Government Fundamentalism

Free market fundamentalism is a disparaging term that attempts to emasculate the credibility of anyone who is in favor of the free market, who believes that a voluntary society is morally justified and gives the best result. People have been trained to think of fundamentalists as dangerous, crazy people, so the strategy is to paste the descriptive term “fundamentalist” on someone who thinks that the government has exceeded its bounds, has screwed things up enough already, and that it’s time to try freedom again.

Freedom is ownership of your own body and your property, to use as you see fit. The only restriction is that you can’t infringe on the rights of anyone else. My freedom to swing my fists ends where your nose begins. The opposite pole is slavery. It is the absence of rights and lack of ownership of your body and property. Totalitarian socialism is slavery taken to its obvious and necessary conclusion. All citizens forfeit their rights to those of “society”, or the dictator, who poses as the all knowing mind of society. The opposite of free market fundamentalism is slave market fundamentalism. In all cases, slavery has been and is possible in the long run only if government is an active enabler or participant. Since government is the enforcer of slavery and the eliminator of voluntary markets, a synonym for slave market fundamentalism could be government fundamentalism.

The choice that we need to make is whether we want to move in the direction of freedom or in the direction of slavery.

Though America is still among the most free countries, we actually haven’t had truly free markets and free society for a very long time, only less oppression than others. We have the freedom to vote, but that has evolved into a license for legalized theft. Freedom has been replaced by bribing voters with goodies. Both major parties are big government fundamentalists. Both want to be the master. They differ only in their approach and target audiences.

We have the freedom to buy things, but that freedom is bound by the requirement to use the legal tender created by government, which is constantly being manipulated and systematically devalued. Our present economic situation is due to the boom and bust cycle inherent in our national monetary policies of interest rate distortion, loose credit and expansive money supply. At this time, nearly 98% of the value of the dollar has been inflated away by the Federal Reserve Bank since its founding in 1913.

We have the freedom to work, but that freedom is bound by a complex maze of regulation and distorted incentives which discriminate against the poorest and least skilled people in society. We are free to earn money, but that freedom is bound by confiscatory taxes of approximately 40% of national income to support unproductive government. It is a huge and growing parasite on the productive people in society.

We still have some level of freedom in our health care choices, but it is heavily bound by the chains of protectionism, regulation, and distortion by floods of federal dollars. Of any of the markets in America, health care is one of the least free, the most heavily bound by bureaucratic strangulation. It can be no surprise that it is also one of the most wildly distorted.

Education in America at all levels is a wreck and failing us and our children because of central planning by the government education monopoly. Any alternative is made very expensive and, in most cases, impractical. There is little freedom in education.

I am a market fundamentalist. I think freedom is right and is the definition of justice. Since free markets are merely freedom in all its forms, the only other alternative is to move toward slavery. Any person or business that doesn’t violate the body or the property of anyone else should not be subject to the whims of a politician. Any business that does violate the body or property of someone else should be punished for whatever violation they commit.

A distorted legal system that doesn’t protect rights, or corrupt officials that don’t punish wrong doers, are absolute necessities for slavery and oppression to flourish. A government of bureaucrats that imposes arbitrary, detailed rules on everyone is a form of slavery. Freedom and dignity include not being told what to do by a master, whether that master is a slave owner or a government bureaucrat. The move away from free markets is the move toward government fundamentalism.

Immorality Writ Large and How to Fight It

We are living through a time in which all common sense and logic has been sacrificed for blind hope and misplaced faith. According to the current gospel, peddled by the Messiah and even his anti-Christ enemies (the Republicans ironically), in a crisis in which millions are being thrown out of jobs, debts are being called in and people are being forced to cut back and save more, naturally we must see to it that these forces are prevented.

So we pump public funds into failed banking institutions that took risks imprudently and followed a business model in which short-term windfalls were rewarded over long-term viability and sustainability…all at the cost of the taxpayers and the financial companies that would have been able to find value and profitability in the assets that would have been liquidated had the banks been allowed to fail. We do the same with the auto industry, bailing out our failing companies, and specifically the UAW – the union that pushed the companies towards failure by demanding the massive salaries and benefits that bankrupted the companies in the first place. We reward debtors who purchased homes they could never afford by forcing lenders to rewrite mortgage contracts and allowing the government to purchase mortgage debt to keep interest rates low, with the government thumbing its nose at those who had responsibly paid off their mortgages. We relieve people who took on too much credit card debt by forcing lenders to lessen their fees (the fees necessary to compensate them for the risk involved in allowing people to finance their purchases through debt) by putting restrictions on “unfair” charges, inevitably causing those who were more responsible in paying off their debts to pay higher rates of interest.

When it comes to the protection of failing bureaucracies, it looks as if all of the states in the nation will be forced to bail out California (amongst others) when the federal government comes in and helps ameliorate their debts created by reckless spending. More importantly, the responsible states will not only be sacrificing their money, but their sovereignty to the federal government, due to the fiscal idiocy of the other states.

Even looking to something as fundamental as our progressive tax structure, whereby those who generate more income are penalized through higher levels of taxation (and forced to subsidize) those who earn less income, in every single case the people that are in the wrong are rewarded, while the people that are right or at least not responsible for these problems are penalized. Given the rate at which our national debt is expanding, the burden of these current problems unfortunately will be borne on the backs of future generations of Americans as well.

At length I have spoken in the past about how economically destructive these policies are, merely exacerbating problems instead of allowing markets and the individuals that make up the markets to adjust. I have explained that many of these problems were created by the government in the first place. I have also spoken to the fact that the holes that we are digging in attempting to stave off our problems, in the wasted future resources and diverted current resources being put towards government-planned projects, the massive amounts of money and debt creation by the federal government and also in our move overall towards a collectivist society.

But fundamentally, what I am seeing is that there is something far more insidious at play. What this crisis has illuminated to me is that because everything the government does has the force of law, it allows it to embody all of the worst traits of fallible man, writ large. More specifically, practically every single thing the government does and has done is about taking things from one group of people or more often all people and redistributing them to other people. Since the government can tax, it has the legal authority to rob you of your wealth and give it to someone else. Since the government can regulate, it has the power to help certain companies and harm the ones it doesn’t like. Since all can vote for government officials, government can allow 50% + 1 of the people to destroy the rights of all people; or allow 99% of people to subjugate the rights of the other 1%.

What I have come to realize is that unfortunately, our Founding Fathers did not think through deeply enough how far men were from angels, because the Founders were imperfect just like the people that they built the government for. They did not understand that while they tried to protect us from democracy, given the power to amend the Constitution, democracy could be implemented, with certain classes plundering other ones and bankrupting the nation in the process. Were the document to lay out in clear language any number of restrictions separating the public sphere from the private, this would simply lead to innovation amongst the people in subverting law and usurping power. Unfortunately, they didn’t understand the fatal flaw that they designed a framework in which the people got the government they deserved, not the government that was best. I do not mean to decry their efforts, but merely point out that as great as the Constitution they crafted was, it still could not ensure that people did not corrupt or disregard it.

As some have argued, were the populace to be more educated, our government would be better policed and regulated by the people it is supposed to help protect, and closer to the kind of paradigm that was intended by our forefathers. However, the government through public education gets to indoctrinate the citizens from day one. Even for those who are home-schooled or receive a private education, they still might be deluded into voting for bad candidates — just look at the New York Times crowd or the Ivy League (I know, I can’t believe I am emerging from it with a clear head either). And an educated populace might be even more adept at using the government to serve its interests as is.

I have always found that more influential than any of these institutions are the people that we grow up with and live with – our families, our friends and our mentors. And this is why I believe that our role as free-thinking individuals is so important, and that we must seize this moment in which the world is upside down, when good is treated as bad and moral is treated as immoral to seek to open the eyes of our fellow men. We need to educate by teaching in theory, demonstrating in practice and appealing in good sense and morality to the fact that this system whereby everyone plunders everyone else in the end leads to our demise; into a land devoid of all values, corrupted and whithered like so many empires that came before us.

We need to engage in debate, unafraid of saying what we feel in our hearts and in our minds is right. We need to sharpen our arguments against our challengers so that we can swiftly, calmly and rationally show them the errors of their ways and turn them into our friends, or at least respectful enemies. We need to explain that our actions affect more than just those around us, but also our future: our children, and our children’s children. We need to preach that as Reagan put it “Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same.” We need to argue that principles and values do matter, and that the consequences of sidestepping them are fatal. We need to scream at the top of our lungs that all progress comes from individuals, not coercive powers that dictate to free men that they must build pyramids or dingy fuel-efficient cars.

As things get worse and worse, people will first most likely react angrily. They will be looking for heads to roll. But we must keep our heads. We must be there with the answers, because it is only when people have lost everything that they will be willing to listen to the voices they dismissed before. If socialism can come into fashion so quickly from the height of what people thought was capitalism, then why can’t Liberalism supplant socialism just as quickly?

Until that day however, we must continue to advocate our principles in the face of angry, irrational intolerant sophists. We must keep fighting the good fight even if it means being hated. Derision and ridicule should be met with satisfaction, because it will mean that our detractors can only react emotionally to our reasoned arguments.

There is no shame in being hated by a group that is wrong theoretically, practically and morally. We must continue along, emboldened in the face of tyranny. We must defeat the gravest of evils with the greatest of goods: freedom.

Physical Gold In The Hands Of The People

Decades ago Ludwig von Mises wrote in The Theory of Money and Credit,

It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments.  Ideologically it belongs in the same class with political constitutions and bills of rights.

There is a simpler way to state the rule:  He who has the gold makes the rules.

One of the reasons, if not the chief reason, for the excessive government encroachment on civil liberties is the abandonment of sound money.  Contained within the United States Constitution are very specific monetary powers and disabilities.  This constitutional violation is the chief cause the world has become a very dangerous place.  Governments and their central banks are able to engage in legalized counterfeiting which is confiscation through inflation and a form of taxation without representation or due process of law.

Why a special interest group is given an exclusive monopoly enforced through violence to produce the currency used in ordinary daily transactions baffles me.  A common Western ideal is equal justice under law.  So likewise currency should be money and a tool for society that is fair to one and all.  Anyone and everyone should have the same power as the Federal Reserve to print up little paper tickets or be able to create as much new money as they want.  But nowhere should those paper tickets be decreed legal tender.

As a result the market would choose, voluntarily, commodities as currency and civil liberties would be protected.  There is a great book on this topic by Jörg Guido Hülsmann called The Ethics Of Money Production.

GOLD PRICE SUPPRESSION SCHEME

A lot of profit can be made running and riding cartels.  OPEC is a good example that when economic actors own a lot of something it is in their best interest to run a cartel to keep the price up.  Cartels are a common occurrence and take place in all types of industries such as potash, diamonds, etc.  But contrary to initial logical impression, the Gold Anti-Trust Action Committee, GATA, alleges that central banks run a cartel to keep the price of gold down.

But if you own a lot of something then why run a cartel to suppress the price?  After honing in on GATA’s beacon and applying some initial analysis the answer is actually quite simple and makes a lot of sense.

The power of central banks to issue without limit irredeemable tickets that billions of individuals use as currency in ordinary daily transactions is infinitely more valuable than the price of a portfolio asset.  As such, gold is a currency and always poses a mortal threat to their irredeemable fiat paper ticket franchises.

By analogy the current currency market is like McDonalds (FRN$), Burger King (Euro) and Wendy’s (Yuan) receiving preferential treatment by government decree which requires that customers must pay exorbitant prices to eat their inferior food.  But governments did not create food so there is always competition in the marketplace and therefore anyone who wishes to eat food made by the trans-fat cartel’s common chief competitor, a star French chef serving kobe beef (gold), must pay excessive taxes or be shot in the head.  After all, what would the rational customer have for lunch if a Big Mac cost $100 and an expertly prepared kobe beef filet was $5?

Consequently, legal tender laws and taxes on gold and silver serve the purpose to hobble gold and silver as competitors in the currency market.  But even with such extreme handicaps they are still formidable competitors and so as Dr. Alan Greenspan testified before Congress in 1998, “central banks stand ready to lease gold in increasing quantities should the price rise.”

As an IMF paper titled Treatment Of Gold Swaps And Gold Deposits (Loans) reveals, the asset side of central bank balance sheets are incredibly overstated.  The net effect of these gold derivatives, creative fictitious accounting and leasing of physical gold into the market to keep the price suppressed has greatly weakened central bank balance sheets.  As a result, GATA alleges that central banks have less than half the gold claimed and confusingly “carry gold in the vault and gold out on loan as one line item; as a result report cash and accounts receivable as one in the same thing.”

But even more important is that the central bank gold price suppression scheme is a key lynchpin of a monetary system that is in complete opposition to the supreme law of the land.  Even more disturbing is that the deeper one digs the more essential the gold rig appears to be.

PHYSICAL GOLD DELIVERY IS GOLD CARTEL’S ACHILLES HEEL

The distinguishing characteristic between gold and its chief competitors is that it actually is something tangible.  Gold has atomic number 79, a standard atomic weight, melting and boiling points, etc.  Gold is real in contrast to FRN$, Euros or Yuan which are mere illusions absent of any consistent tangible definition.  There are many inferior substitutes for gold, such as the problematic GLD ETF, but they generally have much lower melting points than 1,064.18 °C or 1,947.52 °F.

One of the reasons governments are abusing their livestock is because of the livestock’s lack of possession of physical gold, silver and guns.  While central banks thought they would slowly leak 100-200 tons of gold per year instead GATA alleges they have been hemorrhaging between 1-2,000 tons of physical gold.  Precise figures are difficult to obtain.  Some central banks, like China, have been understating their reserves.  Others refuse to allow their reserves to be properly audited.  For example, Fort Knox has not been audited in many decades.  But all this does not destroy the reality of gold:  gold is either in your possession or it is not.

THE GOLD ATM

Curiously and despite the language barrier I have many readers in Germany.  While their Weimar experience which led to the rise of Hitler may be faded in the corridors of memory it is still brighter than the American’s experience with the Continental.

On 19 May 2009 Reuters India reported that

a German asset management company which plans to set up 500 “Gold-To-Go” ATMs in Germany, Switzerland and Austria … ‘In absolute numbers, the demand for physical gold is still tiny in Germany.  But in relative terms, the growth is explosive, inquiries have been doubling every six weeks’ … The gold ATMs to be set up at central locations such as airports, railway stations and shopping malls are intended to gradually accustom people to the idea of investing in physical gold.

And so hastens the remonetization of gold in ordinary daily transactions.  With gold dispensing ATMs, digital gold currencies like GoldMoney and complete ignorance of monetary science by the vast majority of the world’s inhabitants the future for gold is brighter than ever.

With the current above ground salable gold there is only about 0.8 ounces per person or approximately $740.  That is a pitifully small amount for checking or saving account cash balances.  But it is the fundamental lack of interest in gold as money and currency that is perhaps the most bullish aspect of this cycle.

CONCLUSION

Gold and silver are not mere barbaric commodities but essential checks and balances in the political machinery.  Most individuals are extremely ignorant of monetary science and gold’s role as money, currency and protector of liberty but through advances in communication the ideas are spreading rapidly.  The central banks are profusely bleeding physical bullion.  The flow to individuals is hastened with ATMs in Germany expelling the ’sweat of the sun’.

Tremendous amounts of fictitious capital was created during the great inflationary credit expansion.  But there has been a change in psychology and The Great Credit Contraction has begun resulting in capital is seeking safer and more liquid assets.  Consequently, as the penultimate asset the future for gold is extremely bright and with physical gold in the hands of ordinary people they will begin making the rules.

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Disclosures:  Long physical gold and silver.