Monthly Archives: December 2012

Comfortably Numb on the Road to Collectivism

It’s been a week since the atrocity in Newton, Connecticut.  As we mourn the loss of innocent life public debate over the reasons why this happened and what should be done about it have become vitriolic.  Immediately, the call for stricter gun control, armed personnel in schools, curbing video and entertainment violence, and the use of psychotropic drugs has raged.

I understand the need to make sense of the senseless.  I understand the desire to do something instead of nothing.  I understand the opportunistic amongst us will use this situation to further political agendas.  Never let a crisis go to waste, some believe.

The killing in Newtown is a microcosm of a much larger set of issues regarding the individual and society.  Issues man has faced ever since Adam took a bite of the apple.  Because Adam was tempted and succumbed to his temptations God has given man free will.  Because man has free will he chooses how to conduct himself.  Just as darkness is a term to describe the absence of light and cold is a term to describe the absence of heat; evil is the absence of good.  Evil comes from mans’ free will to act.  Just as Cain killing Abel was evil so was the murder of twenty eight people in Newtown.

The outrage over the use of a firearm to commit an evil act is misplaced.  The firearm was the tool but the tool can only be wielded if a person freely chooses to commit an act of evil.  Just as box cutters, knives, fire, automobiles, and fertilizer and diesel fuel are used to create a bomb these are simply tools used to  commit an evil act.  This becomes a question of human dignity and human life.  Ultimately, the mind reasons, rationally or irrationally, another human life is unworthy and the evil act of taking another human life is a reflection of how people view life.

Every life is worthy and every human life should be treated with dignity.  However, there are many people that advocate for the killing of the unborn in the womb on Monday and then on Friday are outraged by the killing of innocent life.  Likewise, too many people are comfortably numb to State sponsored killing.   There have been hundreds of innocent women and children killed in Pakistan due to drone bombings.  The loss of life across the globe as war is waged goes unnoticed.  The State calls this collateral damage and the sad truth is too many people have grown accustom to State sponsored killing.  Moreover, where is the outrage from these very same people now screaming for more gun control when there have been over four hundred children killed in Chicago this past year?

Everything revolves around one central issue.  Thomas Jefferson said, “The issue is the same today as it has been throughout all history, whether man shall be allowed to govern himself or be ruled by a small elite.”  It all boils down to the individual vs. some other collective alternative.

The smallest minority is not a racial, religious, or other group of people.  The smallest minority is the individual.  The Declaration of Independence set forth the founding principles for free people.  Political societies are formed for the sole purpose of better protecting certain unalienable rights endowed upon us by our Creator.  Political societies are a reflection of mans’ free will to associate with others for the same end.  Individuals act freely to preserve their lives and pursue a course to ensure their own happiness.  This is what it means to have liberty.  More specifically, in political society it is the concept of rightful liberty which is the unobstructed action according to your own will drawn around the equal rights of others.

Along with rightful liberty comes responsibility.  The recognition that free will in a state of nature or rightful liberty in a political society, not only implies, but requires responsibility for one’s actions.  You are held personally responsible for the consequences of your actions.  Therefore, if any member of society violates the equal rights of another they are held responsible.  An important and necessary aspect of any justice system within a political society is the person committing a wrongful act is held responsible.  The people collectively are not responsible for the act of one person.  There are eighty-nine million gun owners in the United States that did not violate anyone’s rights last Friday in Newtown.  One person was responsible for that act.   The very idea that the rights of all people should be abridged or denied because of one person’s actions is absurd.

This reflects the nature of many differences we face today.  That is the individual vs. collective alternatives.  As President Obama said the other day people must sacrifice for the collective good.  But what is the collective good and, more importantly, who decides what is good for everyone?  Do we have a government – a political society – based upon the free association of people and states, or do we have an omnipotent nationalist government?  The same question arises in the question of free markets vs. central planning.  Do free markets allow for two or more people to freely engage in commerce and reflect the wants and needs of the people?  Or can central planners decide which industries succeed or fail, how much or how little of a good is produced, how much money is printed and the cost of money (interest rates), or how much property is confiscated through taxation to wage war and to kill innocent women and children in Pakistan?  The same question arises over property rights.  Does the individual or the government own property?  Does another person have a rightful claim to your property, and if so, how much and why?

Are we free people exercising rightful liberty or are we enslaved to a collectivist government where an oligarchy of a few hundred people lord over three hundred and ten million people.  Can a cabal of people oversee a centrally planned economy?  Do these rulers decide who owns property and under what conditions?  Furthermore, can these very same rulers institute social, economic, and other forms of distributive justice?  Such power concentrated in the hands of the few is inimical to the ideal that government is instituted for the sole purpose of better securing our unalienable rights.

Is man capable of self-governance and self-determination or does man need to be ruled by a cabal of other men?  The centrifugal force that is the tendency to consolidate power is accelerating.  The 20th century was one of the most deadly in the history of mankind.  Collectivist societies such as the Soviet Union, the National Socialists in Germany, the Italian fascists under Mussolini, and the Maoists in China have resulted in roughly one hundred million deaths.  Dictatorships, theocracies, and other collectivist societies only add to these numbers.

Collective societies seek to punish individuals that do not conform to the greater good.  Collective societies recognize the State as the greatest power not the individual.  Collective societies survive only because of violence initiated by the State against anyone that opposes the collective good.  A collective society results in people becoming comfortably numb to State sponsored killing.  A collective society is void of responsibility because there is so little personal and economic liberty.  People living in a collective society, some freely and some forcibly, shackle themselves to the chains of slavery to ensure the survival of the collective.  Collective society does not and cannot recognize the value or dignity of human life because the State is above each individual human life.  To make individual life equal to or more important than collective society would be the death to the State and centralized power.  Just as the killer in Newtown did not value human life and chose to commit an evil act, collective society is evil  because human life, liberty, and the pursuit of happiness is disregarded or unworthy of recognition.

May God’s grace shine warmly upon the souls that entered the Kingdom of Heaven last Friday and grant them peace ever lasting.

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Pop Goes the Debt and Currency Weasel

The entire global monetary system is a debt based system.  The aggregate debt of all countries is roughly $220 trillion and that doesn’t include state and local governments nor does it include unfunded liabilities.  Global GDP stands at $62 trillion.  The global debt to global GDP ratio is 355%.

Central banks continue to debase their currencies in a race to the bottom.  It’s not a race anyone wants to win, just a race where central banks one-up each other in the currency debasement race.  Future economic activity is brought forward through zero or negative interest rate policies intended to spur consumerism through credit expansion.  The Federal Reserve has announced multiple quantitative easing programs over the past three years including expanding the money supply from $800 billion at the end of 2008 to nearly $3 trillion today, the purchase of $40 billion a month in mortgage backed securities, and the swapping of long-term debt for short-term debt.  In fact, the Federal Reserve now owns over 90% of the long-term yield curve (bonds with 10 year maturities and longer).  This week the Federal Reserve announced QE4 and will be adding $85 billion per month to their balance sheet.  By the end of 2013 the Fed’s balance sheet will be at least $4 trillion.  That pales in comparison to the Japanese Central Bank’s balance sheet which stands at 156 trillion Yen.

Trillion dollar government deficits along with various so-called stimulus programs are used to increase economic activity.  Not unlike the depression era programs Franklin Roosevelt’s administration implemented, government intervention failed to produce the results central planners expected.  Shockingly, too many people believe we need more government spending and more intervention by the central planners.

The recession of the past four years has been compared by many to either the early 1980s or the great depression.  It is my assertion this is substantially different than prior recessions or depressions.  Since our founding the economy has experience three major resets, and arguably, four monetary regimes.  The major resets occurred in the 1840s, 1890s, and 1930s.  The four monetary regimes were the silver standard, the gold standard, the Fed Reserve era up until 1944, and finally the Bretton Woods era.  The post-Bretton Woods monetary system is the fifth monetary regime and, demonstrably, marked the beginning of the end for the dollar.

We are long overdue for the fourth reset.  But this reset will be unlike any of the others.   Today we have a fiat currency controlled by a central bank that can print without restraint.  Global debt and credit is the new monetary system backed by nothing of value.  Many countries have accumulated debt far exceeding their capacity to repay it through traditional means like taxation.  Moreover, the prior resets where all deflationary in nature.  The economy was purged of debt and misallocated resources, and any speculative bubbles were burst.

Today, the central planners promote the idea that deflation must be avoided at all costs.  Instead of a great purge, which allows the people to establish new bottoms to initiate the next cycle of economic prosperity, the central planners are doing the exact opposite.  They are creating an inflationary debt and currency bubble.  Debt is piled upon debt with no end in sight.  Goods and services are subsidized which results in the misallocation of resources towards government centric preferences.  Private companies are bailed out by unprincipled and morally bankrupt politicians and central planners.  Consequently, moral hazard is removed from the equation as rewards are privatized and risks are socialized.  The social risk means the people pay for the mistakes, poor decisions, and illegal acts of private companies.  Government is a facilitator and abettor to this global debt ridden, Ponzi entitlement, fiat currency scheme foisted upon the people.  Debt is purchased outright by the Federal Reserve and other Central Banks.  In fact, the Fed has been acting as the buyer of last resort for the past four years.  The final capitulation will come when the inflationary money bubble bursts.  Pop goes the debt based, worthless currency Weasel.  Then the fourth reset will occur.

Another difference most people do not recognize is that debt will not be paid off by future earnings.  Instead it will be purged by past earnings stored in the same currency as the debt.  Through a process of inflationary monetary policy decisions a large swath of past earnings will be diminished if not obliterated by inflation; the silent killer of wealth and prosperity.  A massive transfer of wealth will occur as a consequence of inflationary policies.  Since government only needs money in nominal terms to repay debt it is in the government’s interest to implement inflationary policies.  Government’s interests are inimical to our interests.  Those that live in the real world and operate on real terms will be punished severely as prices continue to rise, gradually at first, then suddenly when the final collapse is upon us.

Initially, equity markets generally react well to inflationary policies.  The past three years the U.S. stock markets have risen because of inflationary policies not because of sound financial fundamentals.  However, nominal gains due to stock markets rising will be meaningless because of currency debasement.  People may feel better or more secure because their 401Ks are rising when measured against the dollar.  But, the dollar’s purchasing power erodes those nominal gains and will be offset by larger loses in purchasing power.  In other words, you can feel good about being able to buy less.

Someone once quipped, “If history has taught us anything it is that history has taught us nothing”.  The Weimar Republic in the early 1920s is eerily similar to what we see today.   As Jens Parsson explained in his 1974 book Dying of Money: Lesson from the Great German and American Inflations.  “Monetary inflation invariably makes itself felt first in the capital markets, most conspicuously as a stock market boom. Prices of national product remain temporarily steady while stock prices rise and interest rates fall. This (is what) happened at the commencement of the German inflationary boom of the 1920… (then) velocity took an almost right-angle turn upward in the summer of 1922, and that signaled the beginning of the end.”[i]

As far as fiat currencies are concerned history doesn’t lie.  Every fiat currency in the history of mankind has ended in collapse.  A perfect one hundred percent record of collapse.  J.S. Kim wrote an article that discusses the history of currencies.  In that article Kim said, “though we have thousands of years of history to draw upon from which it is self-evident that money backed by nothing will always collapse and that granting monopolies on monetary creation always leads to tyranny, we seem not to be able to learn from prior tragedies and continue to yield despotic power to Central Banks and continue to accept fake immoral money as our primary means of conducting trade today.  For those of us that use the thousands of years of monetary history to extrapolate present day conclusions from past day events, we know that it is absolutely insane NOT to expect the US dollar, the Euro, and the Yen to eventually implode and collapse as long as we allow them to be backed by nothing.”[ii]

The world is moving away from the dollar as a reserve concurrency.  A new monetary system will eventually supplant the dollar as the reserve currency of the world.  Debts will be repudiated or paid off via massive currency debasement.  Undoubtedly, most people won’t care how the debt is handled, however they will care when prices rise exorbitantly and the stored wealth and purchasing earned over a lifetime is destroyed by the central planners and government.

I implore you to cast aside what you hear from the media or the DC’vers.  The fiscal cliff is propaganda to divert your attention from the real issues.  Their agenda and interests are very different from ours.  Avoid falling into the normalcy bias trap. You must think objectively.  You must question your premises and the premises of others.  Your beliefs, thoughts, and arguments must be grounded in principles.  Those principles include; truth, unalienable rights, individual rights, and the right to self-determination and self-governance.

Why is government needed?  What is the purpose of government?   The proper role of money in a political society, what money represents, and why should governments control the money supply?  You must understand the philosophic, historic, constitutional, and economic reasons to ensure you can explain these things to others and also apply them to current and future events.  The next reset will be unlike any others in our history.  While it will be painful and destructive in many ways it may provide the only opportunity to reorganize our political societies for decades.

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[i] Thunder Road Report December 2012 by Seymour Price

[ii] The Golden Gift by JS Kim

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