BOOK REVIEW: The Black Count by Tom Reiss

This is a fabulous  non-fiction narrative that rivals many of the best novels ever written.  Even the fact that it made the New York Times bestseller list and also won the Pulitzer Prize hardly does it justice.  Tom Reiss obviously spent many months, even years, doing very original research on at least two continents and as many languages.  But let’s begin at the beginning

If you have ever read the novel The Count of Monte Cristo by Alexandre Dumas, and you liked it, or like me, loved it, Reiss’ book is a must-read for you.  Dumas also wrote The Three Musketeers and The Man in the Iron Mask, as well as dozens of other fiction and non-fiction books and articles.  The Count of Monte Cristo is a story of revenge; the story of a man imprisoned for life on unknown charges as the result of a conspiracy of three enemies he didn’t know he had.  He is condemned to a medieval prison, whose castle walls are several feet thick.  He makes a daring and miraculous escape aided by another prisoner, an aging abbe, who reveals to him the location of great treasure.  The hero becomes fabulously wealthy and the rest of the book is about how he wreaks revenge on those who had condemned and then forgotten him.  The Hollywood movie version in my opinion ruined the story by changing the ending.

What I didn’t know is that the author of these sagas, Alexandre Dumas, was a mulatto, and his father, Alex Dumas was a very dark black man from the island of Haiti who intermarried with a white French woman.  Through the real story of this man, Reiss takes us on a global panoramic tour of the institution of slavery itself, with many surprises along the way.

Slavery of course, has been around since the beginning of man’s recorded history, and obviously predated that history.  All acquisition of property and power throughout the ages was through conquest, and the victor took all, including the vanquished as slaves.  Slavery was not racially tinged until the 18th century.  Before then, anyone anywhere was at risk of becoming a slave if a predator group won the battle.  For example, when Alexander the Great conquered Egypt, he made slaves of the Egyptians, but he also imported lots of white slaves from what are now eastern European nations populated by ethnic Slavs, which is where we got the word slave.  Christians during this time period thought slavery was fine as long as the slaves weren’t other Christians.  So making slaves of non-Christians and especially the Moors, was acceptable.    In time these ethnic Slavs, who became known as Mamelukes,  revolted against their Egyptian masters, and the Egyptians became their slaves–until Napoleon came along and drove off the Mamelukes. Read more..

In the western hemisphere, there were large population centers located among the Mayans, the Aztecs, and the Incas.  One of the Incan cities had a larger population at the time than the European city of Lisbon, the capital of Portugal. Each of these south and central American civilizations had slave populations themselves.   When the Spanish conquistadors invaded they absorbed the existing slave populations and also made slaves of the former masters.   Those  who didn’t die of the white man’s diseases were turned into slaves and were sent to die in brutal, murderous silver and gold mines.  None of this was race related.

When other imperial explorers reached the islands of the Caribbean, they didn’t find precious metals as they had hoped, but instead found sugar cane, which they learned how to refine into sugar.  The sugar capital of the world became the island of Haiti, then known as Saint Domingue.  Growing sugar cane was labor intensive, and unlike in central and south America, there were no large concentrations of population that could easily be enslaved.  The African slave trade in the 18th century was largely concentrated around the sugar plantations of Saint Domingue.  There were few African women imported to Saint Domingue, and the men were treated so brutally they died quickly of starvation and beatings.  This rapid turnover further exacerbated the labor shortage, requiring more and more slaves.

Reiss traces how the imperial expansion into the western hemisphere took place concurrent with the philosophical movement of The Enlightenment with its special emphasis on liberty and individual rights.  The French were the first to attempt to come to grips with the contradictions between slavery and liberty.  The French were intrigued by the American experiment and the principles embodied in our Declaration of Independence and Constitution, and of course our revolution only came to a successful conclusion due to the assistance of the French navy.  As a matter of fact, the French involvement in our revolution drove their nation into bankruptcy, and precipitated food riots and their own Revolution.  The French Revolution championed the rights of man at the same time that it engaged in a Reign of Terror against its own citizens, sending thousands of innocent people to the guillotine.

The French resolved the slavery/liberty debate at first by declaring that any black man who made it to the shores of France proper was a free man, and the French sort of washed their hands, Pontius Pilate-like,  of what happened in the slave-holding colonies such as Saint Domingue.  Activists pressed the issue however, and within a short time freedom was being promised to slaves in the colonial territories, which of course enraged the plantation owners, who withdrew their support from the French Revolution.   This facilitated Napoleon’s rise to power, culminating in his naming himself emperor of France and ending the centuries-old monarchy.

Alex Dumas, the father of Alexandre, came to France as a young man and entered the military, and quickly distinguished himself.  For a while he actually outranked Napoleon, but in time came to report to him.  He was captured in what is today Italy, and spent several short years in a medieval prison, held without charges.  His prison experience broke his spirit and his health.  Napoleon meanwhile, in an effort to placate the very wealthy plantation owners of the French Caribbean colonies, rescinded many of the freedoms that the Revolution had instituted for blacks.

After many years of valiant service to the Revolution in which he devoutly believed, Alex Dumas found himself without a pension, without a home, and with no means of support.    Napoleon, who knew him well and personally, ignored his requests and his lieutenants ignored the requests and pleas of his widow after Alex died, still fairly young and impoverished.

This is broad brushing this delightful narrative, which holds many insights you’re not going to find in a history book.  Reiss approaches his topic without bias or political correctness, and what I came away with was that the lot of the common man of any race, color, or origin from time immemorial has been to serve as the cannon fodder of the ruling class of every nation, and that the golden rule prevailed:  he who had the gold ruled.

Reiss is quick to point out many of history’s ironies:

Napoleon and Alex Dumas fought against the Spanish in southern Italy.  This is the same Spain that was colonizing the central and southern Americas.  And that is how the South American tomato made it’s way to southern Italy, which of course made it famous. or was it the tomato that made Italian cuisine famous?

The French continued to refer to black and mixed race people in France as “Americans”, in America members of its Congress would not permit blacks into their presence except to serve refreshments or sweep up. Says Reiss: “But having enjoyed prestige as “Americans” during the[French] Revolution, black and mixed-race soldiers now found themselves denigrated as “Africans.”

The French helped us achieve the rights to life, liberty, and pursuit of happiness, and were also the first to give blacks freedom, at a time when  General George Washington said he didn’t think Virginians were ready for that step yet.   French  General Lafayette of Yorktown fame had to flee for his  life from his own Revolution.  He was captured by the Prussians and spent the next five years in prison.  His friend George Washington was powerless to help him because Prussia [parts of what is now Germany] and Austria at the time refused to recognize the new United States.

Miscegenation , or racial intermarriage, was common until it too was outlawed.  Haiti, the sugar capital of the world and probably the richest island on the planet, experienced the first successful major slave rebellion. The slaves fought 80,000 of Napoleon’s troops to a standstill; the French left, the plantations closed, and today Haiti is quite possibly the poorest island on the planet.  Today Haiti has experienced something of a brain drain as their best and brightest have abandoned her to seek their fortunes in the United States and elsewhere.

New post-revolutionary France decided to deflect attention away from their internal problems by invading most of their neighbors, which is how Napoleon and Alex Dumas came to know each other and fight almost literally side by side.  As always, the government attempted to finance their wars with debt, in the form of bonds backed by property–that had been seized from the Church.  These bonds were on pieces of paper called assignats, which were used as money,  and of course they printed more assignats than there was real estate collateral, which resulted in devaluing the assignats and creating massive inflation.  Eventually the floor under the assignats gave out–literally.  At the Paris printing house someone piled up too much of the worthless paper in one place and the floor of the building collapsed under the weight.  Their real-estate secured bonds were worthless.  Nothing familiar here, is there?

Reiss peppers his story with personal vignettes such as this description of one French revolutionary:  “. . . his main character flaw was that of so many French revolutionaries: a zeal for human rights so self-righteous that it translated into intolerance for the actual human beings around him.”  I’ve often thought the same of the purported champions of the war on poverty; their concerns are usually self-serving and they wouldn’t want to get too up close and personal with real poverty.  They preach humanity but don’t like poor people moving into their neighborhood.

Reiss weaves a wonderful and complex tapestry of events that spans the globe and leads to even more questions.  Life is never quite what it appears to be, and the more it seems to change the more it stays the same.  If you have strong opinions about modern race relations in the U.S., read Reiss’ book for a more global perspective.  Without our Constitution and limited government, there is nothing left but the governments guns, the moneyed powers behind the throne, and the ragtag mob.  Without individual freedom that cannot be voted away by any block of voters of any color for any reason, there is no freedom except by permission, and that is not freedom at all.

For author Alexandre Dumas, his novel The Count of Monte Cristo was the fantasy version of his father’s life.  Indeed part of the story begins in an obscure little village in Haiti (Saint Domingue) near the border with the Dominican Republic (Santo Domingo) called Monte Cristo.

Many parts of this biography of Alex Dumas, and his legendary fictional counterpart, the Count of Monte Cristo, read like a Kafkaesque novel.    Until we figure out a way to change human DNA, the possibility of a return to this world should never be dismissed lightly.  Liberty is and always will  be under siege.

10 Rules: How Closed Minds Become Closed Borders

It is my intention to provide my readers with a very valuable and unique service.  I am a voracious reader and it is my special talent to distill complex subjects down to their simplest parts and principles (if indeed such principles exist).  Much of what is written, past and present, is intentionally obfuscated for political purposes or dishonest gain, whether of the material, intellectual, or emotional varieties.  It is designed to misinform or mislead.  Even when the ideas are simply muddle-headed rather than intentionally disingenuous, there is rarely an understanding of where those ideas originated, or historical consequences of their application.   These observations are particularly applicable to political discussions, but are not uncommon in virtually any serious discourse.

I am driven to know what is.  I grew up in an intellectually closed society, as one of Jehovah’s Witnesses.  I left that religious organization in mid-life only to find a whole smorgasbord of other closed societies, whether religious, philosophical, political, or social.  There is a vehemence and even fierceness of advocacy that inhibits civil conversation and betrays intolerance of different life experiences and conclusions.  What is most remarkable about all of these is that either side in any of these debates would passionately agree with my observations herewith stated, but only find them applicable to the attitudes and behavior of those with an opposing viewpoint!

As the polemicists outshout each other in the vain belief that raising the volume of their cranky bombast is the key to recruiting you to the cause or the sale, regard for evidence, logic, scientific method, clarity, and other calm pursuits are left behind like abandoned children.   Defense of our own position usually trumps all other considerations without any awareness whatsoever of the road by which we arrived at our convictions.  My most important takeaway from my own life-altering experience  is that I am the bouncer and doorman to my own mind, and I have sole discretion over what is permitted to enter.  I am the final arbiter of what I accept, because I become what I ingest intellectually.   This is a personal responsibility that I cannot delegate to any other person, institution, or authority. In my opinion, every one of my readers shares this same responsibility for themselves, for the same reasons and with the same rewards. Bitterness and anger about years wasted in misguided belief and defiance of reality are efforts to transfer responsibility for our own past choices onto others, but in every case it was we who negligently invited strangers, in the form of ideas, into our mind unidentified and unchallenged.  Even when we absorb faulty premises in our age of innocence, responsibility to identify and correct these later in life cannot be avoided with impunity.

I frequently include book reviews on this blog, on a broad range of subjects.  All of these book reviews are at least somewhat positive in nature, because I do not waste my readers time on books that are in my opinion without at least some important redeeming values.  I am neither Democrat nor Republican, neither liberal nor conservative, and these days, once you get past the rhetoric, it can be said their distinctions are often without differences.  I have no ideology except the value of the individual human being. Each of us is a minority of one.  Regardless of the comfort we find in each other, there is no collective brain.  Descartes famously said “I think, therefore I am.” What we think determines what we become.

I want to share some rules of the road from my personal experience.

When I was growing up, my parents taught me to eat everything on my plate at meal times.  It was axiomatic that to waste food was wrong, even though our young minds rarely grasped the contradiction in the fact that we didn’t overload the plate with all that food, the grown-ups did.  How could we possibly know that for the rest of our lives other BIG PEOPLE would be filling up our intellectual plates with the impassioned ideas, ephemeral notions, and absolute certainties they insisted we must ingest because it is “good for us.”  As in childhood, we trust the source, the same one we associated with survival itself.

Rule #1 :   The purpose of all propaganda is to become your “trusted source.” Read more..

Everyone, it seems, has the strongest notions of what is best for us, beginning with our immediate families and extending to all the institutions of our culture.  What is accepted and practiced in one generation may be repudiated by future generations.  The philosophy that someone else knows what is best for us is nothing more than delegating to strangers what gets put on our plate.  It makes no difference whether this authority figure or expert comes in the guise of clergy, government, Chairman of the Federal Reserve, media talking heads or television and movie script writers; all of them provide us with generous helpings of their opinions and rules and they expect us to eat it, even if it gives us heartburn.  They do not like to be ignored, and most of them are happy, if given the opportunity, to harness the coercive power of the state to enforce what they know is, if not for our own good, at least for the good of the greatest number.  After all, Daddy knows best.

Everything is based on core premises, and unfortunately these are usually absorbed unconsciously from the Influential People of our childhood and adolescence, parents, teachers, news media, friends, and church.

Rule #2:  At a tender age we are neither equipped nor qualified to evaluate  conceptual content, and we know little or nothing about possible  alternatives. 

Content becomes indelibly associated with the persons and institutions of authority that deliver it.  Because of this early childhood association between content and source, we begin to develop class distinctions based on these associations.  We are more inclined to trust and believe those who dress like we do, worship as we do, get educated where we do, and who earn their living as we do.  At the most mundane level it is often said that the best place for a young man to pick up a date is at a church wedding, because he benefits by association with the joy of the occasion and the trust placed in that institution by its members. A “no” response in a different context might become a “yes” at the wedding.

Rule #3:  As children, content becomes truth when it is delivered by those on whom we depend to survive.

Once imbibed, these childhood-acquired core premises become unchallengeable, eternal truths, the template against which all new information is evaluated.  We quickly learn to block dissonance, any new information that makes us uncomfortable.  As we build the rest of our lives around these core premises, our emotional investment in them becomes such that a challenge to their veracity becomes a challenge to our identity.  There is a crushing need to shut down, shut out, and utterly annihilate such threats, and this need is all the more powerful and insidious because it is experienced subconsciously, as in dis-ease.  We experience anxiety without knowing the cause. 

When you experience something that disturbs you, it may or may not mean it is bad for you.  A bad taste in your mouth may mean a poison mushroom, or it may only mean conflict with the taste of the previous mouthful, in which case you need to cleanse your palate before proceeding.  A mouthful of lemon juice may cure you of scurvy, but it could be intensely unpleasant right after eating a sweet.  Likewise you may have been led to believe that very wise people are looking out for your welfare, and this goes down pleasantly, like a sugar cookie.  You might have had great faith in the honest intentions and competence of Bernie Madoff in handling your life savings, or you may currently be planning an extended retirement on Social Security and Medicare as they currently exist, and it tastes sweet.

Rule #4:  What feels safe and tastes good may be the prelude to the financial equivalent of a diabetic coma.

In every case, we always trusted the source.  The doorman to our mind was sound asleep.  There were red flags about what we believed, but we chose to ignore them.

That’s why I write about labels.  I sit down to lunch with people of all stripes and within minutes I can hear, and feel, the palpable hatred as my temporary companions launch into diatribes about those who think differently than they do.  The emotional intensity and intransigence derives from the speaker’s sense of certainty.  A mere label such as the name of a political party, or particular belief or non-belief excites the passions and invites the derision of the group at the table.  To belong is to share in the laughter.  The opposite is equally true and commonplace; the willingness to blithely accept nonsense if it comes from a trusted source.  We will defend what we have already emotionally invested in.

Rule #5:  It is possible to have a lifetime investment in something that is indefensible by any rational standard.  

How long have we known, and has our government refused to acknowledge, that our Social Security is history’s largest Ponzi scheme ever?

I used to finish reading any book I had started.  Like cleaning my plate at dinner, I felt compelled to finish what I had started.  I don’t always do this anymore.  Life is too short.  I always seek to identify as quickly as possible  authors’ basic premises, and even if I disagree with them, I may continue reading if only because I enjoy the writing style or because an author occasionally drops in a redeeming original thought or new twist on something.  I no longer waste my time filling my mind with garbage, but there is a balance between that and closing one’s mind.  Periodically I have to remind myself to re-evaluate my own core premises to see if they still withstand close scrutiny.  The final questions are always, Who says so? Why?  Based on what?  I am always on the alert for the hidden agenda, the sugar-coated dodge.

If some distinguished authority figure makes claims that appear improbable and  unsubstantiated by the facts as you know them, assuming they know more than you is one possibility.  Another possibility is that they have reasons to be less than truthful on this occasion.

If their explanations more accurately resemble circumlocutions, going round and round in circles and making no particular sense, you could assume that their explanation is too deep for your comprehension, given their special training, or you could also entertain the possibility that their non-answer is because they really don’t have an answer but won’t admit it publicly.

How do you spot obfuscations, disinformation, and hidden agendas?    For starters, unless you’ve taken a serious course in statistics, distrust all statistics.  Most are not scientifically sound and are intentionally manipulated for uninformed public consumption.  I could say there are a thousand ways to do this, but that would not be a scientifically sound statistic.  So we’ll move on.  In commercial matters, follow the money.  In political and institutional matters, follow the power.  Look past the easy answers.  Look past the obvious beneficiaries of a particular group action.  The secondary beneficiary is always the real beneficiary.  The primary beneficiaries receive very diffused benefits.  They are the poster children of the much ballyhooed political action; the orphans, the poor, the children, the unemployed, the elderly, the American middle class, the racial minorities.   The secondary beneficiary receives very consolidated power;  the power to bestow or withhold.   Daddy isn’t interested in your growing up.  Daddy needs you to need him.  Daddy needs to be in control of permissions, punishments and perks.

Rule #6:  If someone is selling invisible clothes, let them run around naked.  

It is better to be underwhelmed by the titles and decorations and positions of power of the so-called experts.  Who even remembers yesteryear’s Nobel prize winners and Treasury Secretaries or Fed Chairmen?  If anyone makes claims that to your mind seem like the Emperor’s invisible clothes, let them wear them.  Plan your personal life and make your financial choices around your own perceptions, not theirs.  They will usually have agendas you will never know about, and disincentives to provide full disclosure or tell the unvarnished truth.  Do they really know better than you how to direct your life?  Most American households’ finances are looking better than the governments, perhaps for no other reason than we can’t print money like the government  does.  We have been acting to correct our balance sheets, to start saving and stop borrowing.  Does that sound like what they have been doing?  Do they care about you, or are they far more concerned about polishing their credentials to the largest blocks of voters?  This goes for anyone who is offering you advice on any subject.  Would you look to the Dalai Lama for guidance on improving your sex life, knowing he is a celibate monk?

In the end it’s the same.  Money is power.  But government is money plus guns.  By guns I mean the police power of the state.  With guns you can seize other people’s money.  If you get enough people behind you, even in a democracy you can decide whose money you will take, and how much of it.  This is REAL power, and this is why groups will spend a billion dollars to secure a position of power that pays only half a million.  The most expensive seats are reserved for those who hold court, who trade in favors and gifts, and who choose the winners and the losers.  These people are not producers; they are looters who talk as if they understand production.

All ideas have a history, and if you follow the thread of an idea back far enough, there are always surprises.  Every opinion, belief, and conviction—indeed every certainty, was arrived at in a certain historical and social context, and made perfect sense to those persons in their place and time, and was almost invariably the partial result of emotional turmoil in the author’s personal life.  In other words, intellectuals, philosophers, clergymen, or brick layers, we are all made of the same dirt.  Ideas all began with real people and every single one of them had problems, issues, and emotional dilemmas.  Some of them were morons.

Rule #7:  Many of the world’s greatest thinkers would be in therapy today.

Ideological sparks at the intersection of the right time and the right population periodically ignited the imagination of masses.   New truths became eternal truths that have often reversed themselves, sometimes over and over again, everyone so preoccupied with the minutiae of their daily routines they fail to notice the intellectual roundabout on which they have traveled for decades or centuries.    The grand ideas  have all come and gone, or splintered and evolved in almost unrecognizable ways, becoming innumerable dogmas and orthodoxies,  and today they make compelling narrative for the history or philosophy buff.  Those who take the time to look more closely are sobered by the awareness that in every time period of history there were those who were willing and eager to kill or enslave those who disagreed with them.    Our current democratic society provides some cultural and legal protections against this, but a basic meanness still often lurks beneath the surface of many human believers.  I hear it in conversations at lunch.

Rule #8:  There’s a troll under many a believer’s bridge.

When belief devoid of thought is extolled as a virtue, doubt becomes suspect, opposing opinions are demonized, dissenters are criminalized, and definitions of the enemy are crystalized.  Hatred is born and mob action is galvanized.  Ascendant mobs become the state. Other groups see opportunities to advance their respective causes by hitchhiking on the coattails of the rising group, with the idea that they will address their important differences after they achieve a more favorable situation in the power structure.   The state attempts to co-opt and harness culturally powerful forces (the most powerful of which is religion) and then moves to consolidate its power by weakening, neutering,  and eliminating competing groups.  There are no enduring loyalties, just the shifting sands of temporarily overlapping interests.

This is why I champion individual rights in my writing.  The individual is the smallest group in the world.  Protect individual rights and you protect the world.  Democracies are the competition and conflict between groups, but history is replete with the horrors perpetrated by one group (even elected ones) on other groups.  Great evil has been done repeatedly in the name of God or in the name of Society.  Even in a so-called free society there is nothing more fear-inspiring than observing an impassioned closed mind reflected in the eyes of another human being, so certain of his ideas in fact, that he will gladly sacrifice your life to prove it.  On their own, they are dangerous and capable of atrocities; organized into groups with their hands on the levers of power (duly elected or not), no one is safe.  Not even the members of their group.  Every group has its purges.

There IS a problem with championing individual rights.  It puts responsibility on the individual.  There is uncertainty, and results are neither equal nor guaranteed.  What is guaranteed is that no group can by itself or backed by the power of the state, make you do or be what you do not believe in.  And you can’t do that to anyone else either.  Not everyone is comfortable with that.

Individual rights are inalienable, meaning you were born with them and do not acquire them by permission from others–no one and no group can morally take them from you, even when those others are infused with certainty about their better idea.   They may seize your property and take your life by force, but they can never do so morally.  Individual rights mean the right to pursue your own life and happiness as your highest values, and you are free to seek and perform work that sustains those values.  This includes buying and selling from whomever you choose, to your own benefit.  Individual rights means essentially the separation of church and state and the separation of economic activity and state.

Individual rights mean the government is there to protect  individual rights of all, and no one is there to serve the government.  Individual rights in practice, of necessity mean small government because there just isn’t that much the government needs to do.  No modern state, including western democracies, will ever pay more than lip service to government based on the sovereignty of the individual because all governments derive their power from the purse, which includes both confiscatory taxation and gross interference with free trade of its citizens.  The power of government is in granting permissions.  That’s where the money is.

Rule #9:  The government’s favorite childhood game is “Mother, May I?”

You can recognize individual rights in action when your government fears to transgress against its citizens.  

Group rights, on the other hand, are acquired by permission from a majority of others in society, and those permissions can be revoked.  The herd sometimes gives little or no notice of intent to stampede.  The primacy of group rights derives from the belief that your highest value as an individual  is not yourself but your contribution to society as a whole.  Individuals can  expect to be sacrificed to the group when the group calls for it. Every single favor demanded of  government by a group always implies a request for the police power of the state to be used against someone else  who doesn’t want to do the group’s  bidding.  Otherwise, if the group could achieve its ends on a voluntary basis, arrived at through negotiation, documented and signed by the parties, why would they need to involve the state?  Groups only need the state to club minority interests into submission.   I use the word minority here in the very literal sense of anyone who does not have sufficient votes to protect their interests. Group rights are the inevitable political legacy of those obsessed with the certainty of their beliefs, so much so that in their minds the ends justify their means.  Sooner or later the means include the confiscation of human life and property by the state–for the benefit of the greater good, of course.  Group rights degrade into group warfare and lead to an indefinitely expanding state, with eventually the state dwarfing all other groups.

Group rights lead to totalitarianism, which is sanctioned and even welcomed by the public in the name of efficiency.  When the cacophony of bitterly opposed groups gets too rancorous and the machinery of the state grinds down, someone with the necessary stage presence steps forward and suggests temporary consolidation of power to get through the political impasse.  We all know the rest of that story.

You can tell group rights in action when citizens fear their government.

So what is my point?  Am I advocating political activism in favor of limited government and individual rights?  Not really.  You can, of course, if you want to.  All I am encouraging is to become aware of what is happening around you, and to be aware of the ideas behind the events.  Keep your finger on the pulse of the politics in your community, your state, your nation.  Be more careful what you believe in, and scrutinize documentation with a critical eye.  In almost every location it is possible to exercise a great deal of personal freedom as long as you don’t make too much fanfare about it.  Love your life, keep your mind open and your passport current, and

Rule #10:   Know where the border is.

Closed minds eventually become closed borders.

 

Labels and Group Warfare (Part 2)

Sometimes one group finds it useful to appropriate the label used by another group and adopt it as their own.  Those who called themselves liberals 200 years ago most likely would today identify with the label classical liberals or libertarian to better distinguish themselves from the progressives who arrogated the label of liberal to their cause.  Why is the label so important?  Because folks buy labels.  Once a brand is established and trusted, it becomes invaluable. 

Very broadly speaking, Democrats became known as the party of the poor and minorities.  Republicans became known as the party of the business-rich (not to be confused with Hollywood-rich) and the financially savvy.   For perhaps the majority of voters, once these identifications become fixed in their minds, little or no further research is necessary.  These instant mental associations do not need to be accurate to be effective precisely because they serve as a shortcut for thinking and make decision-making easier.  From the point of their acceptance  on, the only reinforcement that labels need is brief but frequently repeated sound bites in the media.  As with sports, the names may change and even the entire team can be transformed or relocated, but it is still our team.  We are loyal to our brands. Read more..

Because of the blurring of boundaries when using labels, we are often unsure who we should hate.  During periods of intense competition for control over resources, we find our leaders fanning the flames of our differences, because assimilation usually means loss, defeat.  Republicans don’t want their membership showing interest in or empathy for some of the Democratic Party’s platform. (And of course, vice versa.) There can be no weakness, because we have a winner-takes-all system.  The rank-and-file then behaves much like sports fans, learning to hate people they don’t know, people with families like themselves.  There is too much at stake, or so it seems at the moment.  Politics is group warfare, and the grandstanding of the candidates has little to do with the maneuvering for the levers of power in the back rooms of the State.  The power they seek is to control resources confiscated by taxation and regulation of the producers, to be redeployed to the fulfillment of the winners’ personal vision of a better world and rewarding the pillars of their personal power structure.

Racial Brands

When I was growing up, white people called black people colored.  It wasn’t terribly important because in my neighborhood we were friends and we were all just people.  Well, somewhere along the line colored people became blacks.  I never really understood this because a lot of my colored friends were not very black.  They were just not white.  It didn’t matter.  We were friends, we went to the same church, and I thought a couple of the girls were hot.  But our new abbreviated labels made it clear we had been de-peopled.  Dehumanized.  It became easier to know who to hate.  Black versus white.  Us versus them.

Then black people became persons of color.  As Americans we were in search of better, more politically correct labels.  In trying to mitigate prejudice, we became more focused than ever on differences.  Our labels reflected and exacerbated those differences.

At one time, people who came to this country wanted to become, and be called, Americans.  What was important was not where they came from, or where they had been, but what they had become.  This was the New World, and they were thrilled to begin a new life.  The world changed on us again, and today we are distancing ourselves from our homogeneity and resurrecting and re-emphasizing our cultural differences.  People of color have now become African-Americans.  Perhaps this is because some people came here to become free, and others came here to be slaves.   That would certainly have an impact on my attitude.

But the fact is, today none of us regardless of color are free.   There are growing limits on our autonomy and our lives become increasingly circumscribed by the intrusions of the State.  In New York City as of this date, it is illegal to donate food to homeless shelters because the government does not have the manpower to monitor the salt, fat, and nutrition content of the donated food.  Read about it here http://newyork.cbslocal.com/2012/03/19/bloomberg-strikes-again-nyc-bans-food-donations-to-the-homeless/.   Are there really people who  imagine such micromanagement as being part of the founding fathers’ vision for freedom? The sad truth is, yes there are—a lot of them.  And obviously they have the power to turn their opinions and whims  into law.  One has to wonder, are they really concerned about the nutrition of hungry people, or are they simply trying to starve undesirables out of their city?

Do we want to be perceived and judged as individuals or as members of our group?  Is being a hyphenated American a good thing, or simply one more sign of our fractured society?  If you haven’t traveled much, you may be unaware that prejudices of one group against another are everywhere.   There is no place on this planet that is prejudice-free.  This is just what groups do.  Us versus them.  So by hyphenating ourselves, emphasizing our group-ness, are we celebrating our differences or deepening the divide already between us?  Are our labels the herald of our rise or the stigmata of our fall?  As individuals we might like each other; in the aggregate we can demonize and hate each other.  Divided we fall, while the ascendant State continues to metastasize.

The American Brand

Americans are a group.  What does it mean to be an American today?  What do we stand for?  How would a European watching our elections answer that question?  I used to think being an American had something to do with our Constitution, but today that document seems to change in meaning daily, if not hourly when Congress is in session.  Is there any philosophical bedrock to this racial and ethnic medley called America?  Some few people came here because they were tired of groups, but most came here because they were tired of their group being told what to do by another group.  America meant freedom from harassment from other groups who didn’t approve of your group.  For me, the meaning of the Constitution was simple.  In the words of Erwin Griswold, one-time Dean of Harvard Law School in a speech to Northwestern University Law School in 1960:  “The right to be let alone is the underlying principle of the Constitution’s Bill of Rights.”  America was an experiment in upholding the rights of the individual.  America was not about your freedom to conform, but your freedom not to conform.

Our politicians from both sides see that Constitution as a rubber document.  Yes, some of them pay lip service to a strict construction of the founders’ intent, but those philosophical pretensions evaporate as soon as they get their shot at winning a prize for their group.  The Constitution was formed to protect the smallest minority in the world—the minority of the individual.  If you protect the individual, including those individuals we don’t like and don’t agree with, then you have defanged the power of groups.  Individuals need protection from groups.  When we lose sight of that one fact, we have opened Pandora’s box to endless possibilities for injustice and evil.

 

Democrats and Republicans Compete for Magician-in-Chief

I did not watch the first presidential debate when it took place.  I watched it two days later on a video replay.  The first ten minutes, that is.  That was all I could stomach.  This country is at the biggest crossroads since its founding, and the candidates were given two- minute segments of time to address the most complex and dangerous issues.  In some cases the candidates simply ignored the questions and used their time allotment to make a pre-scripted pitch directly to the voters, or to bandy about accusations and labels in sound bite form.  And indeed, there wasn’t much time for anything else.  It was the triumph of form over substance, as indeed is the entire electoral process.  I think we could have learned as much from the candidates if we had turned the sound off and simply watched their mouths move.

Apparently it doesn’t matter all that much.  The country is split down the middle ideologically, with a lot of hatred flowing both ways.  The Democrats and Republicans will vote along party lines, and there’s about 5% of the electorate that is still undecided and could be swayed one way or the other in the final days before the election.  No matter who wins, about one half of the country will be quite certain the wrong choice was made and will be wringing their hands and preparing for Armageddon.  No matter who wins, very little of substance is going to change.  Political debts will come due, and favors will be rendered.  The spoils of victory will be parsed out.  Our military-industrial complex will continue with its global adventures, the Fed will continue to expand the money supply, and the warfare/welfare state will continue in imitation of the universe itself—expanding ever outward.

Congress will pass another 600-700 new laws each year, most of which probably will be read in their entirety only by the congressional staffers who wrote them.  Each of these laws will benefit a focused few that passionately pushed for passage, and will be ignored by the stupefied, confused, and disorganized masses.  And no matter who wins, economists, like trained seals, will flip fantastic numbers back and forth like bright colored balls, orbs containing mostly hot air.  But the delighted crowds will applaud and award prizes to those with the prettiest algorithms and formulas and prognostications.  We will still have millions of unemployed we don’t

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count, debt we don’t include, cost-of-living numbers we manipulate, and GDP figures that mesmerize us—because every dummy on the continent knows we’re going to “grow our way” out of $70 trillion in debt.

When Gridlock is Good

We voters in this land of Oz look on in suspended animation, waiting for someone, anyone, to please perform some magic, some sleight of hand, to make all this go away.  We bemoan the stubborn, irrational, and obstructionist position taken by the other side, and fantasize about how much better everything would be if we didn’t have the political opposition to deal with.  I would caution my readers, regardless of which side of the political aisle you come from, that our nation and our economy is like a big 18-wheeler rig loaded with 80,000 pounds of freight picking up  speed on a steep downgrade,  and the brakes are acting funny.  The only thing between us and certain disaster is the runaway truck ramp, and that ramp is the political opposition.  Why do I say that?  Because our government, and its handmaiden, the Federal Reserve, are making everything worse.  Some congressional gridlock is the only brake on a runaway government that currently exists.  That and an election just three weeks away.  Both sides are going to do a lot of talking, but very little doing.  No one wants to set off a land mine that loses the election.  That’s good for everyone.

The Operation Was a Success, but the Patient Died

Let me illustrate it another way.  Our government is like some incompetent doctors; it doesn’t know when to stop treating the patient and simply let the patient’s body heal itself.  Like that doctor, our government must do something, because the voters expect it.  And like that doctor, our government prescribes unnecessary treatments, increasing the possibility of unexpected side effects and increased possibility of infection.

The voters, like that ignorant, vulnerable and unsuspecting patient, look at their government and demand action. So they get action, and the patient dies from complications of the ill-advised adjuvant therapy.   Is the doctor going to come out of the operating room and approach the survivors of the deceased and say, well, hindsight being what it is, maybe we shouldn’t have done that?  Not in our lifetime.  When the economic sepsis of endlessly printing money triggers all the monitors and this nation goes on life-support or flatlines, the politicos and the Fed are going to put their hands up in the air and say, sorry, we did everything we could.  Nothing worked.  And we voters will grieve and feel sorry for ourselves, or angry at the injustice and unfairness of life.  Who knows, we may even feel sorry for Mr. Bernanke and the experts on his team—after all, they did the best they could.  The government’s very predictable response will be more treatments, for us, those still left standing, some new and better interventions so that what just happened will never happen again.  Of course.  Is any of this beginning to sound familiar?

Political and Financial Sleight of Hand

True sleight of hand requires psychology.  We saw that in the first debate, and we’ll see more of it soon.  This means our candidates need to understand what the voters want, and then they need to convince them that they can have it, in defiance of all odds.  Yes, we can spend our way to prosperity.  There will be no unintended consequences.  As a matter of fact, now that we have belatedly learned this, who needs a budget anyway?  Such unnecessary unpleasantness!

Then comes misdirection, getting the public’s mind off of what you’re really up to.  A good crisis usually serves the purpose, possibly domestic, but preferably foreign—a crisis created by an enemy outside our borders.  If no one is challenging us militarily, we can always invoke some foreign demons of economic warfare. China will do nicely.  Something will have to be done about their being smarter and more efficient at producing the goods we want and providing them to us at lower cost.  This has to stop.  New tariffs, perhaps, to force them to charge higher prices.  Then we Americans will have to pay higher prices for goods produced domestically and less efficiently.  Higher prices means the buying power of our dollar went down.  We just got poorer.  Now there’s a good move to improve the economy!  True, it will hurt your and my economy, but it will do wonders for the economy of the handful of companies who are protected by the tariff.  Their sales go up, their profits go up, and their contributions to their PAC go up.  No crisis should be wasted.   The experts tell us jobs were saved, and that’s what it’s all about right?  Not your job, and not my job.  A handful of jobs were saved, and fees will be paid, but you’ll never see it.  The magician is too clever and he had us looking in the wrong direction when the favors were exchanged.

Timing is important too:  sometimes we need enough time for the amnesiac voting public to forget what we said or promised, or manufacture and release some “good news” before the vote, or deliver the hammer right after the vote.  There is a time to loudly publicize the jobs that were saved, and there is a time to be silent about the domestic jobs that were lost when our foreign competitors retaliate and impose tariffs on our goods we sell to them.  Trade wars have a nasty habit of leading to shooting wars.  But wars are good for our economy.  Think of all the jobs we create or save!

Do Pickpockets Declare their Earnings?

Illusion is important; the voters need to be led to see what they expect to see.  Like magic, something has to come from nothing.  As with every good magician, this usually requires picking the pocket of some unsuspecting someone to please the audience.  We are ready to believe.  We are ready to be persuaded that nothing is what it appears to be.  We need to believe that we can achieve a painless recovery, or at least, with someone else bearing the pain.  Just not us.  If we can  get out the vote, we can make sure we get ours.  It’s not our fault some have more than they deserve.  As we pick the pockets of those above us, it never occurs to us that there are those below us waiting to pick ours.  I can’t help wondering, do pickpockets add to GDP?

Book Review: How We Do Harm–A Doctor Breaks Ranks About Being Sick in America, by Otis Webb Brawley, M.D.

Otis Brawley says that the system of healthcare in this country is not broke.  He says it is “functioning as designed.  It’s designed to run up healthcare costs.  It’s about the greedy serving the gluttonous.”

Otis (he prefers to be called by his name rather than his title) should know.  He is an M.D.  He is a graduate of the Pritzker School of Medicine, University of Chicago, and he completed a residency in internal medicine at University Hospitals of Cleveland, Case-Western Reserve University as well as a fellowship in medical oncology at the National Cancer Institute.  Today he is the chief medical and scientific officer and executive vice president of the American Cancer Society, and he also serves as a professor of hematology, oncology, medicine, and epidemiology at Emory University in Atlanta.

And if I have the misfortune to contract a serious, life-threatening disease, I am going to call Otis and ask who I should go see.  I want him on my side.

But for right now, I am going to refer to him as Dr. Brawley.  Without having personally met him, it just seems more respectful, and this book he just published commands respect.  Dr. Brawley is a brawler.  He has had to be, just to survive, and certainly to achieve the level of professional distinction he now enjoys.  Growing up in the streets of Detroit, Dr. Brawley says that of a group of twelve from his childhood, only three got out.  Nine are dead or serving life sentences.  Dr. Brawley is black.

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Educated by nuns and priests, Dr. Brawley was helped and mentored by many who obviously gravitated to his sincerity and determination.  As a child he learned to duck bullets, and as a highly educated adult, he remains a keen observer of human nature and the nature of his profession at all levels.  He has overcome suspicions of a culture that would exclude him, but he remains empathetic to those who justifiably retain those suspicions.  Dr. Brawley is a skeptic.

As a practicing physician, a scientist and clinical researcher, an epidemiologist, and political activist, Dr. Brawley knows where the bodies are buried (sorry, couldn’t resist), and few are spared in his scathing criticisms of healthcare in America. And Dr. Brawley pulls this off still sounding humble, self-effacing, and passionately dedicated to his cause.  His book is part memoir, part jeremiad at callous and profiteering colleagues, and part exposition of what constitutes scientific clinical research and how findings are corrupted, repressed, or ignored by special interests. Consider:

 

  • America is #1 in dollars spent per capita on healthcare, but 50th among the world’s countries in life span, and 45th in infant mortality rates—behind even Cuba and Slovenia.  Shouldn’t that tell us there’s something wrong here?  Or should we just go to Cuba to have our babies?

 

  • “When you look at outcomes, our health-care system is closer to Communist states . . .

 

  • “Economic incentives can dictate that the patient be ground up as expensively as possible with the goal of maximizing the cut of every practitioner who gets involved.”

 

  • Of the 51 million Americans with no insurance, he says:  “Often they get care of appalling quality or no care at all until they become sick enough or old enough for government benefits to kick in.  As soon as this happens, the system welcomes them as sources of revenue, because even at Medicare and Medicaid coverage rates, you can make money on uncontrolled diabetes, kidney failure, heart disease, and late-stage cancer.”

 

  • Of the wealthy: “If you have more money, doctors sell you more of what they sell, and they just might kill you.”

 

  • “We doctors are paid for services we provide, a variant of “piecework” that guarantees that we will err on the side of selling more, sometimes believing that we are helping, sometimes knowing that we are not, and sometimes simply not giving a shit.”

 

  • “Doctors who own labs have been shown to order more tests than doctors who don’t.”

 

  • Of free prostate cancer screening:  “The blood test is free, but the cascade of follow-up services will ring up considerable sales for treatments that leave guys impotent and incontinent.”

 

  • “I know doctors who are just plain bad.  Why do they continue to practice without impediment?  The answer is simple:  because no one is looking over their shoulders, no one files a disciplinary complaint, no tribunal of peers punishes them unless they do something spectacularly awful. . . our professional societies tend to choose misguided collegiality over the well-being of our patients, the people who trust us with their lives.”

 

  • About patients:  “The majority is placid at best, confused at worst . . . [they] need to understand that more care is not better care, that doctors are not necessarily right, and that some doctors are not even truthful.”

 

  •  The importance of employer sick leave policies:  Some breast cancer patients with enough insurance will opt for a radical mastectomy, because the better option of a lumpectomy requires a regimen of radiation for weeks afterward and the patient can’t get the time off from work to make the appointments.

 

  • “Wallet biopsies”: You receive treatment in the emergency room of a private hospital until they learn you have no insurance.  You fail the wallet biopsy.

 

  • Insurance companies are sued by patients who want a certain treatment, and the insurance company has denied payment because the treatment is experimental or potentially unsafe.  Many patients have won their lawsuits only to discover (or their survivors) that the treatment was worthless and the side effects terrible, even lethal.  Be careful what you pray for . . .

 

  • Cancer treatments can easily reach $1,000,000 or more and surpass the lifetime maximum of a policy, leaving the patient without further recourse, uninsured and uninsurable.  Some, or many, of the treatments that ran up the bill may have been  spurious, ill-advised, or even harmful to the patient, but were cash cows to the providers.
  • Doctors’ pay is increasingly incentive-based, and they are under pressure to overprescribe.  Nurses in their practices are often trained to ask patients leading questions, such as asking a cancer patient if she experiences fatigue.  What cancer patient doesn’t?  This question predetermines an affirmative answer, which then segues into the sale of  a remedy for a novel medical condition ‘manufactured’ by the pharmaceutical company:  “cancer fatigue”.

 

The book contains about a dozen real-life case studies of catastrophic results from poor science and greedy practitioners.   Adjuvant therapy, which is additional therapy that is prescribed after the primary disease has theoretically been eradicated by other, earlier treatments, is singled out for special and extensive treatment in this book.  Adjuvant treatment is performed as insurance against the return of the disease.  Adjuvant therapy is sold as a no-brainer easy and lucrative source of revenue for physician practices and big pharma.  Adjuvant therapy is eagerly accepted by vulnerable, poorly informed,  and traumatized patients who will not be paying the bill out of their own pocket.  Unnecessary and overprescribed adjuvant therapies have inflicted excruciating harm and even killed patients, not to mention exploding  the cost of health care.  There is little or no malpractice risk for even a mediocre doctor as long as the treatment was within “evidence-based guidelines”, guidelines often written by the subspecialties of medicine whose members will profit handsomely from their application.

First of all, cancer survivors have been thoroughly traumatized by their disease and want to do anything to make sure they never have to relive this nightmare.  They are emotionally vulnerable and an easy sale for an unethical doctor who may (or may not) know the desired adjuvant treatment will most likely do nothing good for the patient,   and which  in some well-documented cases has actually done great harm by promoting the growth of new tumors where none existed after the primary treatment was successfully completed.  Many patients get very sick and even die from adjuvant therapies that physicians are all too happy to provide, but were not indicated by a now-symptom-less patient.  The cost of these therapies, for just one patient, can often run into five and six figures.  For a physician with a revenue quota to fill, this is easy money that is rarely passed up.  Ironically, the patients most at risk are the wealthy and the well-insured.  If you are uninsured or poor, you are not part of this particular target market.

In other cases, terminal patients are desperate and will grasp at any straws offered to them, including clinical trials of new drugs.  Very few of these patients are aware that Phase I of a clinical trial has only one purpose, and that purpose is NOT to cure them or even benefit them.  It’s only purpose is to determine the correct dosage of the new drug should it get approved.  Too little and it does no good; too much and it incurs catastrophic results.  Care to guess how the researchers determine what the magic dose is?  They start small and keep increasing it until something bad happens, then they back off from the cliff and hope they can rescue the patient.  In interviews very few patients in clinical studies really understood what was going on, and they were certain they were being cured.

Dr. Browley says the only ethical course for a physician is to “Tell the patient what I know, what I don’t know, and what I believe, and label all three correctly. Patients need to be informed about uncertainty in order to sit out the game or roll the dice.”

Everyone with a good mind and a ninth grade reading level should read this book.  The stories are compelling, even frightening.  The book is an educational tour of what really goes on in the hallways and offices of medicine.   Once we grasp the frightening concept that not  everyone we interact with as a patient is looking out for us but may instead be focused on their own self-interest, we will get off our duffs and take a close personal interest in what decisions we will need to make should we become sick, or what decisions others will make for us.  We also need to become less intimidated or awestruck by our health care providers.  They can be lethal.

Here’s a meaningless statistic of my own for you to ponder:  Fifty percent of all doctors graduated in the bottom half of their class.  When you are done laughing ask yourself,  was your doctor one of them?  Do you subconsciously judge your doctor by outward appearances?  Is the waiting room of your physician palatial? Is your doctor a prominent social pillar in your community?  Does your doctor belong to your country club?  Is your doctor the department head of  his specialty at the hospital?  Do you find particular comfort in his/her conspicuous affluence and projection of unquestionable almost god-like authority?  What do you really know about your doctor?  The practice of medicine changes by the hour.  Do your doctors stay up with the literature, or were they at their best only the first year they were out of their residency?  If you spent more time checking the references of your interior decorator than you did your physician, Dr. Brawley’s book may give you a few restless nights.  How We Do Harm  is a wake-up call for thoughtful readers.  The practice of medicine is this country is not a transparent profession.

Dr. Brawley’s book is predictably well documented and far more than a handful of mesmerizing, heart-wrenching case studies.  His book provides clinical detail for those who wish it, and if you are not a medical practitioner it is quite likely you will improve your vocabulary, which is always a worthwhile ancillary benefit to reading any good book.  If you are a physician, unless you are professionally engaged on the academic and research side, you don’t want to miss how Dr. Brawley connects the dots between academia,  scientific (usually) research, the pharmaceutical industry, clinical practice, hospital and institutional life, insurance, and, oh yes, let’s not forget the patient.  At every level of our system, ethical issues are constantly confronted, and unfortunately too often the financial incentives are  in all the wrong places.

The book is not an academic white paper; it is not boring.  Dr. Brawley is a good storyteller.  He is an original, and the kind of guy you would love to have as a neighbor or good friend.  The worst things I can say about his book is that in my opinion,  structurally,  it could have been pulled together a little tighter.  I wasn’t always sure where we were going, from one chapter to the next.  And of course, as a patient, at the end of the book, I wanted a prescription.  Where should I go next to find out more of what I don’t know? Perhaps that book isn’t written yet.

I admire Dr. Brawley, his attitude, his competence, his integrity and passion.  Dr. Brawley is an activist, and he believes the solutions lie in a massive grass roots movement to overhaul healthcare in America.  Perhaps I would agree with him if I had gone through what he has experienced.  But absent that, I have to content myself with appreciation for his having raised my awareness of how much we take for granted and how naive and ignorant we are, and I take his book as a call to action for me to educate and prepare myself and my loved ones for the day when  we may have to enter the healthcare system and hope to come out alive.  If each of us does that, we have reduced the problem by one.  Read this book.  Save yourself.  The world will be there (probably) when you get to it.

 

Book Review/Economics: Confessions of an Economic Hit Man by John Perkins

I am 63 years old and I need to live a very long time because my bucket list is extensive.  A significant item on that list is another sub-list–of the book titles that I still want to read or re-read.  At an average of two books per week, I can plan on reading about 100 books a year, or 1,000 in the next decade.  Included in this sublist of books-to-read are many of the classics of English and American literature.  These are the books that everyone knows you should read, but no one really wants to.  Or they would.  These are also some of the books that acquire more meaning and significance as you grow older.  They are best read, or re-read, later in life.  My choice of reading material depends a lot on serendipity and derives from suggestions from friends, browsing at Barnes & Noble, and what I stumble upon on the Internet.  The topics are mostly serious, only occasionally frivolous (and then usually because I feel a need to “lighten up”).  As I read I will post book reviews on this website.  I pretend at no special expertise other than an honest and inquiring mind.  My opinions are my own: the reader may follow or ignore my observations as you see fit, and at your own risk.  They may motivate you to read the book under review or save you time to move on with something more worthwhile.

Confessions of an Economic Hit Man by John Perkins was recommended by a CPA friend of mine.  303 pages including Notes and an Index.  The Preface to this book begins with this compelling paragraph:

“Economic hit men (EHM’s) are highly paid professionals who cheat countries around the globe out of trillions of dollars.  They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign “aid” organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources.  Their tools include

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fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.

I should know.  I was an EHM.”

Enough for me!  I was hooked!  I bought the book . . . and was disappointed.

The main story is about how the United States government through its various agencies seduced foreign governments during the seventies and eighties  into incurring debt they would never be able to repay.  Programs and financial instruments were sold under the auspices of altruistic intentions, but were in fact, thinly veiled efforts to advance the interests of empire, the American empire. Being the cynic that I am, I had to wonder well, why would our government treat foreign governments any better than their own citizens?  After all, in the last twenty years did we not compel our banking establishment to make residential home loans with little or no documentation of ability to pay to people who, well, had little or no ability to repay?  And then did we not cynically re-wrap these worthless financial instruments and pawn them off to foreign investors based on the fiction that the price of real estate can only continue to go up?  And when the bubble created by Federal Reserve-induced credit expansion popped, did our politicians not move in to prop up and save the elite moneyed interests?  A few straw men were sent to prison, but the masterminds and real benefactors became government appointees “to repair the system” and “make sure it never happens again.”

It seems an odd thing to say now in view of the current Euro crisis, but “beware Greeks bearing gifts” rings true today more than ever.  But I’m not talking about Greeks here.  Substitute “The Empire” for Greeks.    This reference to the Trojan Horse of antiquity well applies to any programs sponsored today by government promising something for almost nothing.  Something for little or nothing  always equals loss of control.  “Yes, of course, you can come home to live with us.  We still have the spare bedroom available for you” the aging parents say to their adult child suffering through a painful divorce or other financial setback.  Later, they will add “Of course, there are a few house rules you need to know about.”  Any foreign government or domestic citizen who accepts benefits from The Empire that make little or no  financial sense on their face can rest assured that somewhere in the fine print is a loss of freedom and a commensurate increase in the reach and control of The Empire. . .  ‘There are a few house rules you need to know about. . . ‘

My dissatisfactions with this book are not about the author’s premises and anecdotes, which are interesting enough. This much could have been accomplished in a book half this size.    At a deeper level, however:

1.  It offered nothing new.  No new perspectives and very little insider information.  Apart from sparse details of the author’s experiences in Indonesia, Saudi Arabia, Ecuador, and Panama, the author mainly resorted to repeating his fundamental premises ad nauseum without additional supporting material.  I even read his entire bibliography and all his footnotes to see if I had missed something.

2.  The author seemed to be guilt driven, and the sources of his guilt were unclear.  I couldn’t tell if he was agonizing over having gone too far in his career, or not having gone far enough.  Does he resent the privileges of his upbringing, or does he resent not having had enough privileges?  It seems that in spite of his modest successes, he is still struggling with some personal “impostor issues.”

3.  He offers no solutions to the dilemmas he presents, except the vaguest directives to personal activism.

Overall, I thought the author was boring with his endless self-flagellation, and the book was sophomoric in tone.  His argumentation in my opinion resembled the economic forecasts he submitted over the decades:  big on breathless rant and anecdotes, and weak on substance and documentation.  He still sounds like the second-hander he has always apparently feared being.  The shrillness of his exposition resembled the sententious moralizing of a new religious convert.

With all of his expertise, I would have expected much better of him.  Like the Wendy’s old commercial, I kept asking “where’s the beef?” The title of this book was the sizzle; unfortunately there was no steak.  I’m sure the author’s story plays well with the talking faces. I am disinclined to doubt his story, but mostly based on what I have learned from sources other than his book.

Coming up next for review:  How We Do Harm:  A Doctor Breaks Ranks About Being Sick in America by Otis Brawley, M.D. , Executive Vice President of The American Cancer Society.

Also:  Management and Machiavelli, by Antony Jay.

 

Would Everyone Please Stop Shouting?

“To believe is very dull.  To doubt is intensely engrossing.  To be on the alert is to live; to be lulled into security is to die.”

This quote by Oscar Wilde is the purpose of this newsletter:  an honest inquiry into the nature of what is, a rigorous intellectual effort to sift through the barrage of information, disinformation, and misinformation available; to distinguish the credible from the propaganda, the reality from the rant.  Am I the only one who has noticed that anyone with the temerity to ask any question of political, economic, or financial significance in polite society these days risks being immediately overwhelmed with passionate polemics about Read more..

 this ideology or that political dogma?  Names and labels are immediately brought up which were not mentioned in the question, and the entire conversation is promptly hijacked and redirected to the vilification of opposing beliefs, groups, and parties.

It is the view of this writer that the intense human need for belief, for certainty, and for ultimate truth is probably the original sin, for once armed with such belief, we close the door of our minds to new and possibly contradictory information.  For intellectually honest persons to admit to contradictions would require a re-examination of cherished premises, and an admission that their current perception of reality may be incomplete or (gasp) misguided.  Therefore this newsletter is not an advocate of any group; not the Democratic Party, the Republican Party, the Tea Party, the Occupy Wall St. party, or any other party.  Nor am I an anarchist, survivalist, or conspiracy theorist.  I have no “position” to defend other than the inviolability of individual human rights.  As stated in the American Declaration of Independence, these rights are inalienable, meaning that they can only be taken from us by force, whether that is at the point of a gun, or voted away by some group with the backing of the State, which enjoys the monopoly on the use of the guns.  The individual is the smallest minority in the world, and rarely does anyone rise up in his/her defense.  It seems the individual is only valued as one member of the herd.  It is the herd, the collective, the group which is championed, and it seems the only rights that matter much anymore are group rights, and civil discourse has deteriorated into group warfare.

We are human animals, and we have survived by herding together into packs either defined by ethnic origin or religious and ideological associations.  As adults we are no different than we were as small children, determined not to commit ourselves to an answer without surveying the level of support we will enjoy if we expose our opinion.  Political correctness is socially enforced conformity.  We see this conformity everywhere, from our college classrooms to our churches to our political parties, and even, or especially, among our media.  The newsroom has ceased to be about news, but only a coveted tool with which to bombard the public with sound bytes of advocacy.  And our politicians have no beliefs until a survey or their financial sponsors tell them what their followers want them to believe.  Actually, what the politicians believe in private isn’t all that relevant, as long as they publicly espouse whatever will gain them access to the levers of power.  Facts and accurate information are rarely sought after in honest inquiry or the pursuit of truth.  These are only the masks we wear to disguise confirmation bias, status and power seeking.

Several years ago I was invited to a friend’s house for a party, and in due course became involved in a conversation with another guest who shared that he was a stockbroker by profession.  Being a financial writer, I welcomed this opportunity to get his learned feedback on some recent financial events.  I asked a question, and for the next ten or fifteen minutes listened to his erudite discourse.  It was only later that I realized that I did not understand one single thing he said.  It dawned on me that this person’s response was not intended to educate, but to impress, motivated by vanity or an ingrained professional habit of selling by intimidation.  (He knows so much more than we do, things that we could not possibly understand, that the best we could do is put our financial future in his competent hands.)  Nothing is more indicative of such motivations than the intentional abuse of statistics and graphs to achieve desired ends.  We are all presumably sophisticated enough by now to approach all such “evidence” with caution.

I became interested in financial literacy when I realized that few were really interested in informing or educating the public, but only leading them to certain conclusions and actions that empowered those controlling the flow of information.  In reading the financial papers and magazines, I realized that society was divided between those few who “know” and the vast majority who will be told “what they need to know” by the talking faces.  I read the Economist for years before I admitted to myself how much of their financial language I still didn’t understand.  When I asked friends and colleagues questions, many of them with advanced degrees, much to my surprise I learned they didn’t know the answers either.  It made me wonder how much of such “communication” is to convey understanding and how much is the use of specialized jargon to impress, confuse, or worse, to obfuscate or conceal real intentions.  Knowledge, after all, is power.  And power is the name of the game.  The world has changed.  Human nature has not.

To my layman’s eye, much of economics has about as much validity as Tarot Card reading.  I went to such a fortune teller once, and I noticed the questions she asked me during our “interview” and how cleverly she fed my own information back to me.  She confirmed my original bias.  I thought she was brilliant.  One of these days I expect the Chairman of the Federal Reserve to show up with a red bandanna around his head, and a gold hoop in one ear.  Is he not doing the same thing, feeding back to us (and his bosses) what we all want to hear, that we can have what we want without the money to pay for it?  We can masturbate our minds as long as we want in this hall of mirrors, but reality still awaits us on the other side of the Exit sign.  It’s not a good sign when our leaders insist on staying inside the Fun House, explaining their actions with impressive circumlocutions.  Which means we haven’t got a clue what they just said.

The desired goal of much communication is not fostering independence of spirit and action, but obedience and conformity.  It is easier to control and move the herd than it is to control independent and well informed minds.  If the explanations given to us by the Federal Reserve, the Treasury, the bankers and investment counselors seem vague, complicated, dubious, or contradictory, how and when do we know if this is intentional or not?  Since they are the experts, who are we to challenge them?  (It is precisely when we feel this way that we should challenge established wisdom.)

To understand how the world really works requires knowledge of history.  There are two things a person needs to know about history.  1) History is never boring.  There are only boring history teachers.  2) History is written by the victors, because real history is the natural enemy of the State.  The State benefits from the shortage of accurate information, and the State always seeks to control the flow of information.  Much of what children are taught in every nation is heavily influenced by what the State apparatus wants them to learn.  We frequently call this public, or State-sponsored education.  History is where we have been, which means history is how we got to where we are.  History holds many secrets, which is why most interested parties are obsessed with requiring more acceptable versions of it.

The internet of course is changing everything.  Access to information, so far, has been harder to control.  The internet does not have the appointed gatekeepers to information as do the mainstream media outlets.  The internet is changing the face of education, and the sacrosanctness of our universities where we fashion the thinking of our thinkers is being eroded by non-traditional sources of learning. Students have increased exposure not merely to what a tenured faculty member would have them believe, but to more unfiltered global perspectives and experiences.  The income gap in the future is going to be between those few with independent minds and the ability to think critically, and those who choose to follow.  With massive grade inflation in the public school system, a four-year college degree today is often the equivalent of a high school diploma only a few years ago.  In the better schools, very little is being taught to actually help the graduates survive in an economic sense, and perhaps the best assets the students have purchased with their parents’ money are the social connections they develop with their classmates.  Some of those classmates will end up in positions of power, and proximity to power often translates into wealth and privilege.

Government is changing because of the internet.  The bargain between any government and its citizens is changing, as it becomes more difficult or even impossible to identify one’s enemies, or to stop them at the borders.  Economics and world trade are changing, and money circulates the globe at the touch of a button, and corporations become bigger and more powerful than nation states.  Financial instruments of trade are created faster than regulatory environments can identify them, and systemic complications threaten to bring the whole system down.

When the body politic is fragmenting and pulling in different directions, when each group is trying to outshout every other group, when everything is for sale, and the wealth of the nation and the future of its taxpayers are up for sale to the highest bidder, who do you want to believe?  And if you wish to cling to a group for security, which group do you want to trust your financial future with?  What happens to your future when your group is outspent by a better funded one?  Which dogma feels safest to you right now?  What does it tell you when a politician raises almost a billion dollars to buy an office that pays $400,000 per year?

There are those who fail at communication because they have a poorly developed ability to put their thoughts in order, to define what they believe, or enunciate the supporting arguments of what they believe.  These are the folks who have not arrived at their beliefs through rigorous and honest evaluation of facts and evidence, but who most likely absorbed their beliefs from their culture at large, meaning the media, family, church, schooling, college professors, friends, work associates, and other influential people.  Any critical analysis they do is mostly criticism of opposing viewpoints, and their analysis is nothing more than a search for information that confirms their existing prejudices.  In today’s information society, to even have a position is to imply that the end of all progress has been attained.

Take for example, the most amazing bias in favor of government intervention in the economic affairs of consumers.  Usually this is framed in David-and-Goliath terms, i.e. that we as individual (David) consumers are not capable of managing our transactions without the government to protect us from the Goliath of global enterprise.  The bias I refer to here, and take exception to, is the belief that government workers are somehow immune to the same selfish striving, the same or similar ulterior motives as anyone, anywhere else in society.  Somehow, by labeling commerce as profit-motivated (admittedly self-motivated), we are granting government an enormous benefit of the doubt.  For more information on this, go to http://www.financialliteracysource.com/money/why-the-federal-reserve-exists/#more-231.

Now if government is populated by the same Homo sapiens as free markets, how is it that only government workers are sin- and greed- free?  Again, history comes to our rescue.  Throughout the millennia of human existence, it has always been government, with its attendant monopoly on the use of force that has enslaved humanity.  The primary concern of the intellectual founders of this country was to protect the future generations from the grasping, insatiable, and inevitably expanding reach of their own government.  The limitation of powers enshrined in the Constitution was to protect us from voting ourselves into slavery.  Democracy by itself provides no such protection.  Nine foxes and a hen voting on what to have for dinner doesn’t bode well for the hen.

We live in a brand new, technology-driven world, a world the founding fathers could not even conceive.  They lived in an agrarian society, which evolved into an industrial society, and we are now in a post-industrial, information society.  Governments can no longer protect their citizens with any degree of certainty, neither economically or militarily.  The enemy is no longer other nation states, but ideologies that motivate and empower fanatics of every stripe to attain their goals with weapons of mass destruction. MAD, or mutually assured destruction policies have been rendered obsolete.  Likewise, financial and political decisions from Wall St. to Greece to Southeast Asia threaten to derail the financial stability of the rest of the world.  The inability of our existing government structures to provide the basic security that is implicit to the bargain with their citizens can in time undermine their legitimacy, a weakness that will be exploited whenever possible by their enemies, both within and without.

The world has never been a more dangerous place; and our future as a species is by no means assured.  This is not fear-mongering or apocalyptic scare tactics:  I have no doubt the people at the hubs of power who know far more than you or I about what goes on behind the closed doors of government and foreign policy would not disagree.

Now more than ever, Oscar Wilde’s probably offhand remark applies in a very literal sense: “To be on the alert is to live; to be lulled into security is to die.”

I am not pretending to be an expert here.  I am 62 years old at this writing, and I have lived a very varied, but always “examined” life.  I welcome your comments and open debate, and so would my other readers.  This re-launch of this website is intended to be your forum, not my pulpit.  Tell us what you have heard, know, researched, read, or wondered about–in the Comments section below.

To assure you stay in the loop, please subscribe by entering your email address at the top right side of the Home Page.  There is no fee or obligation of any kind.  You can expect to hear from my corner twice a month.  Tell me what you want to know more about.  We’ll find someone with some intelligent, understandable answers.

 

When Money Can’t Be Trusted

Money and wisdom do not always go hand in hand.  The Bible says in Ecclesiastes 7:12:  “For wisdom is protection just as money is protection, but the advantage of knowledge is that wisdom preserves the lives of its possessors.” (New American Standard Bible, 1995)  I can’t possibly know what the author of those words long ago had in mind when he wrote about money, but in this column, money has no intrinsic value, but it serves as a store, or warehouse, of value.  When you work, you produce something of value, and then you seek to trade your product with others who have produced other things of value. 

Money is a symbol of the value in what was produced by work.  Money facilitates the trade, of value for value, between people.  It is easier to “store” or “warehouse” money than it is to store all the goods and services that that money represents.  Think about what a ridiculous burden it would be to store all the commodities we use in a single day of modern life.  We don’t stock up on a year’s supply of Cheerios, for example (at least not most of us), because we know that with this thing called money we can go down the street and pick up a box of cereal at a moment’s notice (at least as of this writing!).  And what do we trade for that box of cereal?  We exchange money.  We can’t eat money, but we can use it as a store of value and a medium of exchange.

Our modern world would not be possible without money to facilitate trade. . . .  Read more..

 The value of money is its universal acceptability by anyone and everyone.  If we had money that no one trusted, our money would be useless as a means of exchanging goods and services.  No one would take our money if they suspected they couldn’t immediately turn around and use our money (now their money) to trade again with yet others.

And therein lies our problem, dear Reader.  Because money is not always trusted.  Sometimes money is not trustworthy.  The problem begins when those in control of money begin to see money as the value itself, rather than the symbol of value.  The value is in production, i.e. the use of our minds or muscles to produce something, anything, some good or service that others want and are willing to trade for.  Without the production of goods or services as the original value, money has no meaning.  But sometimes those in control of money begin to see the money, and not the production it represents, as a value in itself.

What does this mean?  In concept, let’s say Joe Smith has produced some good or service, and let’s say the value of one unit of that good or service is valued (by buyers–meaning that’s what they’re willing to pay for it) as $1000.  Joe sells one unit of his product.  He now has $1000 to show for his effort.  But $1000 is not enough for Joe.  He cannot buy everything he wants or needs with $1000.  Joe says he “doesn’t have enough money”.  What he means, whether he knows it or not, is that he has not produced enough, at the current rate of exchange in his market, of his product.  If he produces and trades more units of his product, he will receive more money.  Joe’s shortage is essentially a shortage of production, not a shortage of money.  Money is the “stored”  value of his production. 

When those in control of money (always governments, who universally hold a monopoly on money)  see the money itself as the value, they believe they can control how and under what circumstances people trade by manipulating the supply of money.  This is important.  Governments do not do well at producing things. Governments excel at telling people what to do with their money, and how much of their money they are allowed to keep, and government does an outstanding job of initiating the use of force if those people do not comply.  Government in the market place is an example of the few dictating to the many what is best for everybody. 

There is a limit to how much of people’s money a government can take.  That limit is set by the patience (or stupidity) of the population, or the cleverness with which the rulers persuade them to part with their money (remember–money as the symbol of what each of them has produced.)  In a democracy, when the patience of the people is exhausted, they vote the rulers out of office.  In a less democratic state, the rulers point guns at their people and the people have to ask themselves if they really want to die for this.  Guns can be very persuasive.  But rulers feel safer if the population feels content.  That is why it is much, much better if the population can be persuaded to vote themselves into slavery, rather than crudely having to point a gun at them.  Slavery, without being too elaborate,  means you work and someone else lets you keep just enough of your earnings to keep you alive to go to work again.

To keep the population happy, you have to give them goodies, treats.  Things for free.  Everyone loves freebies.  Besides, freebies distract the population; they start watching each other, making sure they are getting their fair share of the freebies; making sure others are not getting a disproportionate share of the freebies.  After all, that would be unfair.  Then the rulers step in to make things fair.  And everyone is grateful, and they all forget that it was their money, their production, their time and effort, to begin with.

The freebies are expensive.  Even slaves have to be fed and housed.  And regulating all their activities, to keep everything fair, is expensive.  Because all these activities redistributing everything, and regulating everything, have to be paid for.  Sometimes this expense is bigger than even the rulers can afford.  They can only afford to give away in the amount to which they have already taken, in the form of taxes.  But when the population is unhappy and quarreling over who got what, and the unfairness of it all, the best way to quiet them is to give everyone still more.  It dulls their wits; it distracts them, and they get quiet again, for a while.

But the rulers know they are at the line.  There is a line the rulers must not cross.  No one knows for sure where that line is, but when rulers cross it, they sometimes don’t get to be rulers any more.  They get voted out, or fights break out for control of the guns.  Then everything falls apart.  It gets ugly.  People stop working.  Because they stopped working, they stopped producing, and  they have no money.  So they start stealing from each other. Sometimes they kill each other.  Things get out of hand.   So rulers have to be wise.  They have to know where the line is.  They can’t cross the line.

So where do the rulers get the money to pay for more freebies, without crossing the line?  They borrow it.  And they promise to reward the people who lend them money by paying interest.  How do they pay for the interest on the borrowed money, since they are already out of money?  They print it.  There is now money out there in circulation that did not come from increased production.  There is now a disconnect between money and the production values it is supposed to represent.  Something very important has just happened.  There are no announcements in the paper or on the six o-clock news.  When production has not gone up, but there is mysteriously more money available, everyone is willing to pay more, because after all, there is more money chasing the same goods and services.  So prices rise.  The value of the goods and services has not changed intrinsically; a banana is still a banana, a car is still a car, a book is still a book.  It just takes more dollars to obtain one.  The banana hasn’t changed; the dollar has.  A dollar buys less.  The dollar has gotten cheaper.  The dollar has lost its purchasing power.  The dollar cannot be trusted.  Money has betrayed its owners.

Whoever is in debt wins.  If you borrowed $100, and repay that debt with $100 that now buys only $80 worth of goods and services, you got something for nothing.  You got a discount without having to demand it.  On the face of it, you repaid the same amount you borrowed, but the same value is not there.  The dollar is still a medium of exchange, because people still trust it enough to use it, but it has failed as a store of value.  Money lost its value.  And money lost its value because the rulers disconnected money from its source:  the work, or production that the money represents.

There are winners and losers.  The winners are debtors, because they get to repay with devalued money.  The lenders lose.  They get their money back, but that money has less value than when they lent it.

Who is the biggest debtor of them all?  The rulers.  They get a big discount they never had to demand.  It was so much better than a new tax.  It was a tax, a stealth tax.  No unhappy population.  No riots in the streets.  The freebies still flow.  And the rulers get to keep ruling.  The rulers were wise.  The population was foolish.  The population thinks it has more money, but the money buys less.  It’s an illusion. Everyone’s happy.  It couldn’t be helped.  Who can understand such things?  Who is John Galt?

Money is a protection.  You can buy things with money; goods, services, toys, tools, power, sex, even pretend love.  But if you don’t understand money; if you don’t understand that money is only a symbol of values produced by work, creation, innovation, integrity; if your money is greater than you are; then, indeed, you will lose it.

“The advantage of knowledge is that wisdom preserves the lives of its possessors.”  Money, properly defined, is not the root of all evil.  To say that honest money is evil is to say that the productive use of our mind (aka work) is evil.  However, money disconnected from its source and meaning in productivity, is evil.  Money as something for nothing is evil.  Because such money is no longer a store of value.  The value it supposedly represents is a fraud.  Such money requires no diligence, no work, no mind.  It only requires the backing of a gun.  Eventually such money can no longer even pretend as a store of value; when the mask is dropped and it is sufficiently devalued, even the densest in the population will reject it as a medium of exchange.  That’s called hyperinflation.  When that happens, people will find something else to use for money. Usually gold or silver.  When the population doesn’t trust their paper money, the price of gold and silver rises. 

In the last 100 years, the dollar has lost 97% of its purchasing power.  That’s why it takes so many more dollars to purchase an ounce of gold or silver.  Gold and silver store value reliably.  Paper (fiat) money doesn’t because rulers have severed it from the source of its value–production.

Wisdom is applied knowledge.   The difference between the wealthy and the poor is often the difference between what they know, both in their mind and in their gut.   There are many academics with advanced degrees who probably couldn’t effectively run a lemonade stand.  But they understand grand concepts extraordinarily well, and can explain it to you in long, multisyllabic and arcane terms.  Just as I thoroughly understand the concepts of the game of basketball, but am a lost cause participating in a game of it.  On the other hand, there are families, dynasties even, where the art of trading is a legacy that gets passed along from generation to generation.  They hear it at the dinner table, in conversation; it is almost in the air they breathe.  At the street level, they GET IT because they were raised around it.  They will succeed at ANY business because they know what works, and they are constantly evaluating results and adjusting their plans accordingly. 

Wealth is created by 1) producing goods or services that others will trade for;  2) reinvesting the surplus remaining from such trades in further productivity.  The values in all transactions are stored in money, and that same money serves as the medium of exchange.  The money must be trusted by all for the system to work.  When a government prints money with no basis in production, all that happens is that it takes more money to purchase anything.  Although this may very temporarily make us all feel that we are richer than we are, because all the numbers have gotten bigger, what the government has really done is stolen from the savers from whom it has borrowed.  It repays its debts with intentionally devalued money.  The nations creditors know they have been defrauded.  When creditors are being cheated, they no longer want to loan money or invest money, because they know they will be repaid with money that has less buying power than when they loaned it or invested it.  Or if they do continue to loan or invest, they will only do so at higher interest rates as their reward for their increased risk.  But if interest rates go up, the economy as a whole contracts, because the cost of money has gone up.

So our government has a further solution.  It will continue to print the money (digitally), which will continue to devalue the money, and it will continue to borrow, but from itself.  The Treasury will borrow from the Federal Reserve, and the Federal Reserve will print the money to loan to the Treasury.  The Treasury will use its borrowed money to pay interest on its other debt, and will also loan it out to its member banks.  The overextended member banks will  put some of the new money in the back room as reserves, and only then begin to loan it out to the market.   

This is our government’s Master Plan to improve the economy.  We will manipulate the money supply so we can repay our creditors with intentionally devalued money, and we will give our citizenry a fraudulent sense of well being by injecting into the economy new money with no basis in production, in order to create the illusion that things are better than they really are.   They are betting the farm that we are either too busy or too lazy to educate ourselves.  If you are an activist, you may seek reform at the polls.  Or on a more modest scale, you may simply decide that is time to inform yourself.  It is not enough to earn money.  You have to learn  money, because not all money can be trusted.

This is a financial literacy newsletter dedicated to learning about the financial world we live in, and translating the concepts into concrete financial possibilities for ourselves and our families.  It is dedicated to wealth-building; the reinvestment of the excess of our earnings over our consumption.  In case you missed that, this newsletter is for people with the self-discipline to spend less than they earn, so that they can invest the excess and put that money to work for them.  Wealth is about your money working for you, not you working for money.  Financial literacy is about learning the language of money and wealth.  You can learn it here.  Tell your friends.

Subscribe in the column at the right.   Get wise to money.  Know what’s going on.

The Gods Among Us

In the beginning there was Money.  Well, not exactly.  There was barter.  There was a high degree of vertical integration, which is a fancy way of saying if you wanted something back then, it was pretty much up to you to grow it or make it yourself.  What trade existed was largely between members of the tribe or village or group.  If some guy made a pretty cool hunting knife, and his wife was nagging him for a deer to butcher and eat, a trade of the knife for the deer (or parts of it) might take place.  Trading was simple, uncomplicated, and very very slow.  Life was brutal and short.  At the end of the day, when you had run out of you, you had also run out of future.  You aged quickly and died young.  When groups of nomads found a place to their liking, they sometimes stayed, settled in, and became agrarian.  Society became more complex, and slightly greater specialization of labor became possible.  One family could grow things from the soil; another could domesticate animals as a source of meat.  There was still no Money.

Trading in this primitive context was still taking place among the so-called Indians on this North American continent when the first Europeans arrived.  The native Americans were fascinated with some of the baubles brought over by the Europeans and willingly traded furs for them.  Eventually some commodities became so commonplace and essential to daily life in primitive societies that they took on new importance as a means of facilitating trade.  Salt, because it was needed by everyone for daily purposes, came to assume more importance as a form of “money” than it formerly had as just salt.  Since everyone had salt, and used salt, goods and services were traded using salt as the store of value and medium of exchange between trading partners.  The same was true of other things of universal value, including furs.  Because of their prized ornamental value and scarcity, gold and silver  became universally accepted as Money. 

The term store of value is very important.  Without some universally accepted warehouse of value that had been produced, all exchange was limited to what could be immediately produced and immediately consumed.  No long term planning was possible, and without long term planning, the Industrial Revolution with its complex machines and processes was impossible.  Modern society was impossible.  The invention of Money was a prerequisite to all the amenities of life as we know it.  Without the invention of Money, we would all still be primitives.  In spite of Rousseau’s idealization of the Noble Savage, the Garden of Eden it was not.  Man was the victim of ignorance, superstition, disease, and unmitigated natural disaster the likes of which are only occasionally experienced today in the poorest parts of the world.

In primitive society, wealth was limited to whatever a person could produce in a day, or a month, or a year of his own individual effort.  All other wealth was acquired by confiscating the values produced by others at the point of a spear, or in time, at the end of a gun.  All great monuments of history were made possible by the confiscation, not only of others wealth, including their grain, their herds, their tools, but also the confiscation of the people themselves, physically.  People became property, to be used and exploited by their conquerors.  When Rome was starving because of crop failure, their solution was to conquer Egypt with their legions, make that part of North Africa a vassal state and require them to ship their grain to Rome at prices Rome dictated.  You might say that Rome “nationalized” Egypt;  Cleopatra, in name at least, still “owned” the means of production, but the prices were dictated by Rome, her Master.  For a while, she was able to continue her pretense of being in charge of her country, of being Queen.  Then one day Caesar extended an invitation she could not refuse:  to come to Rome to visit, as his “guest”.  The dress code for the event was a little intimidating–naked, in shackles, to be paraded as the spoils of war through the crowds of Roman rabble and oglers, the nobility and the great unwashed.  Cleopatra committed suicide.

Read more..

Rome, of course, did not invent slavery.  Man was a part of Nature, and you took what you wanted, if you could.  You formed groups and tribes for this purpose, for there was greater safety and strength in those groups and tribes.  There was no concept of the individual or individual rights; you were a member of your group, and your survival depended on that group.  If your group won, you confiscated the property of your rivals, including his children and women.  Anyone you had no use for, such as the old or the sick or the dangerous, you killed.  And of course, if your enemies prevailed, you shared the same fate. 

If you were successively victorious, you celebrated by building temples to the gods who had blessed you, or you worshipped the gods among you  Of course you also built monuments and palaces to your leaders and warriors, as totems to their greatness.  And if your civilization succumbed to a rival some time later, your enemy sat on your thrones and lived in your palaces that they acquired the same way you did–by force.  You supplicated your gods and you placated your gods, and you worshipped and obeyed your kings and princes as gods themselves, or the sons of the gods, or the direct representatives of the gods.  And sometimes the Great Leaders and Warriors had to share the power in an uneasy alliance with the Priests and Shamans who controlled and manipulated the fears and superstitions of the human herd, who provided opaque and inscrutable explanations for why things sometimes went wrong, who demanded sacrifices for the gods of both this world and the next.  It reminds us somewhat of the chief economists and central bankers  ‘divining  the liver’ of the economy, reading the stars, making their prognostications and gobbledygook commentary about what it all means, and who also require sacrifices so that the gods may be propitiated.

There were two ways to acquire wealth; the tedious, slow way of trading successfully with others, or the riskier but faster way–to seize what others already had.  You could do this as a petty murderer; or as a tribal leader, a mass murderer if the occasion demanded it.  You could enslave others, or you could be enslaved by others.  The spoils went to the winner.  For those who chose the route of peaceful and voluntary trade with others, the advent of Money was an organic process that developed naturally as a more efficient way to trade.  It expanded the possibilities of what could be traded, as Money was a way to store value.  Money was a symbol of value that had been created and was warehoused somewhere else.  If on the other hand, you were a Ruler, Money facilitated the confiscation of the wealth of your subjects.  As a Ruler, you saw Money as nothing more than an extension of your right to plunder your subjects; if you insisted that your subjects pay their taxes to you in salt, or grain, or gold, you didn’t care what medium of exchange they used among themselves, as long as you controlled the form in which they paid you.  This became your Treasury.

As the Ruler, what did you need a Treasury for?  Well, your subjects didn’t always have the products or skills to do what you wanted.  So you had to bring people and products in from other places, and to do this you had to trade with them.  You could force your own subjects to engage in slave labor, but you could not do so with others outside your domain, for most likely they belonged to another Ruler, another Tyrant.  They were his property, not yours.  If the other people were accustomed to gold as a means of exchange, as you were, trading was simple.  If they did not use gold, trade quickly got more complicated.  Now there were two forms of money, your gold and whatever they were using.  A rate of exchange had to be negotiated.  If they were using salt, then you had to establish how much salt was equal to an ounce of gold.  Your joint answer to this question would become your exchange rate between two kinds of money.

You also need a Treasury to finance your wars.  You may have had your own troops, but many, if not most wars were fought with soldiers-for-hire, mercenaries.  Either way, they had to be paid.  If soldiers didn’t get paid, they and their families didn’t eat, and when people don’t eat, they get deeply unhappy.  Unpaid soldiers have a nasty habit of slipping away in the night and disappearing.  So they had to be paid, with Money that would be recognized and accepted by others with whom the soldiers would want to trade.  In ancient societies, soldiers were paid in coin.  When the Treasury of the Ruler was low, he would order his minions to shave slivers of metal off the coins, then melt the shavings down to forge new coins.  The coins of the realm tended to get smaller and smaller and people would notice and feel they were being defrauded.  And of course, they were.  By the Ruler, who was trying to expand his Money supply the only way he knew how.  When Rulers figured out alloys, they would instruct their keepers of the Treasury to mix base metals with the precious metal, again in an effort to take the existing amount of gold or silver and make it go farther by cheapening it.  When people felt they were being cheated, they demanded additional coins in payment to make up for the parts shaved off, or the new alloy coins.  They started making etched ridges along the circumference of the coins, so that if any shaving of the edges was attempted, they would know it because the ridges would be missing.  All through history people everywhere showed a basic desire to keep what was theirs, and all through history they tended to distrust their Rulers intentions with their money.  And with good reason.  The Rulers treatment of their Money was the equivalent of a cheating pair of scales.

Over the millenia, nothing has really changed very much.  With the advent of the printing press, it became a lot easier to steal from one’s subjects.  Until shortly after World War I, the currencies of the world’s governments continued to be pegged to gold as a means to facilitate trade between nations on an objective standard.  Because the rest of the modern world had been decimated by the ravages of what had come to be known as The Great War, the American dollar had become the currency of the world; in other words everyone was willing to be paid in American greenbacks because it was agreed that those dollars could be redeemed in gold on request from the American Federal Reserve, our central bank.  Because there was a steady loss of gold over the years from the American Treasury, President Nixon unilaterally decided to take the American dollar off the gold standard in 1971.  Confidence in the American dollar was waning, and foreigners wanted the gold instead.  Well, no more.  The Law of Unintended Consequences prevailed, as always.  In today’s world, when foreign governments acquire larger quantities of another nation’s currency than they are comfortable with, they sell the undesired currency on world markets.  You see, paper money, like gold, oil, cotton, grain, or cattle, can be sold in markets created specially for the purpose.  Currency is bought and sold on what is called a Foreign Exchange market, or FOREX for short.  Well, after Nixon took us off the gold standard, foreign governments rushed to get rid of their dollars by dumping them on the world market, exchanging dollars for other currencies then considered more valuable.  When there are more sellers than there are buyers, the price of a commodity goes down.  The dollar is a commodity, and the price of the dollar went down.  Now let’s make this next connection in a flying intuitive leap:  A paper dollar unattached to an objective gold standard has no value in and of itself.  It represents only the faith of the people who use it.  When it is obvious that governments are trying to unload a lot of dollars, it quickly erodes people’s confidence in that dollar.  When the confidence in the value of the dollar goes down, what the dollar is able to purchase goes down also.  When it takes more dollars to purchase the same item than it used to, you have inflation.  The same thing has happened as when an ancient Ruler mixed other metals with gold in order to create more of it.  The purchasing power of the unit of currency goes down when people don’t trust it; so they want more of it in payment than they used to.  Prices go up.  If you have the same quantity of a currency as you had before, but the purchasing power of that currency has done down, you have just become poorer, as surely as if someone had robbed you during the night.

When Rulers, or governments, for whatever reason, add to their Money supply, you have more money chasing the same goods, which means the purchasing power of the unit of currency goes down, which is just another way of saying the price went up.  The price is nothing more than how many units of currency are required to purchase an item, any item.

The American consumer nation became an empire of debt in order to pay for all the goodies it imported from foreign nations.  America paid those nations in dollars, and by 2001 almost 80% of all dollars in existence were held by foreigners according to Bonner and Wiggin in Financial Reckoning Day Fallout.  Under normal circumstances foreigners can get rid of dollars by buying American goods in return, and this keeps foreign currencies in balance.  That didn’t work because we were importing way more than we were exporting, so the imbalance grew.  Foreigners could have once again dumped their excess dollars on the foreign exchange market, which would have driven the value of the dollar down, which would have made foreign goods more expensive, and our exports cheaper.  That would have reduced demand for foreign goods, and reduced their sales to us.  They wanted to keep their factories going at full production, and that meant continuing to sell to America at maximum levels.  So instead, what did the foreigners holding excess dollars decide to do?  They decided to get rid of those dollars by buying up American assets, including businesses, real estate, and financial investments.

But the plot thickens.  At about the turn of the millenium, America was in the throes of a recession.  The Federal Reserve, determined to make this go away, decided to make credit cheaper by lowering interest rates to unheard of levels.  They wanted Americans to buy, and they figured the best way to do this was to make money cheap.  Cheap credit, combined with government incentives to lenders to make residential mortgages available to people unlikely to pay those mortgages, resulted in a lot of toxic mortgages out there.  Because money was cheap and easy, demand for residential real estate went through the roof, and that of course, caused the prices for that real estate to go through the roof as well.  So prices of real estate are spiraling up, money continues to be cheap and easy, there are a flood of unworthy mortgages.  Now for the rest of the story.  The flip side of cheap money is that lenders, who make their profits off of interest they charge, now have sharply reduced profit margins because their product, money, is too cheap!  They are practically giving it away!  What to do?  Simple:  slice and dice these toxic mortgages that everyone knows are going to result in default by the borrowers, repackage them, take them off the lenders hands, and sell them to ????  Why the foreigners who are holding more dollars than they know what to do with, and let them buy them at outrageous premiums!  And why would they do so?  Why, because the prices of real estate have been spiraling upward like the forced steam of a 19th century locomotive.

Now to put this in perspective, if you got a twenty-dollar bill from an ATM machine, and then went to the grocery store to make a purchase only to find your twenty-dollar bill is counterfeit, what would or could you do?  The bank won’t take it back, and the grocery store won’t accept it as payment.  The one last holding the counterfeit bill takes the hit.  That would be you.  You are out $20.  Unless of course you go up the street to McDonalds or Starbucks and use the same bill to make a purchase, and get change in non-counterfeit denominations.  You have successfully handed off your risk of loss to someone else.  This is what the lenders and Wall Street did with the toxic mortgages.  They pawned them off, at exorbitant profit to the first suckers they could find–the foreigners looking for a place to put their excess holdings of American dollars.  Foreigners such as foreign central banks, for example.

The rest, as they say, is history.  The bubble price level of real estate popped, the mortgages were much higher than the value of the properties that collateralized them, the foreign holders of these toxic repackages had a fit, American lenders who didn’t leave the party early enough got stuck with a lot of non-performing loans, which meant that they no longer had sufficient reserves on hand to cover their exposure to those bad loans (which meant they were insolvent and a prime target for a run on them by their depositors.)  Then there were the insurors of these toxic assets who were extremely overleveraged and ready to go under, starting with AIG.  The American government came to the rescue, and bailed out the banks, the insurors, the foreign central banks.  How did they pay for all this?  At the heart of it all is a defective product–the toxic mortgages and the packages they became a part of.  There is no market for mortgages worth 30% less than the homes that are the collateral.  And to make matters worse, the prices continue to drop, and no one really knows how to determine what these properties are worth, other than to put them out to sale in a market where no one is buying.  So the Federal Reserve decides to buy the toxic financial instruments at prices that are made up, pure fiction.  And the Fed buys these mortgages with more fiction, pretend money.  Money created by making  book entries in digital ledgers.  The banks receive the digital money, their reserves are stabilized, and they are removed from the Endangered Species list.

There is only one problem.  The Fed, when they came to save the day, expanded the money supply of the world’s largest debtor nation to a degree unprecedented in history.  The whole world’s financial system continues on life support, and the machine is making disturbing noises.  You see, there is one minor detail everyone seems to be forgetting.  There are only two ways to acquire wealth:  produce value, or steal the value produced by someone else.  This nation’s value comes from its manufacturing plants, research and development departments, its science labs and production facilities.  There are no current economic indicators that reliably tell us these numbers are improving.  So can we print our way to recovery and prosperity?  Ben Bernanke says we can.  Tim Geithner says we can.  The President says we can.  In time, all that wildly inflated Money supply is going to work its way out into the economy, which means the purchasing power of the dollar is going to drop.  When ordinary people sense in their gut that the value of their dollar is dropping, they will rush to get rid of their dollars, just like foreign governments did in the last ten years.  But who will take them?  As the floor drops out of the dollar, we will rush to spend them in the morning, because they will be worth less by the evening.

Will the government’s debts be honored?  Of course.  Everyone who is owed will be paid.  With currency devalued to a fraction of its face value when it was borrowed.  But who can argue?  Everyone can see the numbers printed on the paper.  We will all be poorer, except those favored few who are in on the insider trading, who get rid of their money first. 

The remainder of the burden will be borne by the taxpayer.  Isn’t it amazing how much better we can feel, knowing we are taxpayers and not slaves?  Would we ever agree to becoming slaves?  Of course not.  At exactly what point does a taxpayer subjected to Washington’s gang warfare become a servant of the State? 10%?  25%?  50%? 75%?  Are we perhaps like Cleopatra, passively accepting our vassal state, as long as we are allowed to pretend we are still a free people?  Do you think Cleopatra felt better knowing that her country’s production of grain was being confiscated for the “good of society”, society as defined by her captors?  Roman society?  Like every other tyrant cum Benefactor in history, Cleopatra eventually got what she deserved, for she also was one of them.  She too had been one of the Gods. 

The claim of governments to control over money has no basis in nature or any rule of law recognizing individual rights and private property.  Statists all believe in the moral superiority of the collective; for them the sovereignty of the State trumps the sovereignty of the individual the State supposedly serves.  It is not hard to figure out which philosophy prevails in our culture.  The well funded collectives who contributed heavily to the campaigns of our politicians have been generously rewarded.   And what of the well-heeled financiers, bankers, stockholders and managers of the insurance companies, the foreign central bankers, and our own professional bureaucrats who created this problem?  They are the very ones selected to be bailed out or worse, chosen to correct it!

We, the individuals, the smallest and most unprotected “group” in the nation, will foot the bill.  Between inflation and taxation, dear Reader, it is our wealth that will be confiscated or destroyed.

Perhaps, like Cleopatra, we too have been given an invitation we cannot refuse.

The gods are still among us.

An Open Letter to Robert Kiyosaki

 

In case you don’t know, Robert Kiyosaki is the author of the Rich Dad series of books on financial literacy, and he and his beautiful wife Kim are the creators of the board game called Cash Flow, a marvelous financial learning tool for young and old alike.  I am a fan of Robert Kiyosaki.  I met him and his wife in a bar in Pittsburgh, PA.  They are very genuine, down-to-earth, and friendly people.  They are for-profit educators, and they clearly have a passion for their subject.  And yes, I really believe Robert’s story about his rich dad and his poor dad.  I don’t think Rich Dad is a figment of Kiyosaki’s imagination.  So I am a believer.  I don’t make statements like that very often.  I have something to say to Mr. Kiyosaki, a disagreement I want to air with him.

Dear Mr. Kiyosaki:

If you are reading this, you already know we are kindred spirits and I admire what you do and share your commitment to financial education.  In a recent article you wrote that some of your best financial advice is to not be average.  That comment was the source of considerable outrage on the part of your readers, judging by their comments.  Perhaps they wanted your message gift-wrapped in softer language, but I couldn’t agree with you more. 

Very few people truly comprehend the mind-numbing reach and power of their government, and its insatiable appetite for their earnings and its religious zeal to dumb them down and control their lives.  Therefore they do not understand how much the odds are stacked against them in their endeavor to break free from the rat race.  They do not understand that to be average is to have no chance.

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Up until a few years ago, if you were to ask any young person on the streets of the European Union what he wanted to do when he was of age, a most likely response was ‘I want to move to America’.  In Europe it was hard to fail, but it was impossible to succeed in a big way.  Success as in break free, to rise above; to know that your life could embrace more than go to work to the same place at the same time and then come home to the telly at the end of the day, till the end of your days . . .   Success in Europe is measured by your ability to obtain employment with a large firm or the government, work as few hours a week, month and year as possible, protect prices and businesses mostly from themselves, and hope the rest of the world goes away. 

For over a century our intellectuals and thinkers have yearned to take us to the same place.  And our politicians don’t seem to care much one way or the other as long as they get to ride in the front of the wagon. . . . .whatever keeps their free ride intact.  These ideas and ideals have become firmly entrenched in our public school system, to say nothing of the Humanities Departments of our universities that promoted them.  America, like Europe before us, is being suffocated under a wet blanket of bad ideas and the false ideals of altruism and egalitarianism.  In our overweening and fanatical quest for equality, if we cannot bring the bottom up, we are committed to bringing the top down.  We have given up our freedoms in the name of ideas whose consequences we do not understand.  As George Orwell once said, “Some ideas are so preposterous only an intellectual could believe them.”  Until of course, they work their way into the culture at large and achieve acceptance by their sheer ubiquity and mindless repetition.  So yes, Mr. Kiyosaki, if we are average, we have no chance of breaking free. 

On the other hand, one man with courage constitutes a majority.  And this is where I disagree with you.  In your writings you always emphasize the value of cash flow.  I understand what you are saying, but I have observed even in playing your own game of Cash Flow that the only way to break out of the Rat Race is to hit it big with a lucky break,  which means either starting a business or buying an asset (real estate or stock) low and selling it high.  I think there were many, many people during the real estate bubble who were attempting to do just this; catch a wave in order to bootstrap themselves up.  A fortunate few did; most drowned.  The smart ones who caught a wave invested those gains in cash-flowing assets later to preserve their gains.  They knew enough to leave the party early and take their money with them.  In your own case, it would appear the wave you caught (or created) was your invention and successful promotion of your board games and your first book, Rich Dad Poor Dad.  Without knowing what to do with your ideas, your ride might have had very different results.

Luck does have a part to play.  Financial literacy has a part to play; you have to know enough to recognize a lucky break when one comes along, and some clue how to get up on your surf board and ride it.  Cash flow becomes your salvation later in the game, after you have gotten up. Courage matters; the courage to seize opportunities and build on them, or the courage to create opportunities where none appeared to exist.  There is risk involved, risk of failure, risk of drowning.  If you succeed in getting up, you may not change the world, but you can certainly change your life.  In that way you are the one person with courage who now constitutes a majority. 

Whether they succeeded or failed, I take my hat off to all those who tried.  And some of them now have the courage to dust themselves off and try again, a little smarter, and more aware of what they don’t know.  These ones are your, and my, best customers.  Let’s help them weigh the risks and direct their courage.  Let’s help them get up.  And sometimes that means they may find an undervalued asset that they need to buy low and sell high.  Financial literacy will help them get it right and know the risks.  I don’t think we should tell them to walk away from an opportunity.  They have to get up on their board before they can ride the wave of cash flow.  They have to establish reserves they don’t have in the present, and without reserves even a cash flowing asset can be a huge liability if anything goes wrong.  Yes, they are in a bad place and they are coming from behind, and yes, their chances of success are low.  Unless, of course, they’re not average.

Above all else, none of us can give up.  Without our dreams, we are nothing more than peasants under a new name.

I read your books, love your games, and I created the Greenville, SC Cash Flow Club.  I applaud your efforts and the way you lead the financial literacy parade.  If you send me your Fed-Ex-deliverable address, I will send you a coffee cup with a photo someone took of you, Kim, Tami, and I in Pittsburgh all those years ago.

Warm regards,

John Bechtel

 

 

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