forms of money.

All these arguments about "Gold is a hedge against inflation" versus "gold pays no income so it is financially worthless" are completely capricious and irrelevant.

Gold is permanent. Low unemployment levels are not; and faith based paper money systems are not, because entropy must de-construct faith just as readily as it de-constructs sand-castles.

The law of entropy can not be reversed- sand can not be "un-weathered" back into granite, and nature does not randomly create sand castles by combining wind, water, and sand (although there is no physical law that says this is impossible- it is only very VERY unlikely).

Only new, temporary orders can arise out of chaos, and these new orders are all doomed to submit back to chaos just as every temporary order prior to them did.

Likewise, only monies that maintain scarcity, and possess the durability to survive the periods of economic chaos can move into the next period of temporary economic order.

Now, I've always considered myself to be pretty sharp, but last night at about 8:30pm as I drove home with a tasty load of Mexican take out, I suddenly felt much smarter and more enlightened than I had been at 8:29 as the intellectual and subjective link between the value of money and the value of employment wired themselves together in my brain...

So that is the most complete rationale I can provide for why your real physical savings must not be deposited into paper or digital intruments if you want them to maintain trade/purchasing value that can only rise and fall based on the concurrent rise and fall of the real value of labor over time...

Thursday, August 4, 2011

Random Thoughts...

1) Obama said he would rather be a great one-term President than to win a 2nd term just for the sake of holding office for 4 more years.... ummmm, yeah, but if a President is truly great in his first term, then isn't the 2nd term pretty much a lock?

3) Bernanke tells Ron Paul that gold is not money. Congratulations, Mrs Bernanke- you gave birth to a fully qualified idiot.

4) If Gold is not money, and if Gold has no value, then why was it necessary for Nixon to close the Gold exchange window in 1971? Think about that one for a good, long time...

Wednesday, July 13, 2011

Sovereignty... It's all about YOU, not them.

The individual human person (read: YOU) is under attack by those who have every want, need, and desire, to maintain the power of a very simple lie.

This lie, within whose envelope we are born, educated, trained, and thoroughly indoctrinated, is simply the concept that sovereignty is somehow hierarchical...

There are two common ways that this lie is fostered and maintained:
  1. Passive Authority- we dazzle and impress others with our brilliance, and those that we impress begin to look to us as somehow superior to them, and soon they revere us and address us as authorities and eventually they begin to yield their sovereignty to ours. This is typically the avenue of Preisthoods and Academia... it relies on bureaucracy and process to maintain the illusion.
  2. Aggressive Authority- Individuals or groups leverage the imbalance of some strength to directly impose their super-sovereignty over those who are "weaker" than they.
Over time, sovereignty yields to higher soverignty, until people organize into "sovereign states" and states into nations, and the next thing you know, we have some ass-clown with a teleprompter standing at a podium declaring that he can wage war against another population of people (human beings- each with personal conciousness and free will) without the approval of his own sovereign state; because he is acting as part of a coalition of other states under the "authority" of an even higher super-sovereign...

And while aggressive authority (number 2 above) is certainly more efficient than passive authority, it is also inherently less stable (since you never really know who is going to submit, and who is going to fight back), so the best "uber strategy" is to combine both methods in a hybrid system that completely obscures a singularity of truth that can not be seen, heard, nor discussed...

Sadly, this entire analogy can also be allegorical to another term:

Without respecting the absolute sovereignty, consciousness, and freewill of other people on an individual level, there can (and will) be no true freedom for our species- ever.

The greatest day any parent should look forward to is the day their offspring say "Take a hike you idiot- I'm taking responsibility for my own life", but instead most parents live with fear and dread of this ever happening...

The nature of the human condition is why we seek affirmation from others, and it is why we so willingly sacrifice our individual sovereignty in the process of searching for some higher meaning.

In other words- the smarter we think we are, the more stupid we prove ourselves to be.

Thursday, June 16, 2011

Economics, Machines and the Real Value of Capital

This commentary is more a flight of fancy than a practical analysis (edit: maybe not. Read Here), but since it’s really intended to inspire thought, I’m going to throw it out there and see what sticks…

I’ve been thinking a lot lately about the 1998-2000 Parabolic blow off that ended the last big bull market in tech stocks. I’ve been trying to rationalize and gain some insight into how/why the  performance of the NASDAQ composite index has subsequently “followed” the performance of the S&P5000, when it is improvements in efficiency (enabled  by technology) that serves to depreciate the real economic cost of labor over time, resulting in improved margins across a broader swath of publically owned companies. In this context, it stands to reason that the tech-heavy NASDAQ should lead rather than follow.

I mean, computers are continuously making just about everything cheaper to do, and computers themselves continue to get cheaper as they simultaneously get MORE powerful (the beneficial consequence of Moore’s law); so how does the disconnect between rising commodity (input) costs versus lower output prices on the final products resolve itself rationally?

It stands to reason that if input costs are rising (whether due to currency debasement, or due to the legitimately increasing scarcity of resources), yet final output prices on finished goods are under consistent price pressure due to economically driven demand pressures, then the price of the second capital element (labor) must be falling in order to facilitate the lower output prices. These reductions in labor costs may be manifest as falling wages, or improved efficiency (fewer human jobs) via automation, or both.

Hmmm… Am I describing deflation? Prices trending lower as the real cost of labor, and therefore real incomes, decrease over time? Bah- I’ve never been a fan of “flations”; and I’m not about to start now- But I am convinced that labor is the key to this analysis, and that when this premise is taken to its logical conclusion, it implies that humanity will soon require a new and revolutionary look at how we value the product of time and effort that we commonly refer to as labor.

Under the current orthodox labor paradigm, people are compensated (paid), not for their willingness to work, but for their actual work output (units of work over time). But what will happen if/when our technological inventions reduce the final “price” of labor to zero?

The Further Impacts of Monetary Policy

The Fed’s officially stated position is that “a little bit of inflation” is the best way to run a currency centric economy, and I will not argue this premise in the context of the post industrial revolution, manual labor intensive economy where people supplied 100% of the labor- Which was the exact economic environment in place when the Fed was founded.

However- in the modern, increasingly automated economy, if people are required to work for wages in order to pay for the things that machines are building for next to nothing, then HOW, pray tell, can a "little bit of inflation" be a good thing over the long term?

Basic supply and demand theory tells us that if I can build one birdhouse for $10, but the next guy can build 2 birdhouses for $5 each, then he will get the business while I will starve, yes?

So, what happens when someone invents the technology to build an infinite number of birdhouses for exactly the cost of the input energy and raw materials?

The Fed's premise that mild inflation is the best guarantor of long term economic growth must fail entirely when technology and automation reduces the real cost of labor to zero.

We can not have "healthy" inflation in electronics while the underlying technology becomes cheaper and more powerful over time. Likewise, as the technology gets cheaper and more powerful, so too must the economic output of that technology get less expensive.  

For a realist’s view of this perspective, just talk to any former Wall Street desk trader who has been “downsized” by the “new guy” who hit the exchange with some fancy new high frequency trading algorithm in the past 5 years.

When it comes to doing economic work- The machines are gaining, and the people are retreating- and the machines work for free- they make no demand for compensation, they do not organize into unions, and they do not lobby for preferential legal treatment.

Taken to its final logical endpoint, one can only conclude that this is the point of catastrophic deconstruction of the current global financial system:

When the work is being done for free by machines, the earning power of people becomes zero, and economic growth/GDP becomes a "division by zero" impossibility.

On that day, the "wealthy" people will not be those who work the hardest; it will be those who hold domain over the energy sources and input materials, and intellectual property that the machines will require in order to do their work.

Those who choose to compete with the machines for labor will all, sadly, lose that fight in a most spectacular fashion. The final line between the haves and the have-nots will be drawn, and it will become nearly un-crossable.

So ask yourself- “Why are commodities (input resources and fuels) rising in price, while the market prices of finished products are under increasing price pressure?”

Are we hearing the first drumbeats of the eventual death of compensated labor?

I know, I know- someone will always be needed to program the computers, and to keep the automated machines plugged into the power grid, etc… right?  Well, as someone who currently earns his keep in this professional domain, I personally think that self replicating nanotechnology will answer the question for us within the next 30 years, and I’m pessimistic that there will be a consistent long term role for people once our technology becomes self-enabling and self-maintaining.

On the theoretical day that this scenario comes to pass, my theory is that money (in all forms) will finally succumb to worthlessness; and,  to the delight of many anti- Goldbugs out there, I’m happy to report that even Gold should finally become worthless as a medium of exchange, since Gold only really represents the intrinsic value of the effort required to extract, refine, and fabricate it- A value proposition that currently still makes it superior to printed currency coupons, but I digress....

The finality of this tech-driven “new reality” also pains me because it represents the moment in time that people will lose their right to choose whether or not they wish to exchange labor for their livelihood.

Where will we find the personal reward of accomplishment (or the incentive to excel and succeed) when we are no longer compelled to expend the time and energy, since any such efforts against the machines will be futile?

I recently wrote a blog entry stating that fiat currencies can only serve as money as long as there is faith in the currency, while Gold will serve as money only so long as there is faith in money itself- In other words, as currencies are fiat money, money itself is fiat capital- it serves as a safe, stored value proxy for work over time. But what would happen when the value of labor drops to zero? Shouldn’t the value of its capital proxy (money) simultaneously fall to zero as well?

When labor becomes a zero-value proposition, humans that wish to work in exchange for livelihood will constantly have to worry about how to feed themselves, while the humans who control the energy, technology and the raw materials will only have to worry about how to control their burgeoning obesity rates...

Even after falling back to Earth after such Flights of Fancy, I still maintain that the only safe long term capital appears to be real assets, but I also must concede that even this is a shaky proposition in the face of accelerating technology that aims to eliminate the time-value nature of capital itself.

At any rate- we’re on the threshold of a new paradigm, because “a little bit of inflation” just isn’t going to work for that much longer.

Wednesday, June 15, 2011

Robert At His Truly Most Random...

No long winded thesis today....  just some juicy tidbits to inspire some thought:

1) The Military Industrial complex:
Our (the good ole UsofA's) military only exists to secure oil in order to maintain the policy of killing foreigners. We extract oil, and burn it in the planes and tanks we use to invade other countries, in the interest of securing more oil to run through our tanks and planes as we look for still other countries to invade in the interest of securing more oil... Brilliant in it's elemental stupidity.

Our military has not defended a US border since the war of 1812. (that was 199 years ago, friends)...

and no, Pearl Harbor does not count. Hawaii was not a state during WWII. Hawaii was a sovereign territory that did not become a US commonwealth until AFTER WWII was already underway. Neither does the Civil War count since the North (represented by the same Federalist Union Army that serves as today's military) invaded the South, not the other way around.

2) Speaking of the Civil War:
The more I study this dark time in history, the more convinced I become that this is the period where the US train left the tracks of Liberty. In the interest of sovereignty, the South should have been allowed to succeed. Slave ownership would still have become a dead practice within 5 years, without all the bloodshed.

3) The Birth Certificate:
Bah, I'd rather see why he's hiding his college records. Perhaps they expose the fact that the first digit in his Cum GPA was a 2...? At any rate- Any President who publically espouses greater governmental transparancy while simultaneously hiding his own dirty laundry from public view is clearly a hypocrite, and certainly not trust worthy. People with nothing to hide, hide nothing.

3) The US Media:
Completely corrupted by the fact that journalists have sold themselves and their ethics down the river as a matter of job security... the pussies.

4) 2012 and the Mayan calendar:
Dec21 will not get here soon enough for me. Let's get this shit over with already and move on to what's next.

5) Bankers:
Scape-goats. Bankers did not cause the mess we're in- they are just to stupid to understand that they are tools of a corrupt system. The core problem at the heart of current economic issues is that people have lost sight of what's IMPORTANT, and what is not. I blame this on the endless, in your face, now is the most important moment of your life stimulation being piped into our brains by the LEAST important information sources out there. It reminds me of the experiment where the electrode was inserted into the pleasure center of the monkey's brain and he was trained to hit one of two buttons- one to trigger the pleasure sensor, and the other to give him food... and the monkey promptly starved himself to death, while the pleasure stimulating button was nearly worn out. It's pure addiction.

6) Speaking of Technology:
I'd rather be fishing than texting.

7) Speaking of Fishing:
I wish I was, right now.

8) Speaking of wishing:
I wish I was retired.

9) Speaking of Retirement:
I better get back to work or else I will never be able to...

Wednesday, May 4, 2011

Why America will make it, even if the United States does not.

I'm sick of reading about the debt ceiling. Seriously. Let’s just get this default underway and move on to the cleanup process, shall we?
I was born in the late 1960’s: Too late to observe the race riots, the hippie movement, or the Vietnam War based social upheaval; so my understanding of these events is derived only by what I’ve read, juxtaposed with my observations of certain historical parallels occurring today around the world.
One thing jumps out at me: back then, Americans seemed to be moved to activism more readily, while today, everyone is waiting… waiting for “another shoe” to drop. Waiting to see their stock accounts wiped out again. Waiting to see gasoline rise to 50% of their monthly expenses. Waiting for the government to announce the next layer of added “security” at the airport. Waiting for the debt ceiling to be raised in the 11th hour before Tim Geithner officially declares the end of the civilized world…
Meantime, I enjoy talking to people. I enjoy hearing their viewpoints.
I ask people if they think America is a free land- the answer is always (100% of the time) “yes”
I ask people if they trust the United States government- the answer is always “no”.
I ask if they believe in the integrity of an economy organized primarily by a military industrial complex that exists only to secure fuel supplies, build planes and tanks, and run that fuel through those planes and tanks killing the people that stand in the way of securing more fuel- The answer is always “no”.
Sometimes, just for kicks, I ask people if they believe the US President is qualified for the office he holds- surprisingly, the answer is “no” more often than it is “yes”.
Then I start asking the hard questions, like “what do you think we can do about it?” and the answers start getting a little frightening, because most often the response is “They have to raise taxes”; to which I always follow up  with “Who are THEY? The same people that endorse the destructive policies that are creating this mess?” – I usually get a stunned silence in return.
I ask if it is the job of the many to finance the destructive whims of the few? – This question rarely gets a yes or no, but that’s ok, because it is intended only to inspire thought.
 I then proceed to drill a little deeper and ask if people WANT to pay more in taxes, the answer is always “no”.
So, with a solid foundation poured, I ask my final question:
“So, do you truly live in a free land when you are forced to relent to doing something you don’t want to do, only because someone else tells you it’s what’s best for them?"
The only correct answer to that question is “no”, and yet the most common reply is “no, but…”
No, But...  and the "buts" always run a gambit of excuses from “the US is spoiled” to “We have too much while the people we kill around the world have too little”, or, “If we don’t keep a strong military, the boogeyman will get us”
Now, most analytically minded, self reliant souls would probably immediately dismiss the respondent as just another sheep- waiting for the sheers to come out, but I see something different.
I see a nation of people who are absorbing and harboring an enormous amount of guilt (whether willingly or sub-consciously) for the actions of the few who declare themselves “leaders” as they recklessly pursue destructive agendas around the globe.
I believe that people are slowly realizing that within the United States’, ethics and integrity have been compromised. Even if they do not understand the complexity of the problem, or what they can personally do about it- a growing number of us do realize that something is terribly wrong, and more and more are awakening to this realization every day. In other words, more and more citizens of the United States are starting to realize that they are actually Americans.

It was Edmund Burke who famously stated that “Evil is allowed to flourish when good men do nothing”; and a sizable number of the “awakened” among us alarmingly hold no faith that America will grow the backbone necessary to revolt against the growing corruption and tyranny of the United States Government. I don’t believe that for one second.
I believe in markets, and there is a market out there for information and understanding, and this market is growing relentlessly. People are beginning to pay attention to things that they never did before. They still might not understand exactly what is going on, and they might not be able to distinguish truth and fact from lies and misinformation, but at least they are perking up and starting to see trends in motion.
Behind every lie, there lives a corrupted truth. As this market for information grows, the information must be distributed and disseminated as either truth or lie by as many people as possible. Now you know why I write.
So, how will America survive? Because America isn’t a place; America is a common spirit founded exclusively upon the integrity of Truth, Justice, and Liberty.  Period.  
It is only the United States where Justice has been corrupted (by Federal Law) in order to allow Truth to be perverted by lies in order to deny Liberty. This place is NOT America.
America is, once again, the growing  group of people that is slowly realizing that the corrupt military industrial economy is financed by bank notes that are backed only by the “Full faith and credit of the United States”, and these bank notes are losing purchasing power (globally and domestically)at a remarkable rate- Do you think this is an accident? It may not be what the war-mongering power brokers want to see; and they will not go down without a fight and, unfortunately, without more economic pain; but the underlying trend isn’t an accident, and the movement is not going to lose momentum.
Self-awareness is the first step to understanding the world you live in, and people are slowly becoming aware that things are just not right. 
Information, integrity and truth are always a far more powerful currency than lies, fear and corruption.
If the United States fails, everyone doesn’t die- the sun doesn’t stop rising, and most importantly- we will not cease to be Americans.
America will make it, because I believe it will- and as Captain America says- we all have to stand up for what we believe.

Wednesday, April 27, 2011

Ahhhhhh, Easter.

Easter- that spring time holiday when Christian families gather around a feast of Rack of Lamb with Mint Jelly (or, in the Southwestern USA, 2 inch thick Ribeyes on the B-B-Que) and argue about who in the family will win the "free trip to heaven" lottery while the rest of the family heathens roast in the eternal B-B-Que of damnation....

Fun Stuff.

Invariably, my personal affinity and understanding of physics, economics, biology, sociology, and all the natural processes that intertwine them makes me the perfect target of the "Darwin was Satan, and the Bible is the immutable word of God" dismissals of those who have it all figured out and find my incessant and prolific study, meditation, and rationalization of the world around me as a fool's errand when, in fact, all I have to do is accept that blind worship directed toward Jesus Christ is the only path to eternal salvation.

Now let's be clear- I'm a huge fan of Jesus. I don't think there has been a human before, or since, who has so loved the Earth that he gave the ultimate sacrifice so that we would all be allowed to continue living as the lying, thieving, and whoring sociopaths that our nature seems so willing to reduce us to.

The question of whether Jesus was God incarnate, or just some atypical guy who REALLY had it together intellectually and emotionally, is the ultimate question of Faith. For me, the question is moot. Jesus in Human form was as much the personification of God as any of us are. To the question of faith- mine is unwavering, but so too is my unfaltering allegiance to the practical teachings of Jesus; meaning that if I live my life as Jesus lived his (without trespassing on his neighbors, facing and confronting human corruption and evil head on, and walking the path of enlightenment) then our walk with Jesus through this life should be (to me at least) measured as a success.

To the question of worship, things get a little more shaky for me. Jesus did not teach his Disciples to worship him. He did not ask them to, and from my own interpretations of the Bible (having read it 6 times) I just don't think he WANTED  to be worshiped. It was after his death that Paul (who is still debated as to his Apostle status) began designing the dogmatic and ritualistic worship practices that would eventually comprise the roman Catholic church and all it's more modern off-shoots. There is no historical record to suggest that Jesus had any part in mandating any worship centric dogma.

The most self-aggrandizing thing Jesus is recounted as saying is simply to the effect of "eat some bread and drink some wine, and remember me when you do so that my loving spirit may live on in each of you". He didn't say anything about building temples and monuments to him.
If you believe Jesus is God, then you must also believe in the infinite love and infinitely transcendent intelligence of God. So how would such awesome power of intellect and emotional grace require such feeble expressions of exaltation as singing and waving your arms in the air every Sunday ? I'm not blasting those who choose to worship in such manners (hey- I like to sing every now and then too), but I am challenging that said practices are a mandatory part of the path to salvation.

Of course, On Easter Sunday I had to ratchet up the discussion by asking the age-old question "If Jesus is the only way to the light, then what about Moses and everyone in the old Testament?", to which the response is somthing equivalent to "well, everyone before Jesus got a free-pass to heaven"; but my Brother in Law actually (for the first time in the hundreds of times that I've asked this question) gave me an answer that aligns with my own interpretation of the Bible- The Mosaic Law- that immutable law from God that tells us that we have the inborn power to distinguish Right from Wrong. Abraham, Moses and everyone else in the Old Testament strove to do right by God, and they were rewarded for their efforts. Those who did not strive to do right, got the express elevator down, or were washed away in floods or turned into salt pillars (I must say- the "sentences" passed down on judgement day in the Old Testament were infinitely more creative- there are some folks I can think of today who could use a good dose of salt-transformation; but I digress)

So, The question of whether "works" (defined by the Mosaic Law) or whether "declaration" of Jesus as savior is the most important component of the Christian's walk through this life remains unanswered, and frankly, I think it will always be, because there is no definitive or comprehensive verse in the scripture that prevents the question from devolving into a political debate, and to me, politics has dishonesty at its core, so it can therefore not be holy, and so I must refuse to engage in a political debate surrounding the basis of faith. I'll debate the politics of fiat currency creation and the evil of Central Banking, but not faith.

But, back to nature (and Darwin).  Evolution is at the heart of the Christian Creationists battle with science. I'm here to tell everyone who can claim an open mind that both sides of the debate are absolutely, 100% correct. Nature and organisms most certainly evolve over extremely long time horizons, branching into what science would classify as new species along the way. We see it in on a micro scale with bacteria that mutate to form resistance to antibiotics, We see it in the adaptive understanding that Humans are not the only species to care for and nurture their young...

In fact, it is caring for our young that seals the debate for me- it demonstrates how Darwin's "survival of the fittest" mantra fits perfectly with the eternal, intellectual love of the creator of the Universe.

Atheistic evolutionists like Richard Dawkins declare that our intelligence (and our conflicted nature)  is the random remainder of an unsolvable biological equation; but, to believe in the random origination theory of evolution requires a faith far stronger than simple faith in God (or some other intelligence that transcends the physical barrier of our Universe). This point makes the athiest the ultimate hyprocrite.

I contend that intelligence can not exist at all without Intelligence existing (how's that for circular logic?) Let me elaborate:

Intelligence exists in this Universe- you and I are irrefutable proof of this inescapable fact; and because the fact of existent intelligence is infallible, the argument of random origination evolution REQUIRES any and all Atheistic, random evolution theorists who ascribe to Dawkins, to maintain unswerving FAITH that intelligence is an accidental by-product of the evolutionary process. I’m afraid this makes them every bit as religious as those who choose to thump their bible and condemn everyone else to hell…

The ability to rationalize (or to reason) is what gives rise to intelligence, and yet the ability to rationalize is nurtured, fostered, and passed on through the generations- good choices are rewarded, poor choices are punished, and REALLY poor choices (like stepping off a building because you think you can fly) get you a one way ticket OUT of the gene-pool. Strong genetics continue, weak genetics fail. This is Darwin's theory in its most elegant form- the process of natural selection that relies on favoritism passed down through the generations.

And yet, there is no Darwinian process that accurately describes the emergence of reason and rationalization. IE: no one can describe the natural circumstances that inspire the process of passing knowledge learned to the next generation; but there is another point here that I think we can all agree on- The process of passing our knowledge to our offspring, and to others in the population whom we favor, is one that we undertake out of love or favoritism for those that we pass these lessons to- we want them to enjoy the Darwinian advantage of what we have learned, yes? And so, if this natural process is born out of love, and yet the end result supports the concept of slow change and evolution over time (as intelligence advances, society advances, and by extension the species advances), then I have to ask how a loving process can be distorted into evil by those who choose to fixate on the political nature of religion?

The Atheist Dawkins and others like him may dismiss intelligence and rationalization as a random by-product of evolution, but I ask you- how random can this process truly be? If the accidental by-product theory of intelligence is accurate, then how is the power of choice justified? Why are right choices rewarded, and why are wrong choices punished? This is all to coincidental to me to be merely random.

Ayn Rand said she could not prove there was God, so she chose not to waste any time debating the topic with herself.

I choose to think that God is simply the loving favoritism we share with each other.

Intelligence begets intelligence. The fact that intelligence is the ultimate gift we pass from generation to generation means that at some point far back in our Darwinian pre-history, this precious gift was passed to us for the first time by the loving intelligence that is the parental source of our own (sometimes) loving intelligence.

My last contribution to this discussion is simply that evil can not exist without good, and that goodness is not commonly considered as the corruption of evil, while the inverse definitely is a commonly held viewpoint; So the question of God (the loving favoritism we share with each other) as the ultimate Universal force of good seems to be a lock, and yet at the same time one can not decry Darwinian natural selection as evil lest they choose never to eat again, for every calorie required to sustain our biological selves comes from a formerly living organism of some sort. We must kill to survive, which seemingly makes a mockery of the 6th commandment and challenges the viewpoint of the Bible as the "irrefutable" word of God. If it truly is the word of God, then it is written in God's language, and we are too stupid to translate it accurately...

So I am left with my logical understanding, and I am left with my personal beliefs and faith.

The only logical conclusion I can draw is that there is a God, because we have been blessed with the ability to ask the question and to rationalize the answer, but in reality, the logic is completely irrelevant to me.

I know there is a God because I have felt the natural advantage of God's love for me as I have journeyed along my own path through this world.

Thursday, March 3, 2011

This post is based on an original post on zerohedge,com, authored by Mark McGoldrick
on Thu, 03/03/2011 - 13:19

It's truly amazing to me to see American citizens complaining about the society in which they live. Whether it's about the number of people on food stamps, ponzi scheming financial sociopaths, government bailouts of high-income plutocrats, or manipulated financial markets, there seems to be no end to the disgust that so many (Dems, Repubs, and Libertarians) have toward this country. Yet, at the same time, no one wants to leave the cozy confines of their middle class lifestyle to do anything about it.  I'm beginning to think that the cornerstone of American anger is simply just cynicism - all bitterness, but no action.

Meanwhile, look at the courage displayed by many other oppressed middle/lower classes around the world. ZeroHedge prominently displays all the rioting around the world on a weekly basis - thousands of oppressed people marching through their streets protesting governments and dictatorships that are not so different from ours. They are the ones with courage - not us.  We just rant on various internet forums, hoping that our cynicism will change something without having to put forth much effort.    

You can complain all you want, yet this is the "free" society that you have allowed to happen. When all you do is rant on an internet forum, then you are equally complicit in the demise of our country. What is the real difference between the ignorant masses who are sedated with American Idol and a bunch of cynical libertarians who know it all, yet do nothing about it?

The answer: nothing.

When you truly want your freedom (that is, not just ranting on the internet), you will stand up and stop allowing yourself to be treated like a slave.  Until then, that is all you are: a slave to the plutocrats who take the wealth of your labor and do whatever they want with it.

It's simple, uncomplicated social darwinism playing out.  The plutocrats bought your representatives, stole most of the wealth of your labor and devalued the little they allowed you to keep; that is the end result of a free society, and, ironically, the end result of libertarianism: the strong oppress and manipulate the weak.  Our big government which is owned by the plutocrats is simply the best vehicle to keep this charade going.  
So, how does this relate to food stamps?  Government subsidies are just more lubrication to keep the charade well oiled.  The plutocrats will make you work a little harder (which you will because you always do), so you can pay a little more in taxes (which you will because - again - you always do), so the plutocrats can take more of your labor (which they will because they always do) and feed it to the poor and lazy, keeping them just complacent enough not to revolt, loot and disrupt this fantastic wealth sucking paradigm that the plutocrats have crafted. Keeping the poor complacent is just another cog in the wheel.

We deserve this fate, because we do nothing about it.

Friday, February 25, 2011

Why Gold?

Ok, This one is for everyone who asks me "how high can Gold really go?"

The question is always phrased that way, and the more correct question is "How low can the dollar really go?"

The US dollar is money, just so long as there is faith in dollars. We call this faith currency. Those self-imposed power mongers back East call it legal tender, as if there were such a thing as "illegal tender" (which the laws and principles of Economic theory clearly state is impossible, for neither money nor debt have to exist at all in a healthy economic system- barter works just fine)

As monies go, Gold differs from dollars in that: so much as dollars are money as long as there is faith in currency, Gold is money so long as there is faith in money itself- that is: if things were to get so bad that people were unwilling to trade chickens for Gold, then I suppose the richest people on Earth would be chicken farmers....

Now, how does savings factor into all of this? Well, the money we save today, we intend to use tomorrow, right? We therefore need to rely on keeping our savings in a form that will purchase as much tomorrow as it purchases today. For this reason, the US Dollar completely BLOWS CHUNKS as an instrument of savings.

Today's savings are tomorrow's capital. So, let's expand on capital:

Chickens are consummable, and perishable- therefore they make miserable long term capital. Money (in any form) makes great long term capital because money is durable. Now, loop back to the point above about USdollars. If the only existent faith in US dollars is that they are money that will not purchase as much in the future as they purchase today, then ask yourself: should dollars be considered as good capital?

I hope you are shaking your head and saying "No Robert, they should not" because that is the right answer.

US dollars are best used TODAY to buy the chicken you need for dinner TONIGHT. They should not be relied on to ensure that you will still be able to buy a chicken for the same number of dollars two months from now.

To secure your future, you need a money that does not erode in value. A money that serves as a proxy for capital until the day that faith in money itself is lost.

Another way to look at it is that dollars (and other printed currencies) are fiat money, and money itself is fiat capital.

Money only serves as a proxy for the stored value of work- IE: If I work sufficiently hard and produce more than I consume, and I grant you that excess in exchange for something else, then that something should appeal to me as equivalent in value to the value of my work, right?

If you dream of the day that you will have enough money that you will no longer need to work, then you need to preserve the "work-proxy" value of your saved money. That should be a no-brainer.

5000 years of Human history (with the plausible exception of the notably brief period of 1981- 1996) tells us that one monetary instrument rises above all others in preserving its "work-proxy" value:


If you need a more "democratic" perspective- think of it like this:

The population of Earth is 6+ Billion, and half of these people are either Indian, or Chinese, and a very much smaller percentage are Americans and/or Malaysians.

Now, the Chinese and the Indians perceive gold as money, and they value Gold extremely highly (much more highly than they value their respective countries' printed currencies), so we have at LEAST 50% of the world's population in Gold's corner already, and the Malaysian's have the only Gold-backed currency on Earth at present, so they might have just tipped the Democratic scales to 51% of the vote...

Thursday, February 10, 2011

The missing piece of the inflation puzzle....

I don't know if you 've noticed, but food prices are acting like they just left the ramp on a ski-jump.

Corn, Rice, Sugar, Wheat, pork bellies, you name it... it's up in price.

But there is no inflation. Ben Bernokio (oops Bernanke) went before Congress again yesterday and soothed everyone's nerves again... prices are NOT rising on big screeen TV's, houses, cars, or yachts, so there simply is NO inflation.

Whew, I sure am glad I believe Ben Bernanke- after all, he showed his gifted Oracle prowess when he called the top in the housing markets, and when he assured us that Fanny and Freddie were well capitalized, and that Bear Stearns would be able to pay its liabilities...

Oh, wait a minute, that's right- Bernanke was 100% wrong on all of these- in fact he was perfectly 180 degrees opposite from reality.

Well, the more frequently wrong a person is about stuff, the better the odds are that they'll get something correct eventually, right? Maybe it's Ben's time to call something right, so let's all enjoy our $8 dollar flatscreen while we eat our $100 hamburger... Wait, I've got those numbers backward. ooops.

To actually give Ben some credit regarding inflation, there is one point I do agree with him on- we don't yet seem to be on the launchpad of a big jump in prices across the board because nominal incomes (incomes priced in dollars) are still not accelerating upward.

With the US population screaming at their congresspeople to take away Wall Street's bonuses, and with Wall Street actually off by a cool 500,00 jobs, and with the rest of the country languishing in 9% unemployment (18% if you use the pre-1970 calculation method) it seems that no one is earning any of the Trillions that Ben and his BFF's at the Treasury are creating like they had just discovered Gutenberg's little invention last week...

Ok, so if Ben's plan is to continue creating dollars, and relying on the fact that none of those dollars are going to end up in people's earnings or salaries, then where are all the dollars going?

Why is Wheat going up?

Why is Corn going up?

Why is Gas going up?

Why is Gold going up?

Have you seen the price of Copper? I have to imagine that the number of vacant foreclosed houses about to have the plumbing ripped out and sold for scrap is about to make a moonshot.

How can any of this be happening when there is no inflation, and no one is seeing any salary increases?

Well, it turns out to be simple. It's because people who own and sell Corn, Wheat, Gas, and Gold are simply not selling them for fewer dollars- they are holding them until a higher bid comes along; and with all those crisp new dollars floating around out there, higher bidders are not too hard to find.- especially when one bidder is JPMorgan ( the Federal Reserve's Bank) and another bidder is Goldman Sachs (the Treasury's bank). These guys are the "Primary dealers" that have access to the Fed's "Discount Window" ; meaning that they get those crispy new dollars handed to them through a drive-through window (they might even get fries with them, who knows?)- Either way, they have a sweet deal- The Fed says "take this new cash (that has not been circulated, so it has not been devalued that much yet) and as long as you buy US Treasury Securities with 60% of it, then the other 40% is yours to pump up the Stock Market and commodity markets."

Well, who wouldn't want fries with that? These guys are getting the same legal tender money, that you and I have to work for and earn, for free, and they are using it to buy the same things that you and I need to take care of ourselves and our families- namely food, gas, and industrial materials.

It doesn't sound fair, does it? Well it's not. So, why haven't you written your Congressman and Senators yet?

Look, if you depend on an income (as I do) to support your standard of living, then you've got two choices:

1) Keep earning the same number of dollars in a nominal sense, and stand by wondering why the grocery bill keeps rising closer and closer to par value with your weekly paycheck.


2)  Convert your dollars into currencies and monies that do not devalue as more and more of them are printed into existence.

Real income rates are falling- America is getting poorer. The cost of raising a family is increasing...

...And Ben Bernanke is doing the exact opposite of fixing the problem.

Tuesday, January 25, 2011

Where Economics Goes Horribly Wrong- The Psychology of Depressions.

We are in a Depression.

Forget about the statistical term “recession” because that term is completely meaningless. The Powers that be are rallying around the published data that says Nominal GDP is rising, yet no one is considering that nominal GDP MUST RISE when the currency creation machine is cranking along at full output.

In August 2010, I wrote an essay for rickackerman.com that challenged the use of the terms “inflation” and “deflation” in the context of a macro-economic cause and affect analysis:

In today’s essay, I’m going to go one further. Today I’m travelling way out onto the thinnest of limbs as I try to convince readers that there is no reason for the inflation versus deflation debate at all; because inflation and deflation are the by-products of the EXACT SAME phenomenon when you strip away all the statistics, and look at the bare psychological core that forms the basis of human economics.

Anyone who watched Ben Bernanke’s “60 Minutes” interview on Dec 5th knows that The Fed is more concerned publicly  about deflation (the Fed’s preferred term for generally falling price levels) than they are about inflation (rising price levels), but it is my studied opinion that the Fed (and most other people for that matter) have it all wrong.  Almost everyone believes that market activity, and therefore inflation and deflation, all pivot on price levels; a very dangerous premise, as I hope you’ll see as we move forward through this analysis.

Everyone sees the inflation/deflation dynamic as a big teeter-totter, with prices acting as a fulcrum, while “more money and lower interest rates” sits on one seat, and “less money and higher rates” sits on the other seat. As the price pivot point shifts toward one end, the Fed shifts its policies to favor the other end, and this is supposedly how the Fed maintains “balance” in the system.

I contend that the Fed’s Teeter Totter model has a major, and potentially catastrophic design flaw, and I’m going to cite some very specific examples (both historical and current) that should demonstrate that the teeter-totter’s back and forth action is dependent on something far more delicate (and far less understood) than general price levels.

Teeter Totters do not shift directions without the force of gravity, and for the purpose of this discussion, we can assume that gravity is a universal physical constant (as mass increases, the force of the gravity by that mass upon other massive objects also increases).

To their credit, the Fed’s “money supply to price” balancing model is a little bit more complex than that. The Fed does not use a constant for the gravity proxy. The Fed’s model allows the downward force applied to their Teeter Totter’s seats (economic sentiment indicators) to vary over time, but they temper this variability by mandating that the rate of change be constant (they use monthly sentiment metrics). This is where their model has the potential to break down. The reason I say this is that rising prices do not necessarily inspire less spending, and falling prices do not necessarily inspire more spending; and neither of these actions can be used to forecast or correlate shifting sentiments at all; therefore the force applied to the alternate sides of the Teeter-Totter is never a constant to the mass of the money supply factor(s) sitting in either seat.

Ok, we should pause for a moment here, because the statement “that rising prices do not necessarily inspire less spending, and falling prices do not necessarily inspire more spending” probably needs more elaboration, because I’m sure it failed to pass through the common sense filter of most readers.

Naturally, everyone is more inspired to purchase when prices are lower, right? Well, it’s not really that easy. True, people are more inspired to spend when prices are low and liquidity (available capital/money) is high, but there is a relatively unknown (yet well documented by history) breakdown point where monetary saturation fails to inspire further spending, at which point supplies start to rise, and prices start to fall; and yet somehow these factors are unsuccessful in re-starting the spending engine.

Sounds kind of like the real estate crunch that kicked off in 2007, right? Well, it also correlates to the sentiment breakdown that occurred as the roaring 20’s came to a screeching halt and the economic declines of the 1930’s took charge of the common psyche . To use the current housing collapse as an example- we have reached a point where people are simply not inspired to move into another house, regardless of how cheap the process of buying houses has become.

Likewise, there are economic conditions where prices are rising,spending is falling, and thus money supply and interest rates are loosened up via policy, and yet the spending party still never gets back in gear- until suddenly, items begin leaving store shelves again, and policy makers, confusing this activity with economic growth, fail to shut down the money spigot, until eventually items begin leaving shelves at alarming rates. Then panic ensues, and spending goes parabolic (as if the gravity on the “less money, higher rates” side of the Teeter Totter suddenly develops into a black hole, forcing more and more “policy” to be thrown on the “more money, lower rates” seat. History is replete with examples of such events (Weimar, Zimbabwe, etc)- and for those who insist “it could never happen in the US”, I’ll remind you of the Continental currency of the Revolutionary War, and of the Lincoln Greenback during the Civil War- both of which died horrific hyper-inflated deaths.

So, using this inflation/deflation Teeter-Totter and the nebulous, unquantifiable gravity-proxy that is economic sentiment, we can address the central premise of my thesis that inflation and deflation are simply mirror image definitions of the same dynamic:

That premise is simply that money does not really buy things. Everything you think you know about using currency to purchase items in trade is an illusion. I use the term illusion because, once again, sentiment (the desire to purchase) is unquantifiable in absolute terms.

Simply put, people do not work for money. When you peel off all the statistical layers of the economic onion, you are left with a very simple, and rather elegant concept: People work for only two reasons:

1)      To appropriate those things they need to ensure survival and longevity.
2)      To appropriate those things which they desire to own.

Simple, right?  Number 1 relates to living (something we all must, and want to do), and number 2 relates to “standard of living”; That is, the level of arbitrary societal convention that seemingly elevates the importance of one person’s existence above others.

Standard of living is only a manifest of reason number 2 above.  Therefore, the desire for money (whether it be for capital gain, or the extinguishment of debt), falls exclusively and 100% into category number 2. While there is no question or argument that monetary currency, serving as a medium of exchange, definitely “lubricates” the process described in number 1, it certainly does not mandate it.

You might have to think through my reasoning a couple of times before this concept sinks in, but remember that I do not distinguish between “ownership for purpose of use” (like cars and wrist watches) versus “ownership for purpose of embellishment” (like Ferrari’s and Rolex’s); nor do I distinguish “ownership for purpose of non-essential consumption” (like tobacco or alcohol) or “ownership for purpose of enhanced efficiency” (like tractors and conveyor belts): all these things fall into category number 2 when you reduce them to their lowest common denominator- the desire to “own”.

Try to keep your focus on the simple fact that labor can nearly always be traded directly for food, shelter, and clothing, and that even during periods when one of these three are in scarce supply, there is nearly always the probability that more work will successfully secure the requirement. In the context of number 1 above, money is always and forever a proxy for work (a store of value, or a vehicle to secure future access to required supplies, to employ a couple commonly used definitions). Just as many of you may have learned in Econ101, money is not a mandatory component of the most basic trade based economic system.

So, it’s time to zero back in on the controversial premise of this discussion: Inflation and Deflation are mirror images of the same dynamic. Simply put, both phenomena are triggered at the moment in time that the unquantifiable factor (sentiment) begins to shift from being relatively stable (exerting equal force on both seats of the teeter totter) to being horrifically unstable (wildly shifting from side to side, with highly variable intensity).

Whether this shifting sentiment finally manifests itself as a reduced willingness to use currency as a proxy for work in exchange for real goods (deflation), or a decreased willingness to accept currency as a proxy for real goods in exchange for work (inflation), the basis of either outcome is still rooted in the underlying common psychology moreso than in statistical economics…

We all spend too much time debating about how the event will manifest itself, instead of focusing our collective energies on how to stabilize the rapidly shifting collective force that has lost its sense of harmony and balance, because when this force decides which side of the teeter totter it’s going to zero in on, the result isn’t going to be good for anyone sitting in either seat.

Gravity (sentiment) is shifting wildly, frequently, and seemingly uncontrollably. When the psychological aspects of an economy become destabilized, the more accurate term for the sensation is Depression (a psychological term) as opposed to Recession (a statistical term)…

We are in a Depression.

Sunday, January 9, 2011

Why The Precious Metals Market Manipulation Argument is Moot.

January 4, 2011 saw a marked decline in the spot prices of Gold and Silver, and naturally, this event inflamed the ongoing debate about collusion and manipulation in the precious metals markets which allegedly undermine the natural price discovery mechanism of these markets.
Now, I have immense respect for Ted Butler, Harvey Organ, Bill Murphy and GATA, and all the other metals market analysts out there who have dedicated themselves to exposing the seemingly malicious price suppression activities that have been a frequent hallmark of Precious Metals market trading patterns for a decade or more. I'm not going to debate the conclusions of any of these analysts, because I agree in principle with the logical and statistical conclusions of their premises), but I am going to (respectfully) challenge the common opinion regarding the underlying intention of these practices.
We've all read about Robert Rubin's "strong dollar" policy that, when viewed with increasing scrutiny, seemed more designed to strengthen the dollar against Gold as opposed to strengthening it against the competitive basket of foreign currencies that comprise the dollar index; and we've all read about the "8 or less" Bullion traders on the weekly Commitment of Traders and Bank Participation reports that are short a collective 3+ Billion ounces of silver (which represents an amount greater than all verified or perceived above ground silver supplies in existence).
The common theme is that the "Powers that Be", aka the "Gold Cartel" frequently, as they did on Jan 4, sell a pre-orchestrated, nearly infinite amount of paper futures contracts into the London and New York Bullion exchanges, with the intention of driving weak long holders into fleeing in fear, so that the Big traders can then proceed to vacuum up these dumped long positions to buy their shorts back at lower prices.
The argument that this practice is collusive, manipulative, fraudulent, and probably illegal is almost certainly valid, seeing as how General Motors is not allowed to sell millions of promises to deliver new Mustangs at prices below MSPRP to willing buyers with the intention that Ford (who manufactures the Mustang) would then have to lower the MSRP by a corresponding amount in order to remain competitive.
The second that General Motors started buying these lower priced Mustangs directly from Ford to deliver to the people who bought GM's forward sold promises, GM would be busted cold for price fixing and antitrust violations.
In essence (and ethics), the practices are identically fraudulent; but since Gold and Silver are not clearly defined as money in commerce case law history (case law treats gold and Silver as commodities, not money), it likely won't be until someone manages to get a case in front of the US Supreme court arguing that what the Bullion Banks do is in violation of the 10th Amendment, that any legal mechanism to stem these practices will come into being. (Perhaps all these recent civil antitrust lawsuits against HSBC and JPMorgan will be the first step in the process of forcing the Supreme Court to legitimize the 10th Amendment within the context of legal tender case law). 
Yes Virginia, The precious metals market is rigged, manipulated, and centrally planned, but not necessarily for the reasons you may think.
So, why do the government regulators look the other way and allow the "Big 8" to seemingly get away with what they are doing?
The answer may not lie in the statistics that underpin technical and fundamental market analysis. Statistics only represents half of economics- the real answer may lie in psychology- the unquantifiable inverse side of the economic behavior coin.
My studied opinion is that the Politicians and Central Bankers may be capitulating to Gold and Silver's perceived superiority as money, but they are doing it in a way that will ensure that the metal's ascent does not evolve into a price driven panic (as it did in 1979-1980). Rather, they are attempting to manage the monetary ascent of the metals so that the public abandonment of fiat paper can be orderly and (relatively) calm, as opposed to chaotic and unruly, as Jim Rickards (another analyst whose point of view I hold in the highest regard) has pointed out in a CNBC interview and a series of articles back in September 2010.
It is not the intention of the big Bullion Traders and their government and Central Banking money printing backers to prevent the price of the metals from rising, nor is it to prevent or discourage the world's population from fleeing fiat currency en masse into Precious Metals.
The real reason Gold and Silver are experiencing these sudden sharp price corrections, I believe, is simply to prevent a societal monetary panic. Think about it for a minute: The market makers in Gold and Silver have tripped off these rapid, waterfall declines in gold and Silver numerous times per year for the past 8 years, and every time they do, the end result is that more open interest gets generated on the exchanges, more physical bullion is taken off the exchanges in good delivery form, and the price ends up recovering and rising to yet newer highs. As a method of driving the market down and “chasing people out”, they are failing in the most spectacular way. However- as a practice of influencing the rate of price ascent, they are demonstrating a degree of success that suggests that the practice could continue in the interest of preventing a riotous rush into the bullion markets by a panicked public that loses control of their collective fear of being left behind.
Could these huge Bullion Bank shorts and their Central Bank paper-backers really be so stupid as to think every time they play this little smack down charade that they will thrust the metals into a bear market? Are they really thinking "This time it will work, and the world will finally understand that our paper is a superior form of wealth"? Seriously, are they that dumb?
Look, Ben Bernanke is not an idiot. Neither is Jean Claude Trichet, and neither is Zhou Xiaochuan. These guys know that money is not what THEY say it is; money is what the population of Earth tells THEM it is... 
The only other data I have to support my contention is the fact that these frequent price smack downs by the big bullion shorts are not making them any profits- at least, they are not making them any profits that are not offset by even bigger losses that are stretched out over a longer time horizon; but this fact may be all that is necessary. I mean, any of us faced with having to pay an ungodly sum of money immediately in cash, as opposed to stretching it out on a payment plan would certainly prefer the latter option, yes? Everyone with an inkling of knowledge of the Bullion markets (Jeffrey Christian included) knows that the Bullion Banks can't settle their current commitments with good delivery grade bullion, so their tactics are intended to make the payments that they can afford to make today, and keep the "collections agencies" (aka the longs who are standing for delivery) at bay as long as they can while they scrounge up the money/gold to make next month's payment.
The necessary consequence of this is a slow, deliberate long term rise in the price as opposed to a sudden, parabolic move that would certainly incite a very different public reaction to the re-monetizing of the metals. The story of the tortoise and the hare teaches us that slow and steady wins the race; but slow and steady also tends to make the race less exciting- precisely the way that "The powers that be" would like this particular race to be run.
With all due respect to GATA, Richard Russell, Ted Butler et al: From the standpoint of human nature (and the standpoint of peaceful co-existence), isn't it preferable for paper currencies to die a slow, lingering death alone in a hospital bed, as opposed to dying a sudden, violent, train wreck of a death fraught with unimaginable collateral damage to society, manifest as hyperinflationary riots, wars, and the invalidation of decades of work toward peaceful global relations...?
They say "seek the truth and the truth shall set you free." Well, if the truth is that gold makes better money than the debt based "full faith and credit" of corrupt governments, then it should also stand to reason that the real Utopia we should all aspire for is a world where money simply "exists" and is not "issued", while price discovery is a function of markets, centralized governments are non-intrusive (if not obsolete), and people maintain peaceful relations via the process of fair and friendly commerce.
I know, I know... Utopia is fantasy; but the scenario mentioned above is far more preferable to me than a world of arbitrary borders and the wars that they stimulate, and I don't believe that I am the only one in this camp. It is far more honorable to fight for a cause that is just than it is to fight for a cause born out of territoriality, bigotry, hatred, greed, or fear.
I actually wonder whether the process for re-instating a currency system devoid of government fiat has actually been underway since Alan Greenspan took over the reins at the Fed? I'm sure that such a controversial point of view will not go by unchallenged, but let's consider a few points:
1) It was Greenspan who wrote in 1966 of gold as the protector of the masses from the insidious process of government sponsored wealth confiscation through inflation.
2) It has been widely rumored (although still factually unsubstantiated to the best of my knowledge) that Greenspan was the creative force behind the Fed's "Roota" comic books. (Please go read the story of Roota if you haven't already- it is a trip down Alice's Rabbit Hole, and you will have to force yourself to remember that it is the US Federal Reserve that published the work.)
3) Most notably- it was Greenspan who created more dollar currency during his tenure than every Fed Chairman prior to him in aggregate.
Think about that last point. Greenspan has been vilified by hard-money supporters as a "turncoat" to his own 1966 thesis, but it is also possible that he was the ultimate contrarian- That old cat printed fait money every time he was presented with ANY reason to do so.
 Whether Greenspan's policy of debasement was intentional and deliberately opposite to his 1966 philosophy, or whether it was coincidentally opposite, will probably never be known, but in spite of that, his actions may end up being regarded by history as the lesson that taught humanity that truth is rarely what “government officials” say it is, and if this history actually comes to pass, I will not be afraid to applaud Mr. Greenspan for his efforts, regardless of what his actual intentions were.