Bull! Not bull

Via the Cryptogon.

by Michael Nystrom
November 9, 2009

I started collecting coins back in 1976, when I was just 8 years old. My interest was piqued when a kid brought an old Franklin half-dollar to school one day. I'd always liked the Kennedy halves since there were relatively rare, and getting one in change was a special event. But that Franklin half was something else entirely - like something from another planet! Even as a second-grader, I could tell there was something qualitatively different about it. It just felt different. It was heavier, and had a certain elegant dullness to its finish. It was dirty and worn around the edges in a way that made you think it was no stranger to work.

But in that glorious year of our nation's 200th birthday, America was far enough down its current slide into poverty that it no longer minted coins from silver. The government couldn't afford it any more. That practice had ended a dozen years earlier, and the silver that had circulated in America for hundreds of years had quietly disappeared. A silver coin was something entirely new - and exciting - to my eight-year-old eyes.

In retrospect, seeing that Franklin half was a life altering event. It got me interested in coins and money, got me started collecting, and provided me with an education that I otherwise would have missed completely in my public schooling. The old coins were elegant and beautiful. Through them I learned of art, economics, history and culture. At the same time, the new copper clad bicentennial coins were making their way into circulation. I wondered why the new coins were made of silver-colored copper sandwiches instead of real silver, and was told that "there wasn't enough" silver to go around. It was only much later that I learned the real reason - not that there isn't enough silver, but that the value of our money is being steadily eroded through inflation. The result is that even pennies today are no longer made of copper.

My education naturally allowed me to understand the language of Ron Paul, back when most others still thought he was a kook. It was through Dr. Paul that I began to understand the link between sound money and Liberty - another subject that was somehow missed in public school.

But something I've only recently been coming to grips with was hammered home this weekend as I read Charles Goyette's excellent new book The Dollar Meltdown. My entire life has been lived during a period of declining American living standards. The collective cultural mythology of 'the richest country in the world' has been so blinding that until recently, I had failed to acknowledge this simple fact.

The Dollar Meltdown puts America's decline it into a sweeping context that makes our collective outcome impossible to ignore: Plunging living standards, a steadily eroding currency and massive inflation in a nation that has lost its industrial base. If you think things are bad now, they're only going to get worse. To quote Goyette: (p.9)

Gold's recent advances signal that we are in a period of major transition now. The American dollar's role as the world's reserve currency is inherently unstable and the signs of a breakdown are all around. Just as the monetary authorities have been unable to reinflate the high-tech bubble or the real estate bubble, when the dollar bubble is finally burst, no other paper currency will be able to take its place.

This is not just gloom and doom. It is a reflection of the simple fact that actions have consequences. Because consequences are often delayed, this is a fact that has remained hidden in plain sight, though more and more are starting to realize it. Intuitively, we feel it - that things are coming apart at the seams. For those of us who still have homes, and jobs, we hope against hope that things will somehow get better. But it is becoming ever more apparent that we've reached a turning point for the US economy and the dollar as we know it.

Goyette begins his book with a story about a caller to his radio show -- Jim in Scottsdale -- who finally connected the dots in late spring of 2008. With his epiphany he took action and completely sold out of the stock market, putting all of his money into gold.

To the 'cultured' and 'educated' members of our society - those who were indoctrinated anywhere from the finest public schools to Ivy League institutions - the notion of doing such a thing must have sounded completely preposterous. After all, in June of 2008 the Dow still wasn't far from its all time high. We had the finest paper currency that money could buy. In fact, we had the world's reserve standard, thank you very much, not to mention an ample supply - nay an unlimited supply - of the 'safest' risk free investments in the world - US Treasury Bonds.

Why would anyone want that barbaric relic gold?

Today, as gold crosses $1,100 per ounce, and the dollar's reserve status is in question, Jim in Scottsdale looks pretty smart, and there is a reason for that. The hour is getting late for our once great nation, which was built and prospered on the solid foundations of Liberty, sound money and limited government. To the indoctrinated masses, these words may also sound quaint and trite, relics of a long bygone era. Because of the current widespread ignorance and disrespect for our foundational principles, further collapse is practically inevitable. Goyette writes (p.143-4): "With the citizenry's willingness to go along with a costly and unnecessary war, and the growing fiscal recklessness of the Republicans and Democrats, it has become apparent that the opportunity for collective action to avert the most serious economic episode in the U.S. since the Great Depression has passed."

Sound money is gone. As government grows, Liberty shrinks. "America is transforming itself," writes Goyette, "without forethought, debate, or pause into a command economy." (p.121)

Didn't we learn in the 20th century that command economies don't work? Apparently we have to learn it again. Our government has already taken over the former pillars of the US economy: Auto manufacturing, banking, finance, insurance and mortgage companies. It was done illegally with money created by fiat, and there is only one-way out for our now rogue state: Inflate or die. "There is no evidence that US officials have any plan other than inflation to deal with real-world economic circumstances that are already underway," writes Goyette. (p.113-4)

And he is quite blunt in his prognosis: The days of hoping to catch a ride on trendy fad investments are long over. Now is the time to hunker down and get back to basics and choose investments that will survive the inevitable inflation. Part IV of his book is appropriately titled, "What To Do." In it, Goyette explains alternative investments that should remain strong in the face of howling inflation, and gives readers tools to maintain the value of their savings and take advantage of inevitable future opportunities.

The following passage near the end of the book (p.231) poignantly summarizes America's journey though the designs on our coinage:

America's earliest coins portrayed Liberty. Not rulers and politicians. Just Liberty. A symbolic representation of the country's highest ideal. In the beginning, Americans had an affair of the heart with Liberty. She was their muse and they were aflame in their love for her. They talked about her everywhere, in their churches and taverns and town squares.

But she hasn't appeared on our circulation coinage for more than sixty years, not since the beautiful "Walking Liberty" half-dollar. It represented Liberty striding gracefully into the rising sun of the future, arm extended in peace and carrying a bounty of riches. It was a beautiful representation, because abundance accompanies Liberty wherever she goes. Our devotion would be no less if it were not true, but it is one of her secrets: Liberty creates prosperity.

It was the above passage that began me on my reverie of my how my childhood coin collecting hobby began, and what it continues to teach me.

Goyette continues:

Today's coinage, looking each year more like subway tokens, celebrate the state. Just as words replace deeds and paper substitutes for gold, politicians have displaced ideals. The American state, which was created to serve Liberty, is now commemorated instead.

Note that our current half dollar not only portrays a politician on its obverse, it features the Seal of the President on its reverse!

Here is the history of our country, in three coins spanning less than 100 years. America's ongoing slide into poverty has coincided with our loss of Liberty - economic, civil and social. The more the state attempts to control the people, the more Liberty is lost. Poverty creeps in until it becomes a rushing torrent. The reason that our Constitution makes nothing but silver and gold legal tender is to prevent the government from running its printing presses out of control, creating money by fiat while devaluing the existing money stock, as it is doing now.

I find it interesting that these lessons can be learned intuitively simply through the study of money. Ron Paul mentions having been fascinated by coins at early age in his recent bestseller, End the Fed. Goyette also talks of learning the lesson in the mid-1960s when his father started sorting out and keeping the silver coins, while spending the new copper clad ones back into circulation. It is an act so intuitively common that it has been practiced by millions of individuals over thousands of years and codified in Gresham's law: Bad money drives out good. Goyette writes (p.141), "I quickly learned that the value of the coins comes not from the name of the issuing government, the images represented, the face values inscribed, or even the stirring mottoes themselves."

Like Ron Paul and Charles Goyette, I was lucky to have started my monetary education early, through coin collecting, which led to a lifelong interest in money and the economy. Most people don't get this education - certainly not in public school system - and now is the time to catch up.

Charles Goyette has written a marvelous book, a comprehensive, guide to what happened, what is likely to happen, and what to do about it to protect yourself. It speaks to the very roots of our crisis in a non-partisan way. This education is invaluable in understanding what you can do to protect yourself and your family from its inevitable effects.

Dr. Marc Faber: "The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults, and the impoverishment of large segments of Western society." Video:

By Michael Nystrom | August 18, 2009

Ron Paul's new book, End the Fed (out next month) illuminates the real reasons behind America's recent stunning economic collapse. The Federal Reserve would just as soon you not read it, and instead believe the standard refrains from the standard economists (including those at the Fed): "No one saw it coming! How could anyone have predicted it?"

One school of economic thought - the Austrian School - predicted it, and the world's most famous practitioner of that school, Dr. Ron Paul, has been warning of it for over 30 years. In fact, Ron Paul's vision of our current slow motion decline is what got Dr. Paul into politics in the first place. A primary catalyst behind his decision to seek office was Richard Nixon's decision to "temporarily" remove the dollar's gold backing in 1971. This set the table for the mess we're now in.

That "temporary" disconnect between gold and the dollar remains in effect today.



After being mostly ignored for the bulk of his career, then being shunned and ridiculed during his 2008 presidential bid, Dr. Paul has since been redeemed as a prescient thinker. His fundraising ability has made him a rock star among his fellow Congressmen, and his proposed bill to audit the Federal Reserve (HR 1207) is riding a wave of bi-partisan support in the House of Representatives. Given the current political climate and Ron Paul's swelling influence, End the Fed is destined not only to be a blockbuster of a book, but one that makes a significant impact on the conversation about who we are where we are headed as a nation.

Money from Thin Air
The Fed -- unlike the rest of us who have to work for our money -- creates money from thin air. This has long been an open secret among those in the know. As Henry Ford is purported to have put it:

It is well enough that the people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.

People are starting to understand, and revolution, friends, is visible on the distant horizon.

The Morality Hazard of the Fed
By now, we are all familiar with the narrow definition of "moral hazard" with regard to our nation's banker of last resort. Since the Fed stands at the ready to bail out our financial system, banks and brokers are free to take excessive risks, secure in the knowledge that the responsibility of their poor decisions will be borne not by them, but by the Fed itself, and ultimately by the taxpayers. The bankers feel no moral responsibility for their investment decisions.

But Dr. Paul's argument goes further than that. Throughout his career, he has warned of a deeper meaning of moral hazard. Anyone who has followed Dr. Paul closely has seen this thread throughout his speeches and writings, but he hammers it home in one of the most powerful chapters in End the Fed. He states bluntly that the entire operation of the Fed is based on an immoral principle. Beyond just a moral hazard that encourages speculation in financial markets, the true hazard is all encompassing for society.

The very existence of the Fed creates a morality hazard for all of society by setting a standard of immorality at the highest levels of business and government.

In its simplest definition, morality is the ability to know the difference between right and wrong. The Fed has a power granted to no one else in society - except counterfeiters. It has the ability to create money from thin air. In fact, the Fed is essentially the largest, most revered, officially sanctioned counterfeiter in the world. It creates money from nothing, which is distributed via Congress to the politically most well-connected individuals and institutions. Bankers, defense contractors, and the medical industrial complex come to mind offhand, but they're not the only members of this old-boy network.

As more money is created to fund bailouts, stimulus measures and just about everything else under the sun, the currency in existence is devalued. Savings are eroded. Wealth is redistributed from the poor to the rich. And all the while, the government and the Fed say the measures taken are necessary, and for the benefit of all.

The Fed is a master of deception in its actions and vocabulary. Few people completely understand the myriad complex machinations by which it creates money and simultaneously devalues the existing stock of currency. But people are not stupid; they understand it on an intuitive level, and the result is the morality hazard: When citizens realize that their leaders are cheating them, they get angry. The implicit message sent from on high is that cheating is okay. Meanwhile every financial transaction is corrupted by the Fed's counterfeit money, weakening the very moral fabric of society.

In the book, Dr. Paul recounts that his first job, at the age of 5 (!), was to help his father, who ran a small dairy line from their basement. He tells of how his father was concerned about the quality of the milk -- primarily that the farmers might dilute their milk with water. This lesson obviously made an impression on the young Ron Paul.

Some forty years later, an older Dr. Paul had the opportunity to ask a Federal Reserve official about the morality of diluting the money supply and how it differs from a farmer diluting the milk he sells:

By what moral right do we have to create purchasing power out of thin air? Whether it is done by the creation of credit or Federal Reserve notes or whether it's the creation of SDRs and international in scope, by what right do they do this? Is it any more moral to dilute the purchasing power of the money you hold in your wallet than it is for the farmer to dilute the milk supply with water?

Let's think about this for a moment: Suppose you find that your local farmer is diluting his milk with water. You'd distrust him immediately - not just with the milk, but in any dealings you have with him. This is the first consequence. If he lies about his milk, you can assume he'd lie about anything.

You might think, "I'd just buy my milk from an honest farmer instead." And if it were a free market, you could do just that. But when it comes to our money, the Federal Reserve is the only show in town -it has a state sponsored monopoly. It is the worst example of a "public-private partnership." (In the old days, we called it fascism.)

So if you're stuck buying from a dishonest monopoly farmer who waters down his milk, you might find that since he is cheating you, it is only "right" that you cheat him in return. Thus begins the perverse cycle of lies and distrust. It is the same with our money. We're all stuck in a dishonest system, forced to deal with diluted dollars, running whatever scam necessary to get as many as possible (after all, if the Fed can create them for free, why should I have to work for them?) then getting rid of them as fast as we can before they lose their value.

Dr. Paul goes on to explain:

I happen to believe that because it [the creation of fiat money] is a moral issue more than an economic issue, it is for this reason that the people have lost trust in their government, trust in the banks, trust in business, trust in themselves, and that we are a nation of distrust.

This is the ultimate moral consequence of the Federal Reserve System: We have become a nation of distrust. Until we regain that trust, the future looks bleak.

The first step in that direction is a full audit of the Fed, and the next step is to end it.

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I found this video morning on the blog Revolutionary Politics, which was linked via What Really Happened.



The video mentions that last week one of the media outlets suing the Fed under the Freedom of Information Act them lost its suit. I thought that was strange, since I didn't hear anything about it, and like most of us around here, I keep an eye on the news. By all rights, this should have been big news. But instead of reading about it on the front page of the New York Times (America's paper of record), or splashed across the home page of the Drudge Report, I hear about it via Russia Today.

Sign of the times, friends.

I knew that both Bloomberg & Fox were suing, but the video doesn't mention either firm by name, so I went Googling the news for FOIA Fed. As it turns out, the media outlet they were talking about was Fox News. So I Googled "Fox FOIA," expecting to find an avalanche of coverage. Silly me. I forgot what year it is. What I got was one (1) MSM story on it, from Reuters, and a smattering of blog posts. I even tried a new Bing news search, which was completely useless.

NEW YORK, July 30 (Reuters,) - A U.S. judge on Thursday denied a bid by Fox News Network LLC seeking details from the Board of Governors of the Federal Reserve about the central bank's loans to companies affected by the financial crisis.

The owner of the Fox Business cable network made an initial request for documents in November last year under the Freedom of Information Act (FOIA) about the companies and funds they received between August 2007 and November 2008.

As far as I can tell, even Fox News failed to report on the story.

I was going to end this blog post with the incredulous, "What's going on here?" But on further thought, that would simply be redundant. I think it is pretty clear what is going on. Silly me. I keep forgetting.

Update: Here's a better story from The Reporters Committee for a Free Press (rcfp.org)

This morning Reuters reports that antidepressant use in the US more than doubled between 1996 and 2005, from 13 to 27 million Americans. That amounts to about 20% of the US workforce. Researchers speculate that one reason for the increase in legal drug use is that Americans more readily "accept diagnosis of depression."

Hmmm....I wonder why that would be? Oh, here it is, right in the article:

Although there was little change in total promotional spending for antidepressants between 1999 ($0.98 billion) and 2005 ($1.02 billion), there was a marked increase in the percentage of this spending that was devoted to direct-to consumer advertising, from 3.3 percent ($32 million) to 12 percent ($122.00 million),

Advertising. Hey you -- feeling a little blue? Can't seem to make ends meet? Paycheck shrinking while the price of everything is going up? Does it seem like society crumbling before your very eyes? Don't worry! Be happy. The corporate drug pushers have just the thing for you to forget all your worries and get back to work as a productive member of society.

More than 164 million prescriptions were written in 2008 for antidepressants, totaling $9.6 billion in U.S. sales, according to IMS Health.

As a matter of fact, if you can't find a job, there may be one waiting for you in pharmaceutical sales. This is big business, and one with ever growing needs:

"Not only are more U.S. residents being treated with antidepressants, but also those who are being treated are receiving more antidepressant prescriptions," they added.

- - - - -

I recently made a new friend - a 23 year old kid from one of the best West Coast schools (Stanford) - who's been on antidepressants & anti anxiety medication since his freshman year of high school. He's out here in Boston doing a summer internship at a non-profit. He desperately wants to get off the drugs, but he is surprisingly candid about his hopelessness.

"I don't think I ever would have finished college without the drugs," he told me. "College seems like such a waste of time. Most people there don't care about anything but graduating." Now, faced with the prospect of entering the workforce, he's equally uninspired. On paper, he looks great - good school, good grades, good internship at a prestigious non-profit. Inside he's struggling with the decision of whether to continue being "a productive member of society," in the eyes of his friends, family & former teachers. To him it is a path that is empty and meaningless. There is the pressure to get a "good" job that offers "insurance" - both "security" and health insurance, so he can continue with his medication.

The sad part about the drugs is that they don't really work, and scientists don't really know what the long term consequences might be. What they allow is for patients to make it through another day as a productive member of society.

If this many of our citizens (20% of the workforce) needs drugs to be "well adjusted," something is profoundly wrong with our society, and its getting worse.

- - -

p.s. - Thanks to Daily Paul user krusty, for letting me borrow his Krishnamurti signature line for the title.

Digg It!

Michael Covel is the author of The Complete TurtleTrader: The Legend, the Lessons, the Resultsand Trend Following: Learn to Make Millions in Up or Down Markets.

His new film Broke: The New American Dream is set for release next month.

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.

But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

• An $8 trillion negative wealth effect from declining home values.


• A $10 trillion negative wealth effect from weakened capital markets.


• A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."

"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."

Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy - as well as their aspirations.

The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

Original Story

In 2009 we'll see the worst economic collapse ever, surpassing the Great Depression, says Gerald Celente, U.S. trend forecaster. Things will get violent in the U.S.,and we'll see tax revolts.

Transcript:

There is no other power greater than the power over money: The power to create and contract the money supply, the power to control the purchasing power of your money. Throughout history this has proven to be the most sought after, monopolistic power of man. And it has become more sophisticated over the decades and over the centuries, more sophisticated now, and more international in scope than ever before. So I see the issue of power and control over money as something that we cannot ignore, that we must address.

I believe that closely associated with this is the issue of morality as well. By what moral right do they have to create purchasing power out of thin air? Whether it is done by the creation of credit or Federal Reserve notes or whether it’s the creation of SDRs and is international in scope – by what right do they do this? Is it any more moral to dilute the value of the purchasing power of the money that you hold in your wallet than it is for the farmer to dilute the milk supply with water?

I would say there is an issue of morality here just as strong as the issue of power. I happen to believe also because it [the creation of fiat money from thin air] is a moral issue more than an economic issue, it is for this reason that the people have lost trust in their government, trust in the banks, trust in business, trust in themselves, and that we are a nation of distrust. It is for this reason that until we restore trust in government, trust in the system, and trust in the money, there will be no resolution to this problem. It is the issue of trust in people and trust in money that must come before you can start talking about nickel-ing and dime-ing it trying to get back to a balanced budget because that certainly hasn’t worked.

So I think it is important to address the issue of central planning, the issue of power, and third, I think that we must address in general terms the origin of money. I know that’s been talked about, and we recognize – those of us who believe in commodity money – clearly understand that money, paper money and credit creation didn’t come out of the marketplace. That came out of the heads and the fantasies of the intellectuals and the government officials and those who want paper to be money – but never out of the marketplace.

So I would say that the paper standard is bucking history, and its bucking economic law and economic truth, and they only can do it with force and more power to make people accept it. Because economically, and historically, paper is not money! It can’t be money – it is only money because we’re forced to used it, and because there is a residual thrust in the pieces of paper that we carry around because at one time it did have real value. You have to have something that people seek after and that they hold as something important that they will hold as money.

History has shown that people have chosen gold first, and probably silver second. They’d rather have cigarettes than pieces of paper!