Thursday, May 13, 2010

The Power of Gold...

Greetings good citizen,

Global markets are mixed with most of the Western Hemisphere currently trading in negative territory, which tells us what, precisely?

It tells us that ‘officially’ the phantom recovery is still ‘on track’ (even if there is nothing that positively confirms this. No matter how much they crow over data points that would ordinarily be ignored!)

We’re back to the old, ‘it’s not what you say but how you say it’ game, the point is to generate excitement thereby creating plausibility, which is almost believability.

Most realists openly admit we will never achieve anything approaching ‘ideal’ circumstances…but this fantasy bullshit is getting way out of hand!

Which is to ask at what point are you forced to admit that your ‘elected representatives’ are no longer in control of the situation? Does this realization come once it is apparent that no matter who you vote into office, nothing changes (a phenomenon that dates back to the Nixon administration!)

The very foundation of civilization is trust, once that trust has been broken, what passes for civilization collapses.

As the, er, ‘decrees’ of management become more and more dependant on the flimsiest of evidence, trust dissolves and civilization collapses.

But I digress. tonight’s offering isn’t a direct critique of the breakdown of trust…but it does focus your attention on what happens when the whole ball of wax becomes a game of ‘trust me’? (Without the question mark…your compliance is ‘assumed’ because your options are, er, ‘limited’)

Why There is Fear and Resentment of the Power of Gold to Discover Value in the Real Economy

There were a few questions raised about the note on the long term chart of the SP 500 deflated by gold which was posted last night, and which is reproduced here on the right, which read:

"This is why the financial engineers like Bernanke hate and fear gold; it defies their plans and powers."

The chart shows something that most investors have suspected. There has been no genuine recovery in the price of stocks since the decline that cannot be fully explained by the monetary inflation of the dollar, as can be discovered by the ultimate store of value, which is gold.

I thought that this was a fairly straightforward observation, but it apparently jarred a few people and their thinking. So perhaps we have some new readers who are not familiar with the long standing animosity towards gold that is uniformly expressed by all those who promote centralized command and control economies, from both the left and the right. [While I still, er, ‘object’ to ‘monetizing’ gold, there indeed has to be a standard somewhere if only to keep things honest. Otherwise you get what we have today, a bunch of morons pulling valuations out of their butts!]

Can any astute observer doubt the Fed's desire to act in secret and privacy? Their obsession with this is almost unbelievable and beyond comprehension, [Not if their ‘goal’ is to hoodwink the rest of us!] unless one understands that they are in a 'confidence game,' and use persuasion and even illusion to shape perceptions, especially at the extremes of their financial and monetary engineering of the real economy.

This animosity and desire for secrecy was described by Alan Greenspan in his famous essay, Gold and Economic Freedom, first published in 1966. In a fairly amusing exchange between Congressman Ron Paul and the former Chairman a couple of years ago, Mr. Paul asked Sir Alan about this essay, and if he had any corrections or misgivings about it after so many years. Would he change anything?

"Not one word." replied Greenspan.

It helps to understand the dynamics of the money world, which appear so mysterious to those who do not specialize in it, even economists, although they often feign ignorance to promote some cause or avoid unpleasant disclosure.

Money is power. Ownership of the means of production may provide for the control of groups of disorganized labor, but the power of the issuance of money allows for the control of whole peoples and governments, through the distribution and transference of wealth, by the most subtle of means. And this is why the US Constitution relegated this power to the Congress and by their explicit appropriation, and denied it to the States and private parties except in the form of specie, that is, gold and silver which have intrinsic value.

It might be useful to review a prior post in reaction to the self-named maverick economist Willem Buiter, who wrote a few attacks on gold, prior to his leaving academia and the Financial Times to take a position with Citibank. Willem Buiter Apparently Does Not Like Gold

It may seem a bit perverse, but I do not favor a return to a gold, or a bi-metallic gold and silver standard. Each nation can be free to devalue or deflate their own money supply as their needs require, with the consent and knowledge of the people and their representatives. What I do promote is for gold and silver to trade freely without restraint or manipulation as a refuge from monetary manipulation, and a secure store of value for private wealth. When nations adopt the gold standard, they invariably see to 'fix' and manipulate its price, and reserve the ownership to themselves, with the tendency to seize the wealth of their citizen under the rationale of such an ownership, or dominant privilege. Let those who have a mind to it have a place of security for their labor and efforts, and let the state do as it will, with the open knowledge and consent of the world. [As I have pointed out numerous times before, money ‘failed’ at it’s intended purpose, but that didn’t stop its subsequent ‘abuse’ as a social control measure.]

"Gold is not necessary. I have no interest in gold. We will build a solid state, without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off to a concentration camp. That's the bastion of money."

Adolf Hitler

A draconian approach no doubt. It is much more common for the ruling parties to debase the coinage secretively while advantaging their friends and supporters, thereby manipulating the value of gold and silver covertly. In modern times of non-specie currency one might choose to select a few cooperative banks and the central money authority to manipulate the price using paper and markets, and hope that this scheme will remain undiscovered. But it always comes out, the truth is always known in the end.

"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people." [And the current governments of the world are no exception!]

F. A. Von Hayek

There are any number of amateur economists and investing pundits around these days who betray an almost irrational opposition to gold, becoming jubilant in every decline, and despondent at every rally. And some of them even take the label of 'Austrianism' in their thoughts. Most often this can simply explained as the envy of those who have not prepared for a crisis, and wish ill upon those who have, regretting and hoping for another chance to provide for their own security. And yet they will fail to take advantage of every opportunity to do so, as they are creatures betrayed alternatively by their own fear and greed. [Jesse’s buttering his own bread here, or ‘talking his book’ as many investment advisors will when given the chance.]

And regrettably, there are always those who will say almost anything for money, and the profession of economist seems to be particularly infested with that sort, given the nascent nature of the discipline, and its lack of scientific rigor, being based on principles which do not easily lend themselves to objectification with serious damage to the data being made by the assumptions in their equations and proofs. [Can’t fault his critique here, economists are worse than pollsters or ‘ratings agencies’ who both produce the results they are paid to report!]

But most of all, the financial engineers, politicians, and Wall Street Banks fear gold because it is the antidote to their frauds, and the informant to their confiscation of wealth. [Ironically, it is the people who hold large stores of gold in their possession that provide us with this fiscal ‘bellwether’, otherwise we would have nothing to ‘compare’…]

Do not expect them to capitulate once and for all, but only slowly and grudgingly, as it becomes more difficult for them to sustain their illusions and persuasion. Protecting wealth against official adventurism is never easy.

Understand good citizen that gold is no more money than paper is…and push come to shove ‘civilization’ can’t be sacrificed on a ‘cross of gold’ (because those who ‘control gold now are the same people who brought the current mess to us!)

The only way (don’t you love that phrase, wars have been fought over such assertions!) to correct the longstanding problem associated with money is to ‘legally’ redefine and ‘re-purpose’ it.

Nobody should EVER be used as someone else’s ‘income stream’ because that is the essence of slavery. Erasing that wrong leaves us with a different ‘truth’; that money is only useful to the individual. It serves society as a ‘regulator’ because it regulates the individuals ‘access’ to goods/services that are in short supply.

If we recognize that money is only useful to the individual, we need to also acknowledge that money need not be ‘transferable’ between individuals, and no facility should be made to do the same.

Too bad people don’t like to think because it is here that people lose their appreciation for the beauty of ‘A Simple Plan’.

They start worrying about what would happen if the computers crashed or if criminals decided to use something else as money (like the ‘shadow banks and their derivatives!)

And the answer to both is simple…the rules of work are so rigid that calculating what you should have in the, er, ‘bank’ is a simple mathematical equation (that will likely give you more than you actually had…although ‘hard crashes’ would be rare.) And if criminals ‘invented’ their own money, they’d be ‘exiled’, a rather nasty punishment reserved for those unwilling to play by the rules.

Well, now I’m ‘talking my book’, see, we’re all ‘shameless’ if given a chance.

Thanks for letting me inside your head,


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