Tag: deflation

Gold, Silver, Copper, Nickel and the Slow Death of Money

Gold, Silver, Copper, Nickel and the Slow Death of Money

A huge opportunity to hedge against both inflation and deflation is lying out there in the open. There are no transaction costs and right now there’s even a built-in discount. But most people will never realize any of this. In 1933 President Franklin Delano Roosevelt signed Executive Order 6102, which made it illegal for U.S. citizens to hold gold bullion. Prior to that, the $20 bill was essentially a warehouse receipt for a one-ounce gold coin. Prior to the Federal Reserve Act of 1914, the $20 bill actually told you this. After Executive Order 6102, $20 notes weren’t allowed to be exchanged for gold anymore. Americans couldn’t legally own or trade gold as money and savings, only as jewelry or collectible coins. A year after making monetary gold ownership illegal, FDR revalued gold from $20.67 per ounce to $35 an ounce with the Gold Reserve Act. The Act also required all gold and gold certificates to be turned over to the Treasury. The dollar was debased. A chunk of the gold it used to be good for was legally removed. Instead of  “containing” 1/20 an ounce of gold, each dollar now only contained (or represented) 1/35 an ounce. And of course you couldn’t actually own the gold itself. In 1971 Nixon severed the last official ties between gold and the dollar. The dollar quickly sunk to its real value, which had been debased by years of money supply inflation. By 1975 Americans were allowed to own bullion gold again, but during the roughly 40 years bullion gold ownership had been illegal, the dollar had been drastically debased. At its former lowest point in the summer of 1980, the dollar …

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Why Economists Are Not Popular

Filed in BP, deflation, Ford, o, silver, US Dollar by on February 7, 2011 0 Comments

One of the many reasons why economists are unpopular is that they keep reminding people that things have costs, that there is no free lunch. People already know that — but they like to forget it when there is something they have their hearts set on. Economists don’t have to say anything when people are buying things at a shopping mall or at an automobile dealership. The price tags convey the situation in unmistakable terms. It is when people are voting for nice-sounding things which politicians have dreamed up that economists are likely to point out that the costs ignored by politicians are going to have to be paid, one way or another — and that you have to weigh those costs against whatever benefits you expect. Who wants to put on green eye shades and start adding up the numbers when someone grandly proclaims, “access to health care for all” or “clean air” or “saving the environment”? Economists are strictly party-poopers at times like these. They are often gate crashers too, since usually nobody asked them how much these things would cost or even thought about these issues in such terms. Some of the more persistent or insensitive economists may even raise questions about the goals themselves. How much health care at the taxpayers’ expense? In Britain, a 12-year-old-girl was given breast implants. That much health care? Meanwhile, Britain’s skyrocketing medical costs of taking care of things that people would never have spent their own money to take care of forced cutbacks and delays in more urgently needed medical treatments. One woman’s cancer operation was postponed so many times by the British health service that, by the time the system could take her, the disease was now too far gone for medical help — and she died. Economists could have told anyone in advance that making things “free” causes excessive use by some, leaving less for others with more urgent needs that have to remain unsatisfied. Rent control, for example, has led to more housing being occupied by some, who would not have paid the …

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Answering Krugman on Austrian Economic Theory

Answering Krugman on Austrian Economic Theory

I still get the sense that Krugman truly doesn’t understand the Austrian position. For example, he asks, “Why is there overwhelming evidence that when central banks decide to slow the economy, the economy does indeed slow?” But because the Austrian theory says the bust occurs when the central bank backs off and allows interest rates to rise toward their “correct” level, this is hardly a problem. In fact, if central banks couldn’t slow the economy, as an Austrian economist I would be worried about my theory. Krugman also poses questions concerning (price) inflation rates and the connection between nominal and real GDP. But I think he is conflating the Austrian theory with a purely “real” business-cycle theory. Austrians understand that monetary influences can have real effects. To repeat, that is the very essence of the Mises-Hayek theory. Although most of Krugman’s objections are due to his unfamiliarity with the actual Austrian theory, I think one source of confusion came from the particular illustration I used in my article. First let’s set the context by quoting Krugman : “So what is the essence of this Austrian story? Basically, it says that what we call an economic boom is actually something like China’s disastrous Great Leap Forward, which led to a temporary surge in consumption but only at the expense of degradation of the country’s underlying productive capacity. And the unemployment that follows is a result of that degradation: there’s simply nothing useful for the unemployed workers to do. “I like this story, and there are probably other cases besides China 1958–1961 to which it applies. But what reason do we have to think that it has anything to do with the business cycles we actually see in market economies?” First, I should say I’m glad that Krugman at least concedes that (his understanding of) the Austrian explanation both is theoretically possible and actually happens in the real world — coming from the guy who referred to it in 1998 as equivalent to the “phlogiston theory of fire,” this is progress! However, Krugman still doesn’t have quite the right understanding of the Austrian view of the “capital consumption” that occurs during the unsustainable boom. As I said above, on this particular issue the fault lies with the necessarily simplistic “sushi model” I used in the article that Krugman read . In that article, in order to make sure the reader really saw why Krugman (and Tyler Cowen) were overlooking something basic, I had the villagers boost their daily sushi intake even while they developed a new technology to help augment their fishing. So during their “boom,” it would have seemed to a dull villager that both consumption and investment were rising. In my fable, this was physically possible because the villagers neglected the regular maintenance of their boats…

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Under the Sun of That Dream

Filed in BP, deflation, Lear, o, silver, US Dollar by on January 17, 2011 0 Comments

“In the end, we will remember not the words of our enemies, but the silence of our friends.” — Martin Luther King Jr. My father grew up at the bottom of a hill. My mother lived at the top of that same hill, in Washington Heights, New York City, in the 1950s and 1960s. Both were the products of refugee families. My mother’s father, an avid reader of the news, left Germany just as the Nazis began to hang signs railing against “Juden!” My dad came to America in 1954, literally on a banana boat, leaving in the middle of the night, fleeing a coup that would be followed by decades of bloody war in Guatemala. My dad’s father was a well-known journalist with connections in government. They left my grandmother and my two aunts behind to be sent for six months later. My dad was 6 years old. For years, they lived at the bottom of the hill in New York. It was a slum, and it still is. My grandfather worked at a plastic factory, from which, my dad tells me, he would come home at the end of the day and peel off bits of plastic that had melted onto his face before bed. The top of the hill, only blocks away, wasn’t so bad. Despite opposition from some family members, my parents married, and there I was raised. Growing up as a child of a mixed marriage comes to my mind this Martin Luther King Day. Today, as I do most days, I drove to the office on a congested MLK Boulevard. Over lunch, I walked past the downtown library, where flyers promote upcoming meetings offering “An Honest Discussion of Race” — a topic promised again and again everywhere. I stopped attending these lectures years ago when I realized that these talks weren’t all that “honest” and that they were not attended by anyone actually interested in discussing anything. Among my fondest childhood memories are our Sunday trips down the hill, amazingly steep it seemed, to have lunch at my grandparents’ apartment. There, my grandfather and I would eat a snack on the fire escape and watch young hoodlums in the street below messing with parked cars, harassing passing girls and generally looking for trouble. My grandmother in the kitchen would attempt to pan fry hamburgers for her American grandsons. Bottles of beer — not cans: Sunday was a special day — went around…

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Don’t Ask, Don’t Tell, Don’t Act

Filed in AMAG, BP, deflation, lead, New Gold, o, obama, Spot Gold, US Dollar by on December 20, 2010 0 Comments

The ongoing touchy and burning question is whether or not homosexuals are “entitled” to serve in the military, and, if so, whether or not they should be required to keep their sexual orientation to themselves. Let me start by saying that I have no interest in what consenting adults choose to do so long as those activities do not result in corpses, do not scare the horses, and are not otherwise harmful to society in general. Many of us are attracted to individuals that bewilder our friends and relatives. The question before us is whether or not some sorts of behavior and traditions should be changed to meet the desires of less than two per cent. of the population. I have no difficulty with same-sex couples who want to “live in sin,” a very old term for cohabiting without marriage, although I am against that for heterosexual couples because we all know the enormous damage done to our society by the increase in illegitimate children. In the nineteen fifties the white illegitimacy rate was 5% and that of blacks was 25%. After half a century of welfare the rate for whites is 25% and that of blacks 80%, to the widespread detriment of all of the little bastards, to use the technical term deliberately for shock effect. Does it strike you as odd that the technical term is still one of the strongest insults in our society, while no social force is leveled against those who bear children out of wedlock? Perhaps mandatory health insurance would solve the argument that gays should be allowed “to marry,” a perfectly straightforward infinitive that has never referred to anything other than heterosexual unions for the purposes of procreation, preservation of capital and family power, and perhaps even happiness. In particular, the questions are whether or not those who are openly gay have a “right” to serve in the military if they wish, with others questioning whether our fighting forces would be better or worse for their inclusion. The arguments are that a sexual deviant can be just as patriotic and competent as anyone else and they should not be denied permission to join the Marines if they want to and can get through Parris Island successfully. I’m quite willing to admit that military prowess and even genius may be — even probably are — independent of sexual orientation. As I recall, Gaius Julius Caesar was at least AC-DC, and many ancient Greeks were of the opinion that a man will fight harder under the eyes of his lover. (If we’re going to take society of two millenia ago as our standard, should modern mothers tell our sons, “Come back with your shield or on it?”) On my angle of the argument, after a life of having been the wife, daughter, sister, aunt, cousin, niece, and daughter-in-law of career military officers, I keep running into the ancient proscription against “conduct prejudicial to good order” and another about “conduct unbecoming an officer.” There are very clear rules against “fraternization” between officers and enlisted men/women, and against after lights out trysts in the barracks. More recent rules involve “sexual harassment” and rendering one’s self unfit for combat by becoming pregnant, neither of which were an issue when all the ships at sea were manned, period. I think all of us can agree that we would find it uncomfortable to shower in mixed groups, whether that meant those of both genders or those of…

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Introduction to the Naked Truth About Drugs

Filed in BP, deflation, o, sov, sovere, Spot Gold, target by on December 15, 2010 0 Comments

For nearly one hundred years our government has been wrong about drugs, about the people who use them and the risks they pose to society. Much of what they report is blatant misinformation, if not outright lies, despite a veneer of good intentions. It is also my contention millions of Americans agree with me. And it is not just the millions doing drugs responsibly, either. It is the millions more who’ve come to see society’s approach to the drug crisis generate more harm than good. They cut across all age, income and race demographics. Over the last thirty-plus years I’ve made it a point to talk with a number of them. And listen. What I’ve gathered reflects not so much a change of mind as it does a change of heart. We still consider drugs to be harmful, but have come to view our drug laws as worse–and many of us no longer consider legalization a four-letter word. But when Richard Nixon first convened his drug war council, escalating the conflict, hardly anyone outside of what was derisively labeled the “lunatic fringe” favored legalization. How dare we, they scolded, when marijuana tuned innocents into murderers and LSD would sufficiently scramble our DNA to produce three-headed babies. None of that was true of course, but it is what our government wanted citizens to believe. And many did. But that was then. This is now. We have come to see the responsible use theory, the one so close to the alcohol lobby heart, parallel itself in the illicit drug environment: as not every drinker is a drunkard, so too is not every drug user an abuser. The Naked Truth About Drugs … All drugs were legal and cheap and readily available in America prior to 1914, and we were even encouraged to use them. Heroin was available from the Sears mail order catalog, as was morphine, opium and cocaine. But if you couldn’t wait for the mailman, all those same drugs were sold at the corner grocery or drugstore. Our addiction rate then was very low, near identical to now. And we had no drug crime [emphasis mine]. What changed it all, what disrupted our peaceful co-existence, was the…

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Why Don’t Conservatives Oppose the War on Drugs?

Filed in BP, deflation, New Gold, o, Ron Paul, Spot Gold, target, ubs by on December 13, 2010 0 Comments

The war on drugs is a failure. According to the latest National Survey on Drug Use and Health conducted by the Substance Abuse and Mental Health Services Administration: “Drug use in the United States increased in 2009, reversing downward trends since 2002.” There was a spike in the number of Americans admitting to using marijuana, ecstasy, and methamphetamine. Yet no matter how much it costs to wage the federal drug war (more than $41 billion, according to a just released Cato Institute study), conservatives generally support it. I know of no prominent conservative who publicly calls for drug legalization. I know of no Republican candidate in the recent election (outside of Ron Paul) who has ever publicly voiced his support for the decriminalization of drug possession. Republicans in Congress — by an overwhelming majority — have even criminalized the purchase of over-the-counter allergy-relief products like Sudafed because they contain pseudoephedrine. [The sale of Sudafed isn’t illegal, but its quantities are strictly controlled so much so that the experience of purchasing Sudafed may make one feel like a criminal. — Ed.] Negative arguments about how the war on drugs ruins lives, erodes civil liberties, and destroys financial privacy are unpersuasive to most conservatives. None of these things matter to the typical conservative because they, like most Americans of any political persuasion, see using drugs for recreational use as immoral. The hypocrisy of conservatives who support the war on drugs but not the prohibition of alcohol should be readily apparent. But aside from a small minority of conservative religious people that long for the days of Prohibition, conservatives generally don’t support making the drinking of alcohol a crime, even though alcohol is a factor in many accidents, crimes, and premature deaths. So why is getting high on drugs treated differently from getting high on alcohol? The reason conservatives should …

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Endless Targets for Terror

Filed in AMAG, BP, deflation, economy, o, target, ubs, US Dollar by on December 10, 2010 0 Comments

The Number of Potential Terrorist Targets Is Essentially Infinite Terrorists seek to kill people and/or destroy property in pursuit of a political goal. They may exercise some discrimination in selecting targets, but because people and vulnerable property are everywhere in the United States, they have a wealth of potential targets—there are about 5 million commercial buildings alone. Nothing can be done to change this fundamental condition. Indeed, it is difficult to think of something that couldn’t be a target. Even a tree in the woods, after all, could be ignited to start a forest fire. The Number of Terrorists Appears to Be Exceedingly Small and Their Efforts and Competence Rather Limited Since terrorism of a considerably destructive nature can be perpetrated by a small group, or even by a single individual, the fact that terrorists are few does not mean there is no problem. However, many homeland security policies were established when the threat seemed far larger, and those perceptions may still be fueling, and distorting, current policy. In 2002, intelligence reports asserted that the number of trained al Qaeda operatives in the United States was between 2,000 and 5,000. And on February 11, 2003, Robert Mueller, director of the Federal Bureau of Investigation, assured a Senate committee that al Qaeda had “developed a support infrastructure” in the country and had achieved “the ability and the intent to inflict significant casualties in the US with little warning.” By 2005, however, after years of well funded sleuthing, the FBI and other investigative agencies concluded in a secret report that they had been unable to uncover a single true al Qaeda sleeper cell anywhere in the United States, a finding (or nonfinding) publicly acknowledged two years later. [The FBI has subsequently seemed to resort to cultivating their own terrorists with questionable set ups and stings; — Ed.] The lack of true al Qaeda attacks inside the United States combined with the inability of the FBI to find any potential attackers suggests that the terrorists either are not trying very hard or are far less clever and …

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The FBI’s Stalinist Homeland Security Theater

Filed in Ashland, BP, deflation, EPS, Gold, o, sov, Spot Gold, target, ubs by on December 3, 2010 0 Comments
The FBI’s Stalinist Homeland Security Theater

The FBI’s Stalinist Homeland Security Theater “The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.” — George Orwell, Animal Farm A few days after bombs ripped apart two apartment buildings Moscow , residents of Ryazan — a town 100 miles southeast of the Capital City — were alarmed to find several suspicious-looking figures loitering near a 13-story apartment complex. After police arrived on the scene they extracted three large sugar sacks from the high-rise. An examination of the sacks found that they contained hexagen — the same high-yield explosive that had been used in the Moscow terrorist bombings just a few days earlier. The police arrested two of the mysterious strangers, who immediately produced credentials issued by the Russian Federal Security Service (FSB), the successor to the KGB. Within a few hours high-ranking FSB officials intervened to free their operatives, claiming that they had been involved in an innocuous “training exercise.” “This was not a bomb,” insisted then-FSB Director Nikolai Patrushev. “The exercise may not have been carried out well, but it was only a test, and the so-called explosive was only sacks of sugar.” There was at least one lapse in efficiency on the part of the FSB: The agency neglected to retrieve the detonator, which remained in the custody of the local police. Leaving aside the fact that tests had confirmed the presence of hexagen inside the “dummy” bomb, Patrushev didn’t explain why the FSB would attach a genuine detonator to phony explosives. Nor did he explain why the Security Organs insisted on collecting the “sugar sacks” and keeping them under armed guard at a nearby military base. Patrushev’s account didn’t satisfy one of the paratroopers given that peculiar assignment. The soldier smuggled a small sample collected from one of the sacks to a laboratory, and the resulting analysis confirmed that the substance was hexagen, not sucrose. The Ryazan “training exercise” took place on September 22, 1999. During the previous two weeks, hundreds of people had died in the Moscow apartment bombings. The FSB, acting with what could charitably be called indecent haste, destroyed both of those crime scenes before critical evidence could be collected. Shortly thereafter, six Chechen separatists (five of them in absentia) were accused of plotting the terrorist rampage. Invoking the need to avenge the innocent dead, Moscow carried out a punitive invasion of Chechnya, a predominantly Muslim province whose population has long sought independence from Russia. This series of events struck many in Russia as bit too tidy. In a house editorial published the day before the “training exercise” in Ryazan, the Moscow Times observed that “the bombed-out shell of the apartment block on Ulitsa Guryanova was destroyed in a controlled implosion, reducing to rubble the remains of the building and irreparably buying beneath it any remaining traces of evidence  — just ten days after the explosion. Workers at Kashirskoye Shosse, meanwhile, began clearing the rubble from the site as early as September 13 — the day of the bombing.” As the Times pointed out, the FSB’s insistence that the case had been “solved” was impossible to reconcile with the fact that “untold traces of chemical residue, fingerprints, technical fragments, [and] hair and DNA samples that were present at the [bombing] sites are now irrevocably lost.” “Is this ignorance?” asked the Times . “In the capital city of a country where the…

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Is the Collapsing Empire and Its Police State Worth Fighting For?

Filed in BP, Debt, deflation, lead, noble, o, US Dollar by on December 1, 2010 0 Comments

In 43 BC, over 2,000 years ago, warring consuls Antony, Lepidus, and Octavian were duking it out with each other over control of Rome following Julius Caesar’s assassination the prior March. Each had legions at his disposal, and Rome’s terrified Senate sat on its hands waiting for the outcome. Ultimately, the three men chose to unite their powers and rule Rome together in what became known as the Second Triumvirate. This body was established by a law named Lex Titia on this date (give or take depending on how you convert the Roman calendar) in 43 BC. The foundation of the Second Triumvirate is of tremendous historical importance: As the group wielded dictatorial powers, it represents the final nail in the coffin in Rome’s transition from republic to malignant autocracy. The Second Triumvirate expired after 10 years, upon which Octavian waged war on his partners once again, resulting in Mark Antony’s famed suicide with Cleopatra in 31 BC. Octavian was eventually rewarded with rich title and nearly supreme power, and he is generally regarded as Rome’s first emperor. Things only got worse from there. Tiberius, Octavian’s successor, was a paranoid deviant with a lust for executions. He spent the last decade of his reign completely detached from …

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Why the Government Hates Deflation

Filed in BP, deflation, economy, Gold, Gold Prices, inflation, money supply, o, silver by on November 26, 2010 0 Comments

Being the naturally cynical type of guy that you would expect from someone so angry, so depressed, so outraged, so paranoid and so “Howard Beale” (“I’m as mad as hell, and I’m not going to take this anymore!”) as I am, people want to know “what is with” all of this “deflation” stuff that the Why the Government Hates Deflation originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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There is No Food Inflation; the BLS Made Sure of That

“Moreover, inflation has been declining and is currently quite low, with measures of underlying inflation running close to 1 percent… In this environment, the Federal Open Market Committee (FOMC) judged that additional monetary policy accommodation was needed to support the economic recovery and help ensure that inflation, over time, is at desired levels.” -Federal Reserve There is No Food Inflation; the BLS Made Sure of That originally appeared in the Daily Reckoning . The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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