Glass-Bubble Investment Advice, Part I
By Robert Ringer
I just finished reading The Ultimate Depression Survival Guide by Martin Weiss. It’s an excellent book on investing during bad economic times, and Weiss clearly possesses a great deal of knowledge on the subject.
I agree with most of what Weiss has to say in his book, with two notable exceptions. First, he is a deflationist, and there is no question that he makes an excellent case for a long-term deflationary scenario. Nonetheless, while I’m hoping he’s right, I’m inclined to believe that hyperinflation — even runaway inflation — is a far more likely scenario for the U.S. over the long term.
What’s important here is our reasons for seeing such different economic scenarios in America’s future. As sound as I believe Weiss’s insights to be, he, like so many other modern-day economists and investment advisors, bases his beliefs on the assumption that free-market capitalism is a permanent fact of life in this country.
If it were, I would say there is a 100 percent chance that a deflationary depression is inevitable — which would be the best thing that could happen to America. The marketplace would be cleansed of gross misallocations of capital, hyperinflated securities, real estate, and other assets, and, above all, reckless speculators.
Which brings me to my other disagreement with Weiss. Whereas he approaches economic reality as if it were in a glass bubble — sort of like being in a static universe — my economic reality is perceived through the lens of political reality. And what I see through that lens was summed up quite well by Marcus Tullius Cicero in the first century B.C.
A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. [My emphasis.] A murderer is less to fear. The traitor is the plague.”
In modern terminology, Rush Limbaugh recently put it more succinctly: “What makes this country unique is its freedom. We are losing our freedom.”
Yes, it’s that simple. Not exactly astrophysics. It’s encouraging to know that a lot of people who were paralyzed by tingling legs in the last election are finally starting to get it. But it’s puzzling — and scary — that everyone hasn’t gotten it by now. (When I say everyone, I am, of course, excluding the far-left social progressives who want Americans to lose their freedom.)
In Martin Weiss’s vision of the future, “Our leaders recognize that, despite the trillions spent, lent, invested, or guaranteed, the government is not able to prevent a devastating economic decline. They finally understand that it was actually their own zeal to create a perpetual boom that set up the conditions for the subsequent bust.” (This is sort of like believing that Barney Frank will ultimately admit he was wrong to pressure Fannie Mae and Freddie Mac into making mortgage loans to unqualified borrowers.)
Weiss goes on to say that, in this scenario, the government will finally conclude that since it can’t beat deflation, it should help bring it about so the cleansing process can begin. Sounds great, except for a few faulty assumptions:
First, this scenario assumes that those in power actually want America to prosper. I challenge that assumption on the basis that a prosperous America would mean fewer people dependent on government help, which is anathema to most politicians. Reality check: The agenda of those who are now at the top of the Washington food chain is to transform the U.S. into a collectivist utopia in which the government plans, controls, and, yes, owns everything.
Second, it assumes that even if powerful politicians weren’t hard-core socialists, they would have the courage to tell their constituents that extended personal suffering is necessary in order to save our children and grandchildren from poverty and servitude. I know of no such politician.
Third, it assumes that even if politicians were courageous enough to tell voters the truth, they would be both rational and intelligent enough to understand that a massive deflation is a good thing for America. Again, I know of no such politician.
I believe it’s wise to learn all you can about investing — but, while doing so, be sure to keep one eye on what’s happening outside the economic glass bubble. If you take the trouble to look right now, what you’ll see is that Mao reality that never seems to go away: the barrel of a gun is pointed at the bubble!
Which is to say that so long as government has a monopoly on the use of force, it can crush everything that gets in the way of its main objective: power. And when I say crush everything, that includes market realities.
Recent government actions have made it clear that it can take your money and use it to keep propping up companies of its choice. It can refuse to pay its obligations — or simply inflate them out of existence. Most important, it can silence you if you express dissatisfaction with its conduct.
Limbaugh is right — the real issue is freedom. Economics is a side issue — a distraction. If you have freedom, you have free markets and good investment strategies will work. But without freedom, there is no investment strategy that will work — unless it’s implemented through the black market. (Remember, the black market is the only kind of market that flourished in the Soviet Union throughout seventy years of communism.)
But what about optimism? Doesn’t the outlook of the average American play a big role in how the economy will turn out? Good question — one that I’ll address in Part II of this article.
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How is it possible that the dollar will NOT become worthless if present spending and printing policies are carried out? Doesn’t sound like deflation to me.
Dear Robert.
A good article. Interestingly, I am just finishing reading Francis Schaeffer’s 1970′s book, “How should we then live?” which predicts precisely the scenario you describe. In Schaeffer’s ‘brave new world’, we will have so lost sight of our historical roots (including the reason for our freedoms), and we will be so entirely obsessed with economic ease, that we will be prepared to accept any erosion of liberty, just so we get to keep our Ipods, wide-screen TVs and cheap food.
I find it interesting, and not a little scary, how left-wing politics has now formed dubious alliances with islamism, so that (alluding to your ‘enemy within’ argument) we are no longer allowed to critique these potent anti-western forces which are eating our society out from the inside. The few who are brave enough to critique these worldviews are either labelled ‘islamophobic’ by the administration, or are forced to live under permanent guard.
It seems that we are now too ashamed of our culture to want to defend it.
I agree that one cannot look at and understand economics without also understanding politics and how the government effects the natural free-market forces. A significant point that should always be considered when investing in something is the level of government coercion that is likely to be exerted. Gold, for example, will rise as the federal government monetizes the national debt. So does this mean it’s a good investment? What if gold reaches $5000.00 per ounce? Do you really think that the U.S. government is going to let the dollar—which is a major source of governmental power— go down in flames without confiscating hard currencies, such as gold? The government does have a monopoly on force and coercion and it will use both in defending the almighty dollar. If you’re a true believer in inflation, more specifically, hyperinflation, then you must also believe that there will be a thriving black market. If this does indeed happen, then this might be a good thing. Why?
You see, paper money is a cornerstone to American Socialism and that’s why it will be defended to the death by the socialists and the central organizers. With paper money the masses can be easily fooled. However, paper money and the corrupt fractional banking system can be turned against the socialists. The fractional banking system is the socialist’s Achilles Heel. The fractional banking system could be exploited with a grass roots movement that centers on individuals withdrawing all their paper money out of the banks and exchanging it for a diversified amount of hard assets and dealing in a black market. Of course, in this case, the name Black Market might be a misnomer. A Protest Market might be a better name than a Black Market. Participating in a protest market would be done as both an investment and a protest against the governmental abuse of creating dollars out of thin air—which is the true source of inflation.
Protesting the inflation tax by proactively withdrawing money from the banks and dealing in hard currencies would be a real protest. Nothing like those ineffectual, but well meaning, Tea Parties that took place on April 15th. They were almost laughable. However, I did enjoy watching Ted Nugent. In my opinion, Mr. Nugent has both brains and guts. I believe Mr. Nugent when he says that he’s sorry that he missed his chance at the Alamo.
Right now the federal government and the politically connected bankers are working together to steal wealth that has been deposited and saved in paper money. By educating ourselves on how this theft is taking place and just how weak the fractional banking system really is, then we can put together a meaningful strategy that would be easily understood by the uninformed masses and turn enough of them against the corrupt social-economic-political system to cripple socialism— and maybe even deal it a fatal blow. There will be a way and there will be a time to kill socialism, freedom’s enemy. Those who deeply love freedom will offer a viable solution to crush the enemy when the opportune time arrives.
The traitor, that Mr. Ringer refers to, will not remain unknown forever. I think that when the masses start to experience the deep pain that socialism always causes, they will want blood. Who’s blood will they want? That depends on how well the truth can be articulated by the informed minority who understand the differences about how The Constitution and The Rule of Law serve the long-term best interests of the people and how socialism and those politicians who are full of speciousness have allowed political expediency to flourish and destroy what could of been a bright future for America. If the truth can be articulated well, then the truth can win. If the lie prevails, then it’s my blood, and others like me, that the masses will want.
“Economics is a side issue.”
Reality seeker,
Your last paragraph is the biggest crock of wishful thinking I have read or heard in some time. It would be nice if everyone was taught to think so critically, but the ruling elites intentionally do not teach that in the state schools because that would be a threat to their status quo. The looters will retain their power as long as their enemies (strong people) do not unite with other strong people, and believe that everyone else is weak in ability to think.
America has never been free in my lifetime. Our government has been clever enough to allow some free play for the market, so that the average Joe can be sedated with his TV and, now, his internet video games. The Constitution and the Rule of Law will not save us. They never did. We need a new framework. I suggest Atlas Shrugged. With true freedom, this country could see prosperity beyond our wildest dreams. I just hope it happens in what’s left of my lifetime!