politics

Stuck on stupid: celebrating $1500 gold and the East Coast geniuses that made it possible

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Earlier Posts:  I. More education bubble stuff

Just after Barack Hussein Obama was elected in November, 2008, I was at an academic conference in Boston.  There was a Festschrift celebration for one my profs, at which I met a childhood friend of his–my prof grew up in the Boston area.  Once this elderly “gentleman” learned that I grew up in the state of Alaska, he became red-faced and angry, “What’s wrong with you people in Alaska?  Has the cold weather frozen your brains?”  Well, one could have asked the same thing of Boston residents that year–it was a distinctly cold November.  He continued, “That Sarah Palin is such an idiot!”  Well, I wonder whether Miss Manners would think it proper to talk in this manner with a new acquaintance.  I mean Sarah Palin enjoyed a very high approval rating in the State of Alaska and if I shared the view of the majority, then this East Coast snob was insulting me as stupid along with my fellow Alaskans.  Most of the people in that room held PhDs–so the gratuitous insults were uncalled for.  Well, I couldn’t really think of anything to say, but by this time I was pretty hot under the collar:  “Sir,” I said, “The our problem in Alaska is that when we are hungry and need to eat, we have to go outside and kill something.”

Then my new East Coast friend started to talk about Barack Hussein Obama:  “He’s so smart.  He talks so well.  I just know he’s going to be a better president than that idiot Bush.”

Then one morning in Grand Cayman at Christmas there was a “lady” sitting with me under the veranda at the pool of the hotel.  We began to discuss where she was from:  Washington D.C.  I told her about growing up in Alaska but that I now live in Canada.  “I am going to move to Canada,” she said, “If Sarah Palin ever becomes president.”  Wow.  Miss Manners where are you?  But this brilliant woman doesn’t understand the first thing about Canada Immigration or moving to another country.  It sometimes takes years to get your paperwork.  I know people married to Canadians who have taken over two years to get landed status, and this lady thinks she can just walk up here and live in Canada.  I hate to tell you this, but this is not the Viet Nam War era, and Pierre Trudeau is not the president of Canada anymore.

Well, to all you brilliant people on the East Coast who think you are smarter than us Alaskans who kill animals to put food on the table, I dedicate this post.  I love what your President and your Federal Reserve Chair have done to the value of my gold portfolio.  In the words of Mogambo Guru, “Whee!  This investing stuff is easy!”

In an earlier post I listed the East Coast schools of some the people responsible for $1300 gold.  I repeat that list here (Harvard, by the way, is in Boston):

Barack Obama, Columbia, Harvard

Ben Bernanke, Harvard, MIT

Alan Greenspan, Columbia, NYU

Hank Paulson, Harvard (MBA)

Paul Krugman, Yale, MIT

Tim Geitner, Dartmouth, John Hopkins

Larry Summer, MIT, Harvard

But some of us people who don’t enjoy PhDs from these schools where the genius go, don’t believe it is advanced economic theory that is going to help the economy, but common sense.  Yesterday, in a seminal article, Monty Pelerin summarized our main problems under five points:

  1. An Incompetent President – The President is inexperienced and incompetent. He is likely a fraud, as evidenced by his guarded and unknown past. He is incapable of leadership, honesty or management. Virtually every one of his policy initiatives has been harmful to the economy and country. His intentions are clear, the degree to which he will be able to drive us further down the Road to Serfdom is not.
  2. An Incompetent Political Class – The political class attained power via Santa Claus economics, providing gifts to constituents in return for votes. Both parties are guilty. Politicians have conditioned themselves and their constituents to “free-lunch” governance. Few know how to govern in any other fashion. Most are indistinguishable from prostitutes — vote for me and I will do “that” for you. Both parties want to preserve the welfare-warfare State, disagreeing merely on the means of doing so.
  3. An Incorrect Paradigm – The Keynesian model of spend and spend has been good for politicians but disastrous for the economy. Over time, it has encouraged loose credit, overspending and living beyond our means. The failures are obvious to all but Statists and so-called Keynesian economists.  The political class cannot stop “free lunches” without suffering severe political consequences. Hence, the abuses will continue until resources are exhausted. Like Rome of old, we will soon run out of bread and circuses.
  4. An Unhappy Ending – Current economic problems cannot be mitigated or solved without incurring another Great Depression. Whether it is preceded by a deflationary collapse or a hyperinflationary blow-off is moot. The ending is inevitable and as more people understand this ending, they take more extreme steps to protect themselves — spending ratchets back, savings increases and businesses refuse to engage in new investment or hiring.
  5. A Dangerous Prelude to the Ending – Government is insolvent. It would be bankrupt without Federal Reserve Quantitative Easing. As a cornered, wounded animal will do anything to survive, so will Government. Does that mean confiscatory tax rates, capital controls, IRA investments forced into Treasury Bonds, “excess profits” taxes, a national sales tax, etc. etc.? It could mean any or all of these and more. Government will not roll over. It will do whatever it can to continue, regardless of how illegal, immoral, unethical or harmful it may be for the country.

I am victim

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Leftists always claim to be on the side of victims, the poor, and the marginalized.  Often these so-called victims are criminals, the worst elements of our society, who are sociopathic in behavior, e.g., substance abusers, and are unable to function in normal society.  Some Christian leftists claim that since Jesus said, “Blessed are the poor”, these poor are the true church.  They are the focal point of God’s love and care, not the “rich”.  And you, because you are middle-class or “rich”, you belong to the oppressors.  It doesn’t matter how many good jobs you provide and how many families depend on you, you are an abuser.

When you turn the tables on these leftists and claim, “I am a victim”, they ignore you, mock you, claiming that you are an extremist or mentally ill.  But those of us who pay taxes are being robbed regularly by government.  We work hard and we risk our capital, and the government expects its pound of flesh and strips us of our wealth, and then gives it to the “poor”–such as the banksters or the people who refuse to get a job and call their welfare cheque their “pension”.  This is abuse and we are oppressed victims.  We are like the people in biblical times called the Am haEretz, the people of the land, who were oppressed by Roman tax collectors.

Consider that Charlie Engle went to prison for mortgage fraud while not a single bankster went to jail.  I’d sure love to put my mortgage broker in jail, but I’m sure he’s still free.  I won’t mention his name to protect the guilty, but he received over $5000 in fees for his claim that my brother’s business could earn more than three times its historical cash-flow in SBA loan papers for a commercial building that he couldn’t afford.  As my brother’s partner, I lost a lot of money on that deal.  Yet Engle goes to jail, and the big fraudsters are free.  And so are the Congressmen who pass the unjust laws and receive sweet-heart loans from the banksters.

Today I read an essay on “Morality and the IRS” which claimed that many people are so frightened and demoralized by their treatment at the hands of IRS that they commit suicide.  Indeed, it doesn’t take long to find stories to that effect.  Joe Stack who flew his plane into a IRS building in Austin, TX, left a public suicide note explaining that the IRS drove him to self murder–and the leftists who run the media call those who sympathize with Stack “extremists in the patriot movement“.  One IRS agent testified to the Senate Finance Committee in 1997 that she knew of at least five suicides but thought that the number could be much higher.  If the IRS threatens a person with prison and fines, or steals from their bank accounts and garnishes their pay cheques, then it can really cause a lot of domestic havoc, marital discord, and personal suffering.  I know.  My own wife is tired of hearing of my woes and is not above threatening me.  Such tribulations could lead the weak among us to Selbstmord.

The socialists want this.  They want big government that takes care of us cradle-to-grave.  They begrudge even our little savings accounts, such as the TFSA, where we are allowed to gain interest without taxation–even though the pathetic returns from interest accounts don’t even keep up with organized government robbery called “inflation”.  And yet government does a very bad job of providing services, and we would be much better off if they would just get off our backs and let us fend for ourselves.

The IRS–and probably every other revenue service in the world–is no better than the mafia.  Consider that American citizens are required to pay taxes to the USA no matter where in the world that they happen to live.  Non-residents cannot receive US healthcare, grants, education, or whatever the service might happen to be, because they don’t even live in the United States.  But this taxation is justified because they receive “protection” from the US government.  It makes me think of how Richie Aprile offers protection to Beansie (See video below: viewer discretion is advised because of foul language and violence).  Yeah, the US government has the right to tax me here in Canada because it is protecting me from all the bad guys out there who want to harm me or steal from me.  Wait a second, the only ones who are constantly threatening me work for the government.  You see!  The government has become a criminal organization and I am victim.  Well, excuse me IRS sirs.  I am now under the protection of Canadian organized crime.  In order to make that clear, I’ve lost my right to live in the United States of America.  Poor Beansie, Tony Soprano didn’t protect him from Richie.  Hopefully, the Canadian mob boss will do a better job for me.

Anarcho-Socialism vs. Anarcho-Capitalism

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[This is cross-posted at City of God]

In the wake of the emerging church movement, new attempts to grapple with a Christian approach to economics have become more intensely discussed and put into practice. One of the most popular “third-way” economics, at least in theory, seems to be anarcho-socialism. While, as with most things intellectual, there are variations on this position, there seems to be one or two positions that these variations all hold in common: (1) a labour theory of value, and (2) a dislike of economization and the price-system.

Lurking within many of these positions is a deep suspicion of “private property”. Of course, as with general view of anarcho-socialism, so in the case of private property, there are variations on how it is opposed. Nevertheless, if any sense is to be made of the “socialism” part of anarcho-socialism, some degree of opposition to private property must be present.

Part of the suspicion of private property comes from (1) above. That is, a labour theory of value, most fundamentally, believes that the value of any product must be the same as the value of the input of labour that produced it. By implication, this means if a labourer is paid less by an employer for the production of a good than the employer will make by selling it, so that the employer makes a profit off of the labourer, the labourer is actually being defrauded by the amount that the employer makes in profit. For, as was explained, if the object is worth however much the labour was worth, then there is no room left for an employer to make a profit, unless the employer is simply underpaying the labourer, or else is defrauding the customer.

Austrian economists, the consummate free-marketeers, in response, developed what is called the subjective theory of value (otherwise known as marginal utility theory). The subjective theory of value argues that the value of any product is determined by individual according to their preferences, and that market prices therefore are simply what the buyer and seller can agree on as a mutually beneficial compromise between their two value schemes, leading both to agree that economic exchange is more worthwhile than not exchanging. This fundamental view of value has many implications. It implies that wealth is not a zero-sum game. In any voluntary exchange, in fact, both parties believe they are actually increasing their wealth, simultaneously. It is a win-win situation, because both are getting something they prefer in exchange for something they prefer less. This means that real wealth is created every time a voluntary exchange occurs. It also means that the labour theory’s criticisms of profit are misguided.

The fact is, the existence of profit-making by an employer does not imply that the labourer has been stolen from, because it is entirely possible for a labourer to voluntarily prefer a fixed wage lower than the market price of a product rather than the chance of making the higher profit along with the attendant risks of being an entrepreneur. The labourer prefers a guaranteed wage now to a possible profits in the future, whereas the employer prefers potential higher profits in the future to a more secure income in the present. In the end, some people voluntarily prefer to be employees and have a more reliable source of income, and some people prefer to be their own employers and take on higher risk for the chance of a higher income. In situations like this, employers and employees have a mutually beneficial relationship; no one is being stolen from. Rather, the employer’s profit margin is higher than wage rates because the employer is the one risking his or her own capital; the labourer is not.

Some socialists have also issued criticisms of the principle of economy and of the price system. The former principle basically means just this: it is just a fact of existence that resources are scarce, and so rational agents will act to meet their ends with the least amount of waste possible. Waste, the destruction of wealth, is ultimately a harmful thing in a world where we do not have infinite goods to meet our needs. Rational people perceive this, and so act to avoid unnecessary waste. The converse of this point is that they act in the way they believe is the most efficient to achieve their ends. The price system is simply the social outworking of this principle. As was explained above, prices are just agents communicating to other agents what they think the value of a product is. When a price is agreed upon between a buyer and seller, both are convinced that the product has been appropriately valued, and they believe that they will be benefitted more by what they are receiving than what they are giving away. Socialists (again, as far as I know, some, though perhaps all) have criticized these principles as inhuman. Murray Rothbard, in a 1970 article, “The Death Wish of the Anarcho-Communists”, quotes one socialist making this point:

The anti-rational spirit of anarcho-communism was expressed by Norman O. Brown, one of the gurus of the new “counter-culture”:

The great economist von Mises tried to refute socialism by demonstrating that, in abolishing exchange, socialism made economic calculation, and hence economic rationality, impossible … But if von Mises is right, then what he discovered is not a refutation but a psychoanalytical justification of socialism … It is one of the sad ironies of contemporary intellectual life that the reply of socialist economists to von Mises’ arguments was to attempt to show that socialism was not incompatible with “rational economic calculation” — that is to say, that it could retain the inhuman principle of economizing. (Life Against Death, Random House, paperback, 1959, pp. 238-39.)

But, in response, Rothbard argues that it is in fact the denial of this system that is inhuman:

The fact that the abandonment of rationality and economics in behalf of “freedom” and whim will lead to the scrapping of modern production and civilization and return us to barbarism does not faze our anarcho-communists and other exponents of the new “counter-culture.” But what they do not seem to realize is that the result of this return to primitivism would be starvation and death for nearly all of mankind and a grinding subsistence for the ones remaining.

And it seems hard to deny this counter-argument. For, if an agent did not act in a way that attempted to be efficient with the use of scarce resources, they would lose those scarce resources through continual waste. And if a community of agents could not, or would not, signal to each other what they thought would be the most valuable/efficient use of a particular object would be through a price system, they would have no way of collectively acting in a way that would economize their scarce resources. And eventually, the continual waste of scarce resources would indeed lead straight into “starvation and death for nearly all of mankind and a grinding subsistence for the ones remaining.”

Thus, in the end, it seems that a capitalist understanding of wealth and property is necessary to prevent poverty and death; the principle of scarcity and the need to plan accordingly can be ignored only at our own peril.

With these criticisms made of socialist versions of anarchism, though, there is one valid criticism to be made of some forms of anarcho-capitalism. It seems (at least in my limited forays into their literature) many anarcho-capitalists (usually of the atheistic variety), believe strongly that there exists only one moral wrong: aggression. This means that letting another person starve to death, when you could prevent such an end, and there was no reason not to prevent it, would be perfectly morally licit. Obviously, this sits in stark contrast to the Bible’s command to “love your neighbour as yourself”, especially when it is seen in light of Jesus’ interpretation of it in the story of the Good Samaritan. It is quite clear that our Lord interpreted this fundamental axiom of the Law to require compassion and charity. This does not mean that everyone is required to share their goods in an absolutely equal fashion. In a situation where two people are both well off enough not to need charity, but one is richer and the other is poorer, there is no moral obligation for the richer person to share with absolute equality all of his goods with the poorer person. Absolute economic equality is not a requirement of natural justice. But, that said, human beings have a moral obligation to help our truly needy neighbour, insofar as it is possible for us to help them; this is matter of justice, of the Creator’s moral law, not subjective preference. God will not accept the rationalizations of the atheistic anarcho-capitalists on judgment day.

And so, one could perhaps argue that the only morally permissible type of anarchism is one which affirms two counterbalancing propositions: (1) the ultimate choice over what to do with property should lie with its private owner, not with a community acting coercively, but (2) private owners of property are still morally obligated to help their neighbours when it is possible for them to do so. The decision should ultimately be left with the individual (in the sense that the community should not use violence against them or their property), but the individual is obligated by God to show charity.

So, what does one call this kind of anarchism? Is it capitalistic, because it opposes coercion in exchange, supports the principle of private property, and denies an absolute moral imperative to voluntarily create total economic equality? Or is it socialistic, because it opposes an inhuman disregard for the suffering of others in affirming a moral obligation to show love to our neighbour? I tend to think that, because of the possibilities available for the meaning of the term “capitalist”, it is in fact capitalist. That is, because not all capitalisms deny there are moral obligations to help our neighbour, this “socialistic” principle does not rule out the appropriateness of the term. But maybe others will disagree. I think, however, in the end, this is just a semantic disagreement.

Weimar America: II. O Happy Day, a compromise has been reached (rev.)

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Update:  I learn from Rick Moran that the $38.5 billion in cuts weren’t from the quarterly deficit but of the annual budget.  I revised the post to reflect that.

I am as delighted about the compromise arrangement between Obama and Congress as anyone.  You see, my portfolio is 125% hedged against hyperinflation.  Congress has cut 38.5 billion.  That’s seems like a lot of money doesn’t it?  Let’s just all proclaim the victory.  You see, when the US Federal government is spending 1,600 billion per year more than what it brings in, $38.5 billion cuts less than 2.4% of the deficit.

Let’s try to get some perspective on this.  The Federal Reserve Bank is buying most of debt now since Japan is rebuilding in the aftermath of the Tsunami and the earthquake, and the Chinese are rebalancing their portfolios away from US debt while buying into the Canadian resource sector, among other things.  When Ben Bernanke buys the debt, it is called monetization; i.e., the money is created out of nothing and put into circulation via government spending.  This is creating hyperinflation–just look at commodities: gold is at $1475, oil at $113, silver over $40.  Now $38.5 billion savings will mean that the US will only borrow 97.6% of what they were planning to borrow before the compromise.  That’s a big deal.

Imagine your family had too much debt and expenses.  Every year you bring in $100,000, and borrow $50,000 while spending $150,000.  Now, you have a growing debt base, but you are not making a penny of payments on it to reduce its principle, and balance is now at $500,000.  Your payments are 2% interest, and so you are paying $10,000 of that $150,000 just to service the debt.  You’ve got a problem, because in one year that debt could cost you 5%, in which case your debt payments would become $27,500, and so you would have to borrow another $17,500 that next year just to cover the extra interest, so now instead of  borrowing $50,000, you are borrowing $67,500.  This is called a debt death spiral.  So lets say you and your wife compromise, and you decide to reduce your overspending by 2%, i.e., now instead of borrowing $50,000 you only add $49,000 to your $500,000 debt.  So in year two, your interest at 5% is only $27,450, meaning that you will only have to borrow $67,450 in year two.  Wow.  You’ve really made a difference by cutting your deficit by 2%!  Congratulations.

Thanks to the Tea Party we have a cost cutting Congress.  So I am now predicting that hyperinflation will be slowed down by a day or two.

Great job guys!  It makes my job as an investor easy:

Long: Canadian oil & gas sector; long Canadian gold mining companies, physical gold and silver (Sprott Physical Gold and Silver Trusts)

Short: US dollar.

My April 7 visit to the US consulate

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Today I visited the US Consulate in Toronto to inform them that I had committed an act which had caused me to relinquish my US citizenship.  They made me fill out seven pages of paperwork (which I had done in advance–DS-4079 and DS 4081), swear with my right hand raised that I had read and understood the consequences of my actions, and then I signed the paperwork in front of a consular officer, who then put the seal of the Consulate General of the United States on each signature page.

How I was treated

The main person that I dealt with Mrs. A. was very polite; she too is Canadian, and so there was zero recrimination for the act I had committed–but she did her job, and made sure that I knew what I was doing.  The consular officer, a certain Ms. J.H.F., also was polite.  At first Mrs. A. suggested that I must come in for a second visit, but when I insisted that I had already committed an expatriating act, she agreed that I was only at the consulate to inform them of that fait accompli and that there would be no need to return.  The expatriating act took place on 28th of February, and she recognized that I was no longer an American citizen according to USC 1481 .

$450 renunciation fee [UPDATE: Please note, I did in fact receive my CLN without paying $450]

I can’t yet say, as I suggested in an earlier post, that the $450 fee would not apply to someone who had committed a prior relinquishing act.  It is clear however that “renunciation” and “relinquishment” are two completely different acts in the understanding of the United States Department of the State and their US Consulates General around the world.  Mrs. A. explained that my paperwork would be sent to Washington for examination.  This could take a great deal of time.  Meanwhile, she provided me with sealed copies of all the paperwork.  She said that when the Certificate of Loss of Nationality (CLN) would be approved, she would contact me and I could pick it up after it arrives but I would have to pay any fee that might apply.  She didn’t think that the $450 fee would apply but she wasn’t sure.  So I am not in the clear.  However, the Toronto US Consulate General says that fee is applicable at the time of taking the oath of renuciation.  Singapore too.  The Hamilton Consulate General says the fee is applicable at the time of picking up the CLN, and renuciationguide.com says that fee technically applies to the processing of the necessary paperwork.  In any case, if I’ve made the relinquishing act, owning a Certificate of Loss of Citizenship may not be necessary, provided the State Department recognizes my loss of citizenship.  I’d be like Scarecrow, brains but no diploma.

My written statement

I provided a written statement which I signed in front of the consular officer and which she stamped and sealed.  The text of that statement is as follows:

I have lived in Canada most of my adult life.  I have married a Canadian.  After so many years in Canada it became clear that I have a great attachment to Canada, to my Canadian friends, to my Canadian wife and her family, and to my church community in Canada.  I felt that it was therefore necessary to become a Canadian citizen so that I may become a full member of this great and wonderful country and its people.  Therefore, I applied for Canadian citizenship in 2010, and I also had, even at that time, the intention of relinquishing my US citizenship.  For in taking my pledge to the Queen of Canada, Elizabeth II, on February 28, 2011, I realized that it would be absurd for me to be of divided loyalty.  My duty to the Queen and to the Dominion of Canada precludes me from maintaining citizenship in the United States of America, since when one country calls me to serve, dual citizenship could potentially create a conflict of interest.  To avoid all such conflicts, I have decided with my full volition and all my heart, to relinquish my United States citizenship once and for all, realizing that it is an irrevocable act.