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Wednesday, October 13, 2010

Gold, Liberty Valance, and Joseph Goebbels

In my younger days I rather enjoyed watching old movies and studying history. In the world of today now that I am older, but not yet old, I have seen, experienced and lived life, giving me insight to make connections. I can tell you dear reader that I think differently about the world now then when I was in my twenties, and I suspect that my thinking will continue to evolve as I get older.

As a young man in my 20’s I found myself bored on a snowy winter afternoon and decided to watch a little TV.  I settled in to watch a 1962 film entitled “The Man Who Shot Liberty Valance” starring John Wayne, Jimmy Stewart and Lee Marvin, the consummate tough guy of the day. Dear reader, I do not want to get too bogged down in the story but a brief synopsis is warranted to give you the gist of the film; it is worth a watching if you have nothing to do one afternoon.

Essentially in the film Ransom Stoddard(Jimmy Stewart) plays a sensitive lawyer(yes I know it is an oxymoron, but it is just a movie) who ends up being elected to congress after a gun battle with Liberty Valance(Lee Marvin) in which, although injured and against all odds the tenderfoot kills Liberty.

Flash forward,  Stoddard the now US Senator returns to the small town of Shinbone for a funeral of a friend Tom Dophin(John Wayne) and is interviewed by a local newsman, Mr. Scott. Scott wants to  get the story of why Stoddard has come back for the funeral of Dophin, who was considered a nobody in town. Through a series of flashbacks, Stoddard tries to relay the story of how Liberty Valance was killed , and how he did not kill him but instead it was Tom Dophin who shot him from the other side of the street, which is why the Senator was at the funeral to honor him. At the end of the interview the reporter tears up his notes and insists that preserving the myth of the West is more important than the truth. The famous dialogue exchange between the reporter and Stoddard follows;

Ransom Stoddard” “You’re not going to use the story, Mr. Scott?

Mr. Scott: “No, Sir. This is the West, Sir. When the legend becomes fact, print the legend”

After watching the movie I did not really think much of the line, but after the passage of time and witnessing the world and economic events that have transpired since I first viewed the film I have gained an appreciation of the wisdom buried in this lost piece of cinema. The message to me is clear that if a belief whether true or not, substantiated in fact or just by rumor does not matter anymore; instead if it is a common belief then keep printing or broadcasting it. This is the modus operandi of the media today, if an item will upset the apple cart or not follow along the party line so to speak then it must be fringe so do not give it the time of day instead repeat what we “know” to be true.

"If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such a time as the State can shield the people from the political, economic and or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie and thus by extension, the truth is the greatest enemy of the State."

"The most brilliant propagandist technique will yield no success unless one fundamental principal is borne in mind constantly - it must confine itself to a few points and repeat them over and over."

"Think of the press as a great keyboard on which government can play."

"Faith moves mountains, but only knowledge moves them to the right place."

Some of you may recognize the four quotes. No they are not from the mouth of Rahm Emanuel, Barack Obama, Harry Reid or Nancy Pelosi, but instead are attributable to the wretched Nazi Joseph Goebbels; who if he were alive today would be awestruck at how much better his own propaganda methodology is being implemented. I detailed these quotes from Goebbels, dear reader, and I want you to read them and reflect upon the events we have witnessed over the past decade.  Then think about the news reporting and pronouncements from the government on topics ranging from the budget deficit, surpluses, bailouts, Fanny and Freddie, inflation, deflation, monetization, Fiat Currency, quantitative easing, zero interest rate policy, Federal Reserve exit plans and the endless list of items that impact our lives and economy. Now I do not believe that there is a grand agenda to make us all into slaves of the government, serfs maybe, but not slaves. I do believe that the idea is to try to return to the status quo and the feeling in the government and the media is if they keep telling us that everything is ok and moving in the right direction that the lie or legend will become fact. Instead of having the conversations and making the unpopular choices there is a nonstop attempt to change the conversation and manipulate the situation to buy time for a positive outcome.

It is not just the government and the press that use these methods, but Wall Street too. There a constant stream of prognostic statements that are formulated on unsound economics. The unsound economics are touted by the various investment houses, because it is in their best interests to be able to keep your money invested to keep their asset base high. The Wall Street house can only make those mega bonuses if they have your money to make a commission off of or your funds in house to lever up and speculate with. They need you to keep the party going. The last thing that the “Street” wants is for the system to change or for the individuals to wise up and think for themselves.

So how does gold fit in to this? Well gold is no one’s liability as there is no counterparty risk.; sure the price can fluctuate but over the long run it has proven its ability to hold purchasing power over the course of 5000 years.  Gold has also been viewed throughout history, with the brief exception of the current FIAT money period, as a store of wealth and still is especially in Asia. After Nixon closed the gold window the thinking regarding gold and money and the link between the two began to change amongst the ivy league crowd as well as the government. Many theories of money and credit began to pop forth and began to be implemented across government and on Wall Street, which has lead to the extreme excess and misallocations that plague us today.

Gold whose role in the past had been to preserve wealth by restraining credit creation and debasement of the currency was no longer the “sword of Damocles” for the US Government in regards to its growth into the leviathan it is today.  Both Wall Street and Academia have grown considerably since the fateful day in 1971, and they have both permeated the government and are in positions to set the agenda with regards to money and economy, leading to policies we see today that benefit Wall Street and the Government at the expense of Main Street. This unholy trinity constantly derides gold as it is to their benefit to continually expand without restraint, since gold is a canary in the coal mine that signals currency debasement as well as inflation.

The slander of gold along with Austrian economics has been perpetrated for the trinity to grow at the expense of you, me and every other American. I would not call what the Trinity has achieved a conspiracy as much as a business model that has been implemented. I have heard every reason why one should not own gold. It pays no interest, it is too expensive, it requires the next person to bid it up higher it has no industrial use and the list goes on.

If you look at it realistically the arguments against gold are pretty silly. First, I can look at the thousands of stocks on the exchanges that are highly touted by Wall Street and there are a great many of them that pay no interest, and some that have no or less than stellar earnings, but of course they are not gold so it is ok. The argument that gold is too expensive is arises from the fact that most people do not know how to value gold since it is a store of value not a business entity attempting to create future value. The notion that gold relies on the “greater fool” theory is a pointless one too as there are many stocks and other financial instruments that trade above their intrinsic value and require others to pay a higher price, where as gold’s value reflects buying power relative to other goods and services.

I believe that one should flip the question on its head and ask what is it that makes the Dollar or any other FIAT currency for that matter so valuable. The dollar is backed by the full faith and credit of the US Government and based upon what I have seen happening I have less than full faith the government can handle the current crisis. The Dollar is and has been debasing losing almost 96% of its purchasing power since the birth of the FED in 1913, through fractional reserving and debasement. You can confirm the figures by going to the Bureau of Labor Statistics website where they provide a CPI calculator using government data and plug in $1 starting at 1913 and calculate it in 2010 dollars. Today in 2010 you would need $22.05 to purchase what $1 could buy in 1913, but there is no inflation according to the FED. The Dollar is not really a store of wealth any more but just a medium of exchange. Furthermore, what gives the dollar its strength is the economy of the US, but at present the government has grown so big and so intrusive that it is crowding out business and individuals with the exception of those that it favors.

You cannot have an economy that is virtually all government and little to no private sector or you end up being the EU or worse the Soviet Union; and we all know what Soviet currency was and is worth. Unfortunately our dear leaders do not understand as it does not fit with their redistribution agenda, but they do pay lip service to it. The powers that be believe that the private sector actually needs a strong government sector to be healthy. As long as this is what passes for logic the dollar and economy will get weaker and not recover. Although the latest from a senior white house official appearing on an New York Times blog is that we will hear” more about exports and less about public spending”; to which I say I will believe it when I see it as even with cheaper currency we cannot revive the economy on exports alone as that would require manufacturing, which we have gutted since the 1980’s. Moreover, as most people know the US economy is 70% consumers vs the other countries of the world that depend on exports, so you can see why gold and other “things” are going up in all currencies around the world.

The bottom line is that what passes for policies and truths today would please Goebbels . The public is being lied to so the system doesn’t fly apart. As is the case with Liberty Valance and Goebbels if you tell the lie often enough it becomes truth, however, the lies being spun now are being questioned as evidenced by the rise of the T party. Like the T party or not they are challenging the establishment trying to shed light on the seamy underside of what is actually happening and as Goebbels would have done the government and the media cast them in a discredited light. Further evidence lies in the fact that the media would have you believe that everything is going along fine, yet some 68% of Americans feel the country is going in the wrong direction.

I surely don’t want to experience the system breaking apart, but at some point something will give and Gold, Silver and other tangible items will be what you need to get by. You must not let short term gyrations knock you off the bull. The bull market in “things” is occurring not because people looked around and thought oh look pretty gold I think I will buy some, but instead because there are real problems and people are looking for safe harbors. Until the problems look like they will get resolved or the government begins to get some true discipline such as living with in its means....the trade is on…….Got stuff??
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