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.

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Why the Federal Reserve Exists

Here we go with the vocabulary thing again.  I promise to make this easier than your last root canal.  The Federal Reserve Bank is a central bank.  Central banks are created to control and manipulate the money supply.  The money supply is the aggregate total of all the money in circulation in an economy.  It is often referred to in the media and the industry as M.  Controlling the money supply frees governments from the responsibility of living within their means.  It makes it possible for them to counterfeit money.  All governments have laws making counterfeiting their currency illegal.  That is because all governments have a monopoly on counterfeiting and do not tolerate competition in the business.

Governments counterfeit money in the exact same way all counterfeiters do; they print it, and slip it into circulation into the economy.  They spend it.  They spend more money than the economy produces because they do not want to live within their means.  They do not want to live within their means because they use money to buy votes.  They give out goodies in return for favors; favors in the form of legislation that promotes the welfare of one group over another group; favors that line their individual pockets, reward their friends, punish their enemies, and above all, favors that get them re-elected.

Other reasons are given, of course, for the existence of the Fed.  But it is axiomatic that all governments seek continual expansion of their powers, and control of the public purse and the power to tax is the Holy Grail for power seekers.  The founding fathers of this country feared government more than anything, and the Constitution they framed was to protect us, not from foreigners, and not from each other, so much as from our elected government itself.  The debates about economic policies are a sideshow and a distraction; the main event is the relentless expansion of executive power and the quiet transfer, not only of wealth, but of personal liberties as well.  Without economic freedom based on individual rights, private property, and the right to keep and dispose of our earnings as we choose, there is no freedom at all. Read more..

Financial Literacy: Measuring the Mood of the Mob by the Price of Gold

At various times throughout history money, or currency, has been based on metals, usually silver or gold.  This created an objective value to the currency of the period.  A dollar, for example, was worth an ounce of gold, or 1/10 of an ounce of gold, or 1/20 of an ounce of gold.  Governments and rulers, who always want to spend more money than they take in, either for their own enrichment or in order to bribe voters, usually try to debase their currency.  Kings about once a generation used to re-mint their coins (paper currency wasn’t invented yet), using the need to have their own image on the coin as the excuse, and they would dilute the gold content by mixing other metals with the gold, or slightly downsize the coin itself, but calling it by the same name as its predecessor.  When governments became well established, they usually did a ‘bait and switch’ routine and substituted printed money for metal coin, and again called it by the same name attached to a unit of its metal predecessor.  So a gold dollar was now called a paper dollar, as if their value were the same!

Once governments discovered the delights of the printing press, they would print as much money as they felt they could slip past their gullible and unaware subjects.  Acceptance by the herd was essential, and when the debased currency was widely rejected, it was not uncommon for a ruler to create stiff penalties, including the death penalty, for not accepting the paper currency as legal tender.  The reason governments prefer to print money is first of all so they are not bound by the usual principles of fiscal discipline (Don’t spend more than you make) but also every time they print money, they are actually lowering the unit value of that currency, reducing its purchasing power.  They are actually picking the pockets of their citizens, especially the most conservative ones who save.  The money these citizens save will not buy as much when it is finally spent as it would have immediately upon their having received it.

When citizens get nervous about the stability of the banking system, their political system, or their own personal safety, they are inclined to buy gold.  Gold does not pay interest, and it is still only worth what a buyer is willing to pay for it, but because there is a fixed quantity of it at any given point in time, its value tends to be very stable.  This is why nervous people buy gold as a hedge against inflation.  Gold is not without risk, however.  At times when the madding crowd is enamored of another of its periodic manias, interest in gold will wane as the herd stampedes in a new direction.  When demand falls off, the price of gold drops, like anything else.  Even in times of rising price of gold, there is always the possibility of the government confiscating it (that has been done by OUR government, as well as many others.)  Ultimately the government has the guns, and whatever we have is pretty much by permission.  A democracy, as I have written many times, is no guarantee of anything more than mob rule.  All people, in any period of history, need protected most from those they elect over themselves.  Inevitably their public servants become their masters.  Even here, the freest nation on earth, the Constitution guaranteeing both individual rights and the limitation of government’s powers, has been under steady attack for well over a hundred years by many activists who resent its restrictions.  They want to harness the coercive power of government to an endless list of programs to protect us from ourselves, and of course, with them at the levers of distribution and power.

For a short video on how the price of gold is a measure of the mood of the mob, go to http://www.youtube.com/watch?v=yuDZQFPgXCw

Why Democracy Isn’t Enough

Human beings are a tribal species, and like most of the lower species on this planet, they prefer to travel in herds.  Truly free thinkers have always been a desperate minority, and it has been the unfortunate destiny of such individuals to periodically carry the world forward on their backs, often having to apologize for their discoveries, recant their theories under torture, or have their earnings plundered by their inferiors.  In a world culture based on the nonsensical concept that all men are created equal, these individuals have broken from the herd in their thinking, transcended commonly accepted “truths” and challenged the orthodoxy of the day.  Their discoveries and powers of production have done exponentially more to raise the standard of living  the world  over than the efforts of all the hand-wringing social planners of the planet combined.  The politicians of the world would have nothing to redistribute were it not for the outstanding minds and abilities of these scientists, engineers, and entrepreneurs.  To say that these persons are only the equals of the hordes who benefit from their exceptional minds can only be called the triumph of ideology over reality. Read more..

Why We Believe: The Power of Utopia! Part I

About ten years ago I was asked to give a speech about the power of cults, largely because I had been raised almost from infancy as a Jehovah’s Witness, a religious organization often associated in the public’s mind with cultism.  Some of the hallmarks of cultism are a need for certainty, a conviction that you have absolute truth and are the final authority on that truth, and repression of dissent.  Some cults exercise a physical control of their members, but most of them exert a psychological control.  A true believer is someone who no longer needs coercion or physical restraint, but who now acts as if those restraints are still in place.  I can best compare it to training a guard dog; you use a choke collar with such consistency that eventually you remove the choke collar from the neck of the dog and he is so conditioned that he continues to act as if the choke collar is still there.  When, in my thirties I left this organization, I was eager to embrace a society of intellectually free people, and I was excited about the prospect of associating with others with open, inquiring minds.  I was astonished to find so much more of what I had just abandoned, only worse:  People who were born into freedom, and yet who both abused and despised it.  Read more..

Did Capitalism Fail?

The global economic crisis now in play is being universally touted as the failure and collapse of capitalism.  The cover of the February 16, 2009 edition of Newsweek ecstatically proclaimed “WE ARE ALL SOCIALISTS NOW”.  The documented collapse of Wall St. institutions and international banking is being gleefully interpreted as the failure of capitalism itself.  In the furious debate that has ensued, the arguments for and against capitalism have focused entirely on the causes of various recent economic phenomena, such as Wall St. greed, the failure of regulators, the incompetence of one or another administration, and the complexity of derivatives that were both unheard of and technically impossible only twenty years ago.  All of them have totally missed the point.  Capitalism has not failed, because capitalism was not practiced to begin with.  Pure capitalism has never been practiced because it is philosophically unacceptable in our culture.  What is called capitalism today is a hybrid political philosophy so filled with contradictions, it is unable to defend itself.  To answer the question in the title of this article, we have to begin at the beginning. Read more..

Why Socialism Always Loses (and Always Wins)

Every so many years during the last quarter century a book has been published declaring the death of socialism and the triumph of capitalism.  Always rash, such predictions were not only premature but incurably optimistic about human nature.

 

Briefly put, socialism is the concept that wealth should be redistributed from those who created it to those who need it.  It is based on the concept that all men are equal, or would be at least, were it not for factors beyond their control, such as genetics, culture, personal history and upbringing.  None of us get to pick our parents or our gene pool, and we can easily become trapped in our neighborhoods and other disadvantaged circumstances.  Read more..