Kitchen Table Talk III
"Whosoever controls the volume of money in any country is absolute master of all industry and commerceAnd when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."
President James Garfield 1881, assassinated a few weeks later on July 2, 1881
They Must Be Guilty or For Every Action
Based on another real kitchen table discussion.
"Did you see where the European Union is issuing fines against the major pharmaceutical companies for price fixing vitamins?" I asked.
"This is good. These companies make too much money," says my friend Patricia.
"And why not. They must be guilty or why else would they be paying?" chimes Bruno.
I make my right hand into a gun and hold it to Brunos head. "Give me half of your money Bruno" I say.
"Dont you see the extortion here? Its no different than the mob. The government has a monopoly on force. If these companies do not pay their protection money the government can stop authorizing their drugs for use or just not allow them to sell certain items."
"Bruno, didnt you just tell me last week that your annuity was paying 15% less than it promised you just a couple years ago? And did you not tell me that the insurance company promised you a guaranteed amount for your annuity?"
"Yes thats right. They say they cannot pay me what they originally promised in their guarantee."
"Well, lets try to understand why they may not have the money to keep their promise.
"You deposit your retirement money with an insurance company into an annuity which is designed to pay you a certain amount of money each year. Now the insurance company has to invest this money in order to make a return that can cover the cost of paying you and cover their costs for managing your annuity. Got that?
"Lets say that the insurance company buys stock in Roche, the Swiss Pharmaceutical giant. Roche pays a nice dividend that is used by the insurance company to pay you. This dividend comes from where? Profits.
"Now, the EU comes along and takes $100 million Euros from Roche as a fine for alleged price fixing. We see no evidence in the press, only an allegation. But where does Roche get the $100 million Euros to pay the fine? PROFITS.
"So now Roche has less profits, therefore they cut their dividend and their stock price goes down. Now the insurance company has to cut you annuity. Do you see how it is all tied together?
"The point is that governments cannot give something to someone without first taking something from someone else. They then have to take their cut just like the mob. The government that you guys believe is so righteous for combating the big-bad corporations is actually stealing right from your pocket.
"And its the little guy like you who suffers in the end.
"Now, which of the two can accomplish more good with that money, the EU government or Roche?" I ask.
"What can the EU do with the money? They can hire more workers. That would be a good thing for those hired. They could give their existing workers an increase in pay. That would be good for their existing workers.
"What can Roche do with the money? They can hire more workers. That would be a good thing for those hired. They could give their existing workers an increase in pay. That would be good for their existing workers.
"Roche can also invest in more research and development, right? They might even discover a new miracle drug, maybe a cure for cancer? These are good things, no?
"The EU can invest also. They can invest where government likes to invest, WAR MACHINES. Then they can use these war machines and our young men and women to go out and destroy something.
"Therefore, which is best for the society as a whole? The government taking money from corporations to increase the size of government and destroy or corporations keeping their profits to provide jobs, continue their research and development and make new discoveries to improve our quality of life?"
The answer is simple.
Note: This discussion is not meant to be a commentary on monopolies. I will deal with that at another time. This discussion is meant to point out that ANY government action will have a reaction somewhere else and someone will be hurt by the reaction.
An example of this is Easy Al Greenspan lowering interest rates. Does this help everyone? No, it hurts people who save and collect interest as the US Dollar is constantly devalued.
Managing A Free Market Economy
The following is based on numerous conversations I have had with people and many articles I have read during the last 3 years.
We are consistently bombarded with statements like "Alan Greenspan is doing a good job managing the economy" or "Bill Clinton is doing a good job of running the country." Here is a quote from a February 4th article by Thom Calandra of CBSMarketWatch: "Landon, like Banker, is skeptical of the Federal
Reserve's ability to manage the American economy through a trying 2002. "
If a "free market economy" is defined as "an economy where the sum of all individual decisions determine what is produced, bought and sold" then how at the same time can we have someone "managing the economy?" This "managed market" talk is accepted without argument in all the financial media.
Why is it that men and women today, supposedly in a world where literacy is high and education is a right not a privilege, accept so easily the idea that our society needs to be managed?
Why is it with all the history and historical writings at our fingertips that we accept more and more rules, regulations, oversight, and management of every aspect of our daily lives?
Have we been so mass brainwashed as to think that we need all these rules and regulations? Or is their something else happening? Do we not trust our fellow man?
It is my theory that we, here in the beginning of the 21st century, enlightened, literate, educated, have become "afraid of freedom." Especially "freedom for the other guy."
"I want to be free. I trust myself. Its those other guys I do not trust. We have to have someone watching over THEM so they do not do something underhanded." Or as one person said to me two years ago, "People have too much freedom."
The question for me is "how did this happen?"
Here is one possible explanation: Television. Television is a very powerful tool, much more powerful than the print media is. It leaves very vivid images in our mind.
We are bombarded constantly with the "news" of the day. Terrorists, wars, Enron, etc., all showing the failings of our fellow men and women. But do these men and women represent the majority of us here on this floating rock?
My answer is no, they do not. But because everyday we see nothing but managed "news", because we have not been taught to take the time to sit back and evaluate objectively that which we have been shown, we do not THINK deeply about how the "news" we are shown is not reflective of most human beings. At least the humans I know. What we categorize as "news" is not really "news" but a recap of everything that someone has chosen for us to hear and see. Propaganda.
I want to hear "Welcome to the 6 oclock evening Propaganda report. Where we bring you a summary from around the world of everything we want you to know and exclude those things that we do not want you to know."
What would happen if television news showed nothing but images of clean-cut, young men, walking little old ladies across the street? Young men helping ladies carry their grocery bags out to the car? Men holding open doors for women entering the mall? My wife laughed at this. She said, "Nobody would watch television." Now theres an idea!
What would have happened if Americans had stood together and shamed Bill Clinton for his flings with Monica? What happens when a man and women are married? Do they not take an oath to themselves and to God? And what happens when a man is sworn in as President of the US? Does he not take an oath to his country and to God? If a man cannot keep the first oath, why should we believe that he would keep the second oath? But the media ignored this basic, fundamental principle.
Ever wonder what would happen if all we saw were stories about how corporations provide jobs, how government upholds individual rights, how everyone is treated equally under the rule of law, laws that everyone can understand and how people use guns to PREVENT crime in their neighborhoods?
Would this change the way we think about our fellow human beings? Would we then trust each other more and therefore not need all this needless Big Brother government?
When you are watching the "news" ask yourself two questions:
The Long Term Trend Is Clear
If we were to look at the world economy as a type of "oscillating wave" we would see peaks and valleys. For the last 50 years the peaks and valleys have been setting higher highs and lower lows.
During the 50s the peaks were not high and the valleys shallow. The price of oil was steady, as were interest rates. In 1960, my mother financed our little house at 3% for 30 years. The US government still redeemed gold for dollars to foreigners (lucky them). Our wave was a healthy heartbeat.
During the 60s, we had the Nifty Fifty. We had the London Gold Pool trying to fix the price of gold. We had massive social spending, more war and debt accumulation. Higher peaks and deeper valleys in the wave.
During the 70s we had massive inflation and unemployment. Stocks lost 40-70%. The decade started with Nixon defaulting on the US dollar thereby taking the world off what remained of the international gold standard. More people were affected by larger economic events. The valley in our wave was lower than the previous valley.
During the 80s, the number of economic shocks started to increase culminated by the 1987 market crash and then the bust in Japan. We started seeing international bankers get together to "manage" currency cross-rates, as in The Plaza Accords. The economic events continued to get larger and affect whole countries. We reached another higher peak.
During the 90s we had one massive bailout after another, currency cross-rates jumping all over the map, and more and more markets appearing to be "managed." By 1995, the Japanese Yen was poised to send the US Dollar to ZERO. Take a look at a chart of the cross-rate. The Japanese are now trying to destroy their currency with the blessings of the US Government and the Federal Reserve. We have central bankers meeting monthly in Basle without a peep in the media. We managed to avoid the lower valley in the US and Europe thanks to "carry trades" and massive amounts of new debt and instead actually put in a higher peak. But Asia, Central and Latin America and Africa suffered. The economic events grew to global proportions and affected whole regions and even continents.
The peaks and valleys in our wave are getting more extreme. Also, the phase time between the peaks and valleys is shrinking as information and hot money move around the globe at light speed. We have a small group of men trying to micro-manage the global economy and bailout their comrades. We have "monopoly digits" flying around the world at light speed trying to eke out 0.00001% profit from some obscure bond spread.
During these years we are told "we are experiencing inflation", "growth occurs best during disinflationary times", "we are headed for stagflation", "Japan is in deflation", etc. In less than 55 years we have gone from a steady state, relatively calm global economy to an wildly oscillating, out-of-control global economy.
Our wave is SCREAMING trouble for the patient. The trend should be clear. Our global economy is set to explode. Whether we end up blown to pieces in a hyperinflationary supernova or sucked down a deflationary black hole is really irrelevant.
Both will lead to more freedoms lost. The real trend of the 20th century is clear. It was one of less and less individual freedom. A bull market in government! From passports, drug laws, income tax and the Federal Reserve (early 1900s), to CCTV everywhere, government Internet snooping and "know your customer" rules (1990s), the 20th century has been a disaster for individual freedom. It has also been the century of the greatest experiment the world has ever seen in credit-based fiat paper money. Is this a coincidence? I think not.
There is neither an easy solution nor a magic formula. Waiting for the miracle cure will only increase the pain and agony and end in disappointment when the day of reckoning comes. We must understand the importance of basic, fundamental principles in our daily lives and in our society (and our monetary system). I will share with you a short list of what makes up my basic fundamental principles (my philosophy):
The US Constitution
The Bill of Rights
The Ten Commandments
The Golden Rule
Individual freedom requires individual responsibility
Capitalism is mans only natural economic system
Gold and silver (and other precious metals) are mans only natural form of money
Somehow, in the natural order of things, gold and silver as money is linked to individual freedom.
We need to concentrate on, and get back to, basic fundamental principles. We need to educate ourselves and our friends and families. We need to protect our wealth making ability. We need to have those Kitchen Table Talks.
David M Champeau
March 5, 2002