Gault's Gulch

June 2, 2010

Gold is the canary in the coal-mine…

Filed under: Politics — John Gault @ 3:34 pm
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I have found that people who collect things–baseball cards, stamps, star wars figurines, etc.–usually have an easier time understanding the complex intricacies of monetary policy and its effects on our every day life.  This is because most people have a flawed view of what, exactly, money really is and from where it derives its value.  As a lead in to my point, let’s look at the most valuable baseball card in the world–the T206 Honus Wagner card.

The T206 was manufactured between 1909 and 1911.  Due to issues not worth delving into here, it was manufactured in extremely limited numbers–and the passage of time has reduced those numbers even lower.  As a result, if you wanted to purchase one of the 50 or so of these  famed cards still in existence, you should be ready to pony up anywhere between $500k and a cool $2 million depending on the cards history and condition.  Now, imagine if you will, a kindly old man in a Pennsylvania farmhouse who is cleaning out his cellar.  In the back corner, he discovers a long-forgotten box that belonged to his father.  It says American Tobacco Company on it’s side and it is FULL of T206 Wagner cards–thousands of them in mint condition.  What would happen to the value of the T206 if these new cards suddenly flooded the market place?  Not only would the price go down, it would go down far enough that you could start using them to make that really cool thwap-thwap-thwap sound in your bicycle spokes again…

This scenario outlines perfectly what we, as a nation, have done to our money supply.  Every time that the U.S. Treasury fires up the printing presses and creates new currency to pay for our deficit spending, they decrease the value of every dollar you currently have in your wallet.  The proof of this is right in front of us in one of the most well-known and historically sought after commodities–gold.

In 1975, gold cost about $200 per ounce.  As I write this, gold is currently trading at over $1200 per ounce.  Wow!  Gold is sure more valuable than it was 35 years ago–or is it?  Basic economics teaches us that price is a product of supply vs. demand.  If gold is 600% more valuable now than it was in 1975, then surely gold demand must have gone up dramatically–or supplies must have dropped sharply.  In actuality, however, neither of these things have happened.  Gold is incredibly stable because its uses are very well-defined, its supply is well-known, and it’s demand has remained virtually unchanged for decades.  So why the price spike?  Well, look at those prices from another perspective.  In 1975, a single American dollar was worth 1/200th of an ounce of gold.  Now, a single greenback is only worth 1/1200th of an ounce.  It is not the gold that is changing value, it is the money we are comparing it to.  This is inflation–and it happens because our government has decided that it can spend as much as it wants as long as there is ink in the printing press and paper on the rolls.  Unfortunately, this policy of deficit spending and debt-creation has devalued our currency and threatens to bankrupt the nation. 

What’s even worse than this, however, is that the government knows this and chooses to lie about it.  They tout the Consumer Price Index as the measure of inflation and shout loudly that inflation isn’t a problem.  The CPI, unfortunately, is a terrible indicator of inflation because it fails to take into account the myriad of other influences on the prices of consumer goods.  If the price of Amazon’s Kindle drops, the CPI says that this is because our money is getting stronger–instead, it’s because the I-pad is kicking Amazon’s ass.  Gold–or some other stable, predictable commodity–is the only way to gauge the strength of our currency.  It is the canary in the coal mine and I think it’s about time we all put on our oxygen masks because things are getting dark in a hurry.

When Greece started going up in flames last month, conservative pundits were busy asking the question “Could that happen here?”.  Well, the answer is no.  Greece is a part of the European Union.  It doesn’t have the ability or authority to print more currency and buy its way out of debt.  We do.  As a result, we’ll never “run out of money” like Greece did.  If you want to see where the U.S. is headed, you need to look to Zimbabwe.

When the Zimbabwean dollar was introduced as its official currency in 1980, it was one of the strongest currencies in the world.  Between 1980 and 2009, however, the Zimbabwean government engaged in monetary policy much like our own.  They spent in deficits, they incurred massive national debt, and they printed more and more and more dollars in order to pay for it all.  Inflation speeds up over time–feeding on itself in an ever-escalating spiral–until the changes in value start to become exponential.  By 2009, the Zimbabwean dollar was dropping in value so quickly that money was being burned as fuel because there was so much worthless paper in circulation that to buy firewood would have required a wheelbarrow–not to carry the wood, but to carry all the dollar bills that it would cost to buy the wood.  Finally, the Zimbabwean dollar collapsed to nothing and was abandoned.  Citizens of Zimbabwe now conduct their business with foreign currencies. 

So, why should we care?  If all our money becomes less valuable, then, sure, a loaf of bread may cost $300 but my employer will be paying me $6 million a year so it all evens out–right?  Not exactly.  Think of your 401K.  Maybe you have $500K in it right now.  That’s enough that when you retire, you could use that money to buy a nice house and still have money left over to pay expenses.  The problem is that while your money sits in that 401K account, it is losing it’s value.  As the “Zimbabwe Effect” speeds up, that $500K suddenly doesn’t have the purchasing power to buy a house anymore.  Then it doesn’t have the power to buy a car.  Then it doesn’t have the power to buy one of those horrific Double-Down sandwiches at KFC.  Ultimately, everything you’ve spent your life saving will have become worthless.

What can we do?  Well, we could convert all of our money to gold, silver, diamonds–anything durable and stable.  Maybe it’s just my pampered American predisposition, but that seems a little bit too Mad Max Beyond Thunderdome for me.  No, the answer lies in the mistakes the government has made.  We could return to the gold standard that existed before 1933.  This would fix the value of our currency to a specific unit of gold.  Second, we could allow the privatization of currency creation and let the free-market sort out the mess–the Libertarian in me loves this idea.  Lastly, we could stop laughing at guys like Ron Paul and, instead, elect them to positions that would allow them to dramatically reduce government spending, disband the Federal Reserve, and, most importantly, turn off the printing presses at the Treasury.  That is, unless we want to start using baseball cards as currency–it won’t be long before they are more valuable.

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January 15, 2010

Not Yours to Give…

Filed under: Politics — John Gault @ 12:50 pm
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It is high time that people realize that acts of evil most often come clothed in the robe of good intentions.   The devastation that has been wreaked upon the people of Haiti over the last few days is terrible beyond all words.  Those people need help–and lots of it.  Any decent human being should feel sympathy toward their plight and, I would argue, an urge to assist them in the same way that we would want assistance if it had happened to us.  With that being said, we also have to realize that instances of misfortune and even tragedy are not a free pass for our government to abandon the principles upon which it was founded.

President Obama has pledged $100 million to help the people of Haiti.  Who could possibly be against such a good-hearted gesture?  Me.  And you–if you believe in the tennets of the Constitution and the freedom which  our nation is supposed to stand for.  Foreign aid–whether it be to Haiti for earthquake relief or to Israel for defense or to Ethiopia for famine relief–is forced charity.  The money the government “pledges” comes from the tax dollars of every single American.  It is donated without our consent or our input.  It is allocated without the slightest consideration for the values or preferences of those whose pocket it has come from.  Simply put, we should be telling our legislators and our President that the money is Not Yours to Give.

I capitalized those words because they comprise the title of an excellent story about Davy Crockett during his days in Congress.  The story is a bit too lengthy for reproduction here, so I will simply include this link.

http://www.juntosociety.com/patriotism/inytg.html

In short, the story simply teaches the lesson that charity is a personal choice.  It should come from the hearts and minds of those individuals who truly care enough about a cause to open their wallets and purses to do something about it.  I urge every American to give–and give deeply–to those causes which stir in them a passion to help.  Surely, Haiti qualifies.  Then again, maybe it doesn’t.  You should, however, have the freedom to make that decision for yourself.

December 23, 2009

Utopia

Filed under: Politics — John Gault @ 2:17 pm
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People often debate the great questions of life.  They argue about politics.  They argue about religion.  They argue about the Beatles vs. Elvis.  The problem is that people seldom consider what would happen if they won the argument.  What would the world look like if your personal philosophies of life, love, and death were suddenly the philosophies of the world at large?  What would your personal Utopia consist of?  Gault’s Gulch is a forum for me to share my personal philosophies with those who are interested enough (or bored enough) to read them.  It is also a forum for those who disagree with me to challenge those philosophies.  I feel, however, that those goals can be more effectively met if I provide a broad-stroke overview of “The World According to Gault”. 

The Government:

The government should have an extremely limited role in the life of the average human being.  It’s power should be limited to enforcing the explicit rights of individuals against the infringement or encroachment of others and providing those very few goods and services which are communal in their consumption and must, therefore, be communal in their production.  This means that beyond a police force and a court system, the government should, essentially, be limited to the role of providing for the common defense and building things–like roads–which would be impossible through the private sector.  The government should have absolutely no role whatsoever in “protecting us from ourselves” “giving people a hand up” “providing a safety net” or any other such nonsense.  This means no social security, no welfare, no income tax, no drug laws, no public education, and no I.R.S.  Fortunately for those of us who live in the United States, this was the government envisioned by our forefathers and provided for in the Constitution.  We need only to stop corrupting its content and ignoring its wisdom and we will have taken back that which we once had.

Economics:

I believe in pure, unadulterated, laissez-faire capitalism.  This is not the economic model of the Democratic or Republican party.  The former is quasi-socialist authoritarianism while the latter is quasi-authoritarian corporatism.  No, I believe that the free market should be allowed to function without the hand of government upon it and that individuals should be free to buy, sell, trade, save, gift, invest, or destroy the products of their own efforts without interference from anyone and in any manner they see fit.  The Federal Reserve should be abolished, the gold standard returned, and the Interstate Commerce Clause refined back to its original, constitutional power.  In Gault’s Utopia, money is a good thing as it is the universal representation of that which we have produced–and therefore contributed to society as a whole. 

Charity:

Charity is a personal choice.  In the perfect world, individuals would have the choice to donate the product of their efforts–money, time, goods, services, etc.–to whomever or whatever causes they saw fit.  One might believe that this is the case in today’s world, but one would be very, very wrong.  The government has, through its taxation policies and budget allocations, forced every American to give substantial percentages of their income to charities that were not chosen by them, but by the legislators who approved government funding for their cause.  Charity should be valued and encouraged as a gesture of caring and love for a cause that one deems valuable–but it should never be forced upon anyone for any reason.

Religion:

This is a tricky one at first because it is a topic where my feelings and my principles come into direct conflict with one another.  I am an atheist.  I do not believe in God, Heaven, Hell, angels, demons, spirits, ghosts, or miracles.  I further believe that while these superstitions have provided a great deal of comfort for a great number of people throughout the ages, they have also served as the basis for more suffering than any other causes throughout human history.  How many people have died unnecessarily in the name of God?  I further believe that God is an evolutionary security blanket that keeps humanity from “growing up” and facing the universe in all its beautiful, but frightening, glory.  Religion inhibits reason, logic, and critical thinking.  It retards scientific progress and it delays the advancement of the human race on every front from biology to politics.  On those grounds, I would love nothing more than to ban religions, superstition, and mysticism from my Utopia.  Unfortunately, this conflicts with my absolute dedication to personal liberty.  No one–not even me–has the right to tell another individual that they can not believe in anything they want or worship anything they see fit.  In my Utopia, there would be absolute religious freedom.  Religion, however, would receive absolutely no special status or protection in the world of Gault.  That means no tax exempt status on the operations or property of the church beyond that which is extended to any other legal entity.  The Catholic Church would be no different, legally, from Microsoft.  I would hope, however, that in my Utopia, the value placed upon logic and rationality would render religion obsolete pretty quickly–one can hope.

Individual Liberty:

As mentioned in the Religion section, Gault’s world would be zealously devoted to the guarding of individual rights and liberty.  No government in Gault’s Utopia would have the right to tell an individual citizen how to live their life in any way unless their actions were a direct infringement upon the rights of another citizen.  That seems self-explanatory, but modern government–including our American one–has so trampled the idea of civil liberty that people have been conditioned to not recognize what they actually are.  So here are some examples.  Theft, murder, assault, rape–these are easy.  They directly infringe upon the rights of others and so they are illegal.  Drugs of any kind–legal unless you force others to take them against their will.  Gay marriage–definitely legal.  Abortion–legal.  Drinking–legal.  Drunk driving-illegal.  Seat belts–wear ’em or not, your choice.  Simple, common-sense stuff. 

Much of what has been advocated for in this utopian vision may seem cruel to those who have been indoctrinated to believe that we each have an obligation to help those who have less than we do.  I would argue, however, that this long-held belief is the cruelest of all.  In my world, the individual is prized as the most powerful, resilient, innovative, intelligent force on Earth.  As such, he or she should be respected to make the best decisions for their own lives.  Those who succeed will do so with the knowledge that it was on their own merits that they did so.  Those who fail will do so with the same knowledge.  What more could one possibly want from life than the freedom to succeed or fail based on one’s own effort and ability?  What better world could we, as a people, ask for than one which rewards excellence rather than deficiency?

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