The Keynesian Fiat Economies are so Bad that the World is Turning back to Gold

Posted by PITHOCRATES - January 19th, 2013

Week in Review

Keynesians hate the gold standard.  They blamed it for the Great Depression.  Which they believed could have been avoided if the government printed more money instead of contracting the money supply.  For a Keynesian’s answer to everything is to expand the money supply.  So the government can spend more money.  This came to a head in the U.S. during the Seventies.  Foreign countries were converting their dollars into gold.  Because the U.S. was devaluating the dollar by printing so much new money.  So these countries took the gold instead.  Because you can’t depreciate gold.

The Seventies were a disaster.  It turned out that the government just couldn’t print money to pay its bills as the destruction they caused on the dollar devastated the economy.  So they backed off.  The Federal Reserve raised interest rates into the double digits to stamp out that destructive inflation.  The world didn’t return to a gold standard, though.  As most countries were still hard-core Keynesians who liked the ability to make money out of nothing so they can keep spending. But now the Eurozone is in a sovereign debt crisis.  The UK is slashing their NHS budget.  Japan is now spending twice their GDP and stuck in an economic slump going on for over two decades.  And as the U.S. is spending about 100% of its GDP they added a whopper of a new entitlement.  Obamacare.  The destruction of the dollar isn’t a question of if but when.  And now we’re seeing a quasi return to the gold standard as nations everywhere are losing faith in the ability of these Keynesian governments to spend responsibly (see A new Gold Standard is being born by Ambrose Evans-Pritchard posted 1/17/2013 on The Telegraph).

The world is moving step by step towards a de facto Gold Standard, without any meetings of G20 leaders to announce the idea or bless the project.

Some readers will already have seen the GFMS Gold Survey for 2012 which reported that central banks around the world bought more bullion last year in terms of tonnage than at any time in almost half a century.

They added a net 536 tonnes in 2012 as they diversified fresh reserves away from the four fiat suspects: dollar, euro, sterling, and yen…

Neither the euro nor the dollar can inspire full confidence, although for different reasons. EMU is a dysfunctional construct, covering two incompatible economies, prone to lurching from crisis to crisis, without a unified treasury to back it up. The dollar stands on a pyramid of debt. We all know that this debt will be inflated away over time – for better or worse. The only real disagreement is over the speed.

This is the inevitable result of Keynesian economics.  Reckless spending that destroys currencies.  And right now these countries stand in judgment of the U.S., the Eurozone, Great Britain and Japan.  Their social spending obligations have put them on a path towards currency destruction.  And they don’t want be around when that happens while holding dollars, euros, sterling, or yen.  Because they just won’t be worth the paper they’re printed on.

In Ayn Rand’s Atlas Shrugged American Industrialists went on strike.  Walked away from their companies and disappeared.  Leaving their overregulated and overtaxed businesses to the government to do with them as they pleased.  Refusing to be economic slaves anymore.  They eventually migrated to a place called Galt’s Gulch somewhere in Colorado.  Where they made their own community.  And economy.  Where creators traded with other creators.  Using that one money that stood the test of time.  Gold.  For if you wanted to buy something in Galt’s Gulch you had to have gold.  For no one accepted cash there.  Some have been predicting we’ve been on the brink of something like this actually happening for the last 80 years or so.  And now it’s happening.  Only it’s not American industrialists turning on the U.S. government but the rest of the world.

Is it any wonder that sales of Atlas Shrugged have surged during the Obama administration?  These people are seeing what these countries see.  The decline of the U.S.  And the destruction of the dollar.  Thank you President Obama.

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Atlas Shrugged Always Relevant. And now a Movie.

Posted by PITHOCRATES - March 4th, 2011

 The Slippery Slope to Socialism

Never have so many waited for so long for this moment in time.  And now it’s almost upon us.  But can it be true?  For we’ve long been teased about this day.  Not days.  Not weeks.  Not months.  Not years.  Imagine Charlie Brown trying to kick that football for decades.  Yeah, it’s been like that.  But no more.  We’re finally going to kick that football.  For this is the moment we’ve all been waiting for (see ‘Atlas Shrugged: Part 1′ Review: A Timely Must-See by Jenny Erikson posted 3/4/2011 on Big Hollywood).

Atlas Shrugged: Part 1 is an excellent reminder of the dangers of socialism in our current age of entitlement. The parallels between the story and our current political and cultural state are uncanny and more than a little bit unsettling. As a witness to the Bolshevik Revolution in Russia, author Ayn Rand was well aware of the tragedies of statism, and her most famous work of literature depicts what happens when the wealth is spread around in the name of fairness.

The movie adaptation of Atlas Shrugged remains faithful to Rand’s themes of capitalism and the evils of collectivism. One major change from the pages to the screen was the decision to change the setting from a future fictional country to America in 2016. It was a good decision, in this writer’s opinion, as it illustrates the slippery slope of socialism our nation is teetering on.

The book is about a thousand pages long.  But well worth the read.  In fact, you have plenty of time to read the book before the film hits theatres on 4/15/2011.  Tax day.  How appropriate.  Rand fans will be in the proper mood.  So do yourself a favor.  Read the book (if you haven’t already).  And then see the movie.

The liberal left hates Ayn Rand.  With a passion.  Because she attacks Big Government.  With a passion.  And for good reason.  Rand emigrated from Russia after the Bolshevik Revolution.  So she knows a thing or two about Big Government.  And their BS.  She’s seen all the lies before.  She saw firsthand what’s down the Road to Serfdom.  We’re on that road, too.  Only not as far down it.  Yet.

But really now, are we really on a slippery slope to socialism?  I mean, is our government lying to us?  

The Secret of Passing Obamacare was Lying to CBO

Can we trust the government?  You tell me (see HHS Secretary Sebelius admits to double-counting in Obamacare budget by Amanda Carey posted 3/4/2011 on The Daily Caller).

During a hearing on Capitol Hill Thursday, the secretary of the Department of Health and Human Services (HHS) admitted to double-counting in the Obamacare budget…

The Obama administration and HHS have been criticized previously for double-counting. In a report last summer, HHS claimed a provision in the health-care law would extend the Medicare trust fund by 12 years. The Congressional Budget Office released a memo that said HHS’s math was more than a little off.

“[…] They cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs … To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings,” said the CBO memo.

The cost of Obamacare was the lynchpin.  CBO had to score it under a trillion dollars.  And, surprise, surprise, they did.  Apparently you can get what you want from CBO if only you send them fraudulent data.

They said they have $500 billion that they’re putting aside for Medicare.  To extend its solvency.  Then, unbeknownst to CBO, Congress and the American people, they used that same money to pay for Obamacare.  Well, you can’t do that.  You can’t have $20 in your wallet and use it twice for different purchases.  Once you spend the $20 it’s gone.  Ditto for that $500 billion.

So the Obama administration lied to us.  Had they told us, Congress and CBO about the true cost of Obamacare it would not be law today.  Hmmm.  A ‘compassionate’ government that lies to pass the biggest expansion of federal power?  Well, I guess you could say that we’re on a slippery slope to socialism.  You sure can’t call it capitalism.  And that pretty much leaves socialism.

Just one of many reasons why everyone should see Atlas Shrugged: Part 1.  Of course, you may experience a Charlton Heston moment.  In the Planet of the Apes.  When he saw what was down that beach in the Forbidden Zone.  So watch Atlas Shrugged at your own risk.  For you may see your future.  And you may not like what you see.  Just like Heston.  Of course there is a difference.  You can still make a difference.  Unlike Heston.  We can still hope.  And vote.

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The People are Speaking – and They’re Rejecting Pelosi and Obama and Their Very Expensive, Jobless, Liberal Agenda

Posted by PITHOCRATES - October 31st, 2010

Ethical and transparent is all well and good with Republicans in power, but devious is just fine when the Democrats are back in power.

The Wall Street Journal’s John Fund sat down with Rep. Brian Baird, a six-term Democrat from Washington State.  He’s not running for a seventh term.  He’s retiring and going home to be with his children while they’re still children.  With a close to his political career, he had nothing to lose speaking his mind.  And he did.  (See Requiem for the Pelosi Democrats posted on line 10/30/2010.)  One thing this Democrat wasn’t happy with was the Democrat leadership.

Mr. Baird recalls that he was “very excited” when his party took control of Congress in 2006, but he saw ominous signs early on. Before the 2006 election, he says, Mrs. Pelosi had 30 members working on a rules package to make the House more ethical and deliberative. “We abandoned all that work after the election, and leaders told us we should trust them to clean things up. I don’t know a single member of the Democratic caucus who saw the final rules package before they voted on it.”

Even her own don’t like her.  Nancy Pelosi was going to have the most ethical and transparent House.  Of course, Pelosi initiated that initiative when the Republicans were in control.  When she was working on a very draconian set of rules for the House of Representatives.  Then, to her shock, the Democrats won a majority in the House and, with it, the leadership positions.  And the 30-member panel stopped their work.  Why?  Those draconian rules had but one purpose; curb Republican power.  With them being in the majority, they didn’t need any set of rules to curb Republican power.  And they sure as hell weren’t going to implement any rules that would curb their own power.  For the devious like to work outside the rules as much as possible.

Obamacare – long and convoluted, best passed without reading (for it’s not as quick a read as War and Peace or Atlas Shrugged).

Once back in power, they were giddy with that power.  They took it as a mandate to change America.  But it wasn’t.  It was a mandate to change Washington.  But they tried their level best to remake America to what the people wanted.  Demanded.  To make it liberal.  To give us Big Government.  This is what they and about 20% of Americans who call themselves ‘liberal’ wanted.  So they ignored the other 80% and went to work.  Their bills were so long and convoluted that it made Leo Tolstoy’s War and Peace and Ayn Rand’s Atlas Shrugged (both in the 1,000-page class of novel) seem like Readers Digest reading by comparison.  And one of the longest and most convoluted?  Obamacare.  Which few read before voting. 

“What the hell were we doing voting on this? I had labor groups come to me and insist the bill was so important we couldn’t wait to know what was in it,” he recalls. “I asked them if they were handed a new union contract and told it was so important they had to agree to it without reading it, would they go along?” They continued to insist he vote for the bill and threatened him with a primary challenger.

Even Nancy Pelosi said that Congress would have to approve it before they could learn what was in it.  Remarkable.  Can you imagine the teachers’ union agreeing to this?  Saying to the school board, “Sure, whatever you say.  If the contract’s fair that’s good enough for me.  We, the teachers, can learn about what we agreed to after we vote to ratify it.”  No, they wouldn’t.  Neither would Nancy Pelosi pass a bill sponsored by Republicans without reading it.  It’s okay for her, though.  Because she’s an elitist.  And doesn’t really care what we ‘rubes’ think anyway.

Obamacare – We’ll pay for filet mignon but get hotdogs and hamburgers, a very expensive mediocrity.

Passing Obamacare required some financial shenanigans.  They needed CBO to score it under a trillion dollars.  Which was like giving everyone filet mignon at the family reunion BBQ by asking everyone to pay $5 to cover the cost.  You can’t do it.  If you’re buying food for everyone and only collecting $5 a head, trust me, you’re serving hot dogs and hamburger.  But if you collect the money first and don’t feed anyone until after, say, 4 years, you’ll be able to stay within your imaginary budget in those first 4 years.

“I warned my fellow Democrats that the insurance companies they were whacking could increase premiums just before the midterm election and blame them for it,” he sighs. “I pointed out that the major benefits wouldn’t kick in till 2014, but the costs were up front. I asked them, where was the political win? There was no real answer.”

Of course, people are not going to enjoy paying for nothing.  They’re not just going to sit idly by with their wallets open, whistling a happy tune.  There will come a point when they’re going to ask what they’re getting for all their money.  And then after 4 years of paying for filet mignon, they’ll finally get to enjoy the benefit they’ve been paying and waiting patiently for so long.  And, guess what?  They’ll still get hot dogs and hamburger.  Because everyone can’t have filet mignon.  It’s just too damn expensive.  So like with everything else Big Government does, we’ll end up with a very expensive mediocrity.

The rubes in flyover country have had enough of deficits.  And enough of the arrogant and condescending Pelosi and Obama.

Nancy Pelosi and most in Congress are elitists.  They are so far removed from ordinary America that it’s like visiting a foreign land for them.  That’s why they call it ‘flyover’ country.  The only thing the country outside their liberal districts is good for is flying over en route to another liberal district.  They either think everyone thinks like they think.  Or that those too stupid to be able to think like they think should just be seen and not heard, grateful for whatever alms they hand out.  The concept of alternate viewpoints is alien to them.  So when advisors told them to go ahead and spend because the people (the people that count – the 20%) don’t care about deficits, they listened.  Well, not so much listened.  But heard what they wanted to hear.

Democrats, he says, will also have to recognize why they lost touch with voters. “Back in September, we had pollsters and strategists from my party tell members that the mass of people didn’t care about the deficit. The mind-boggling lack of reality coming from some of the people who give us so-called advice is stunning.”

Well, people care about deficits.  Like the Left used to care about when Ronald Reagan was running up a deficit the size of a drop in the bucket compared to theirs.  And the amazing thing is, they aren’t done spending yet.  Which is really frustrating the 80%.  The rubes.  The good people in flyover country.  Who are growing weary of the condescending and arrogant Nancy Pelosi and President Obama.

The mandate was to change Washington, not America.  Now, America is polarized.  And it’s business as usual in Washington.

Toby Harnden, American Way, wrote a piece appearing on www.telegraph.co.uk called US midterm elections: Barack Obama’s world turned upside down as Democrats face electoral disaster.  Those familiar with history will be familiar with part of this title.  For tradition says that when Lord Cornwallis surrendered at Yorktown in 1781, the British marched out while their band played The World Turned Upside Down.  How very apropos.  For the ruling elite is stunned, much like Lord Cornwallis was, at the thought of being defeated by a bunch of rubes.  So desperate to avoid such a ‘Cornwallian’ disaster, the Left is trying everything within their power.  Even abandoning the lie that brought them into office.  

The irony of Obama being the blue-state president is acute. Back in 2004, the then state senator shot to international attention by mocking the pundits who “like to slice and dice our country into red states and blue States”.

He declared: “There’s not a liberal America and a conservative America. There’s the United States of America. There’s not a black America and white America and Latino America and Asian America. There’s the United States of America.”

Of course, once he got into office, it was all, “I won.  You lost.  Nyah nyah, na nyah nyah.” 

Swept into power on a wave of adulation and talk of an historic new era, Obama never felt he needed to work with Republicans. It took him 18 months before he invited Senator Mitch McConnell, the Senate Minority Leader, to the White House.

But the center-right, the 80%, were not amused.

The problem was that his world view was that of a conventional liberal Democrat but he was president of a nation that was centre-right. His victory came from those who wanted him to change Washington, not America.

And by governing against the will of the people, America is polarized more than ever.  And it’s business as usual in Washington.  Perhaps a bit dirtier, though.

Jobs talk and liberal BS walks.  Yeah, it’s the economy, stupid.

Obama ran as a centrist.  But once in office, he ruled as a liberal.  The most liberal president ever.  And like Nancy Pelosi, he is getting exasperated by these rubes who are just too stupid to know what’s best for them.  So he’s abandoning that reaching across the aisle nonsense and doing what Democrats do best.

Obama’s high-minded appeals for national unity are no more. His electoral strategy is one of desperate damage limitation. Most pollsters expect Democrats to lose more than 50 seats and control of the House of Representatives.

They will probably keep control of the Senate but at least six seats look lost. Obama’s response has been to “slice and dice” the electorate in the way he condemned. He endured the indignity of being called “dude” on Jon Stewart’s Comedy Central show as the price for enticing young voters.

He’s appeared on the Reverend Al Sharpton’s internet radio show to woo black voters. On Univision radio, he told Latino voters of the need to “punish our enemies”. He routinely attacks Fox News and Karl Rove, President George W. Bush’s former adviser, as a way of energising liberals.

With the realization that America doesn’t want what Pelosi and Obama are pushing, they reach out to those who they once simply took for granted: the young, the blacks and the Latinos.  Who they need more than ever now that so many women are turning to the Republicans this election.  Because there are no jobs.  After 2 years in office.  And trillions of dollars in spending.

What was that the Democrats used to say?  Oh, yes, I think I remember.  “It’s the economy, stupid.”  Duh.

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FUNDAMENTAL TRUTH #13: “If you were to live under the socialist maxim ‘from each according to his ability to each according to his need’ you would find yourself surrounded by needy people with no ability.” -Old Pithy

Posted by PITHOCRATES - May 11th, 2010

“WHO IS JOHN GALT?”  If you can’t answer that I’m guessing you don’t like reading 1,000-page novels.  Or that you went to public school and had no conservative friends or family.

The book is Atlas Shrugged by Ayn Rand.  John Galt worked at the Twentieth Century Motor Company.  An engineer.  A pretty brilliant one at that.  He’s the hero of the novel.  The plot is the eternal struggle of individualism versus statism.  Private entrepreneurship versus state economic planning and control.  ‘Leave me the hell alone’ versus the all encompassing nanny state.  Good versus evil.  You know, the usual stuff.

Dagny Taggart is the heroine.  She’s the vice president of operations of Taggart Transcontinental Railroad.   If you like your women intelligent, strong, independent, feminine and sexual, then Dagny’s for you because she’s all that and a bag of Skittles.  She doesn’t take sh*t from anyone.

Anyway, Galt and Taggart do some brilliant things separately.  They have some mutual acquaintances.  They later meet.  Yadda yadda yadda, big climax and that’s the story.  I could tell you more but I wouldn’t want to spoil it for you when you do read it.  And you should read it.  When people put together lists of books that have influenced lives, the Bible often lands in the #1 spot.  Atlas Shrugged often lands in the #2 spot.  A must read.  And when you make it through the 50+ page speech near the end, why, you’ll have some bragging rights.  Those of you who have read it are probably nodding your heads as you recall your own perseverance in reading that speech and your will to finish it.  But fret not, casual readers.  The other 950 or so pages are a breeze.

FROM EACH ACCORDING to his ability to each according to his need.  Great philosophy.  If you’re one of the needy.  Kinda sucks if you’re one of the able, though.  Big time.  Here’s how.

Let’s say there’s a husband and wife who are both brilliant doctors.  He’s a neural surgeon.  She works in the field of infectious diseases.  They are among the best of the best in their respective fields.  They are literally saving lives where people once had no hope.  They worked long and hard to reach this point in their careers.  And they continue to work and study.  They contribute greatly in research.  Workaholics both.  Being so dedicated in their careers they chose not to have children.  They felt the work they were doing was that important.  As did others.  Between the two, they earn in excess of $500,000 annually.  Talent like theirs is just so rare and oh so valuable.

Now let’s consider a 19 year old high school dropout.  He works as a bouncer at a strip club and sells a little weed on the side.  Lives in his mother’s basement.  Parties all night and sleeps in till 4 PM.  And he has 10 children by 9 different women.

Now, in the normal world, the doctors would have a nice home and drive Mercedes Benzes.  The bouncer would not.  But in the world where we take from those according to ability and give to those according to need, things would be different.  You see, the doctors don’t have very many needs.  They have no children and work most of the time.  The bouncer, though, has a lot of need.  Ten kids to support.  So can you guess how things would work in this Socialist Utopia?  That’s right.  We take from the doctors and give to the bouncer.  Fair, right?

It depends on your definition of fair.  If you’re just a leech that wants to suck on the teat of society, you have no complaints.  You find the whole thing pretty sweet.  Why, anyone running on that platform, they got your vote.

But what about the ones who spend 8 years in med school, struggle through sleep-deprived internships, residency, continuing education, who work long and stress-filled days and give up a lot of personal pursuits in the process?  What about them?  Shouldn’t we reward that incredible effort and self-sacrifice?  I mean, if we don’t, why do it?  For the good of the people?  Yeah, right.  If it’s all the same, why can’t the bouncer sacrifice for the good of the people?  Why is it always the ones who work hard that have to do all of the sacrificing?  And do.

So there it is, the Socialist Utopia.  Work hard and succeed and get…less.  Don’t work hard and be irresponsible and get…more.  This is the essence of Marxism/Socialism.  In economics, we call this a disincentive to succeed.  Anyone with half a brain will strive to show as much need as possible while showing as little ability at the same time.  Because if you don’t you can see where this ends, can’t you?  You get stuck doing all the hard work.  And if you don’t have a lot of need, you get bupkis for all your sweat and ulcers. 

But it gets worse.  If no one chooses to do those incredibly difficult and stressful jobs, what happens then?  Simple.  If you choose to say ‘no’ someone will simply says ‘yes’ for you.  And what do we call forced labor against one’s will?  We call it slavery.  Or servitude, if you prefer.  As in F.A. Hayek’s The Road to Serfdom which shows the progression from socialism to servitude when someone ultimately has to be the final decision maker in determining what’s best for the common good.

INTERESTING THING ABOUT socialism.  It has a track record.  Not a good one.  Everywhere it’s been tried it has failed.  Why?  It goes against human nature.  Ponder this, if you will.  Let’s say you’re going to dine at a fine restaurant.  There are two ways in.  One through the main entrance where the maître d’ greets you.  The other is through the kitchen.  If you come in through the kitchen, though, you’ll have to do some basic food prep for table 3 and wash the dishes from table 5 before you eat.  Now, which path do you choose?

Yes, it’s a silly example.  But it makes a point.  Only an idiot would enter through the kitchen in this example.  Why?  Because we choose the path of least resistance.  Always.  Even though helping with some food prep and washing some dishes is best for the common good we’re just not going to do it.  At least, not voluntarily.  And that’s why socialism has failed and always will fail.  The natural state for people is NOT slavery.  We don’t volunteer to do more for the same outcome.  People do that only when forced, for the state of slavery can only exist by force.  As Hayek so aptly shows in The Road to Serfdom with the rise of the Nazi and the Italian fascist dictatorships.

THIS IS WHY Atlas Shrugged is so enduring.  It is THIS story.  The eternal tug of war between individualism and statism.  The escalation of force.  Submission.  And breaking points.  Both Hayek and Rand warned of the same dangers and the ultimate consequences of our ‘altruist’ actions.  He by philosophical treatise.  She by narrative.  And one of her characters, Francisco d’Anconia, summed it up well in an exchange with Henry Rearden when he said:

“…if you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down upon his shoulders-what would you tell him?”

Rearden didn’t have an answer.  D’Anconia did.  He’d tell him, “to shrug.”  To let go his burden.

And, of course, Atlas is a metaphor for those people with rugged individualism, the entrepreneurial spirit.  And the day they do shrug, we’re screwed.

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