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The intention of The
Golden Chalkboard is to feature a focused selection of data
or rare commentary that I think will be useful to enhance your
insights into the gold market and the monetary system.
A very brief lesson from among the several economic realities of human Democracy and the Market environment
Our sometimes sad human experiences show time and again that inflation is an inevitable price to be paid for a democratic system of self-rule. (Winston Churchill once aptly and cleverly described it this way: "Democracy is the worst form of government -- except for all others.") So, given our human limitations, we muddle through and do the best we're capable of with what we've got. At various times through modern history, some groups of us, as nations, have done better than others at exercising self-control -- as evidenced by their degree in achieving reasonable price stability versus runaway inflation.
It is set against this reality that, in an enviroment where democracy and free markets are the preferred and prevailing structure of human interaction, we must have the ability and take action to diversify the savings of our monetary earnings into inviolable hard assets such as physical gold. (The fact that gold, through the illusory effect of derivatives and lending, is currently caught up in a temporary bout of "man's inhumanity to man" shall remain beyond our treatment here, the subject of yet another Golden Chalkboard.)
Elaboration from the USAGOLD Discussion Forum follows....
site steward (12/17/01; 20:30:21MT - usagold.com
msg#: 67031)
HEADLINE: Argentina slashes 2002 budget, PUBLIC ANGER FLARES
http://biz.yahoo.com/rf/011217/n17263362_2.html
------------
BUENOS AIRES, Argentina, Dec 17 (Reuters) - Argentina on Monday
vowed to slash its budget spending by nearly a fifth in 2002 to
ensure it can service its debt, but social protest at government
austerity and banking curbs continued to flare.
But the government faces an uphill battle to get the budget past a Congress dominated by the main opposition Peronists -- who have rejected deeper austerity amid mounting public unrest that has erupted into sporadic violence and shop looting.
Angry protesters in the poor Buenos Aires suburb of Quilmes burned tires outside a supermarket on Monday to demand food handouts -- scenes reminiscent of the angry demonstrations and violence seen during the hyperinflation of the late 1980s. .......amid fears of a default or devaluation that would bankrupt thousands.
...Cavallo hopes Congress will
approve the budget by the end of the year to help unlock aid from
lenders like the International Monetary Fund.........But more
spending cuts will likely only prompt unions and angry state workers
to stage more national strikes like one that brought the country
to a virtual standstill last week. ---end excerpt---
-----------
Simply put, the power of the vote is just another expression of the indefatigable force of THE MARKET. Therefore, I offer this cautionary note to all would-be survivors and would-be economists: If you don't properly take the realities of DEMOCRACY and the influence of "public will" into account in anticipation of the resulting expressions of "political will", then when making forecasts to structure your portfolio you will find yourself sorely ill-equipped to prosper as you otherwise should.
General shifts in national monetary policy become nearly predictable if you allow yourself to understand this.
A weakening dollar and inflation is the course that mankind has charted. Take a cue from your intuition of the desires of your fellow man -- ease out of your exposure to the money "they" (meaning, "all of us") control and into the savings alternative that "they" ("we") do not have the ability to print -- gold.
R.
The Traveler (12/18/01; 11:21:55MT - usagold.com msg#: 67055)
BRAVO!!! SITE STEWARD
for #67031
Thank you for posting yet another example of democratic realities
(a/k/a Political Will).
As FOA, I and others have previously discussed here, the creditor
class lost the battle for a hard currency to the debtor class
early in the last century. Fiat currency now rules the day because
the "great unwashed masses" of Hobbes need to be continually
paid off through welfare programs in order to keep them as docile
as sheep and to keep the powers that be in power so that they
can do their dastardly deeds.
Compared to the Argentines who have experienced decades
of gross fiscal and monetary mismanagement Americans are
virgins. Just over half of the Unified Budget of the USA goes
to just five MIDDLE class warfare programs (or involuntary wealth
transfer payments from my viewpoint). Yes, over ONE TRILLION DOLLARS
goes to entitlement programs.
How loud will the middle class squeal and how militant will they
become should Congress propose an American austerity plan and
a new green back with gold backing and convertibility. Said differently,
how many sheeple really want to see the American Dream collapse
like an imploding building because our currency can no longer
be printed at will in endless quantities? How many of them really
want to exchange value for value with international trading partners
instead of merrily passing out more over-extended green paper
that can never be fully redeemed in exchange for more cheap oil,
cars, antiques and wine. America's economic destiny will not travel
this path.
As FOA has said On The Trail, the FED's imperative will be to
buy enough (corporate and consumer) debt necessary to keep the
price of all debt stable (at par). This begets the hyperinflation
yet to come. But by making this choice, the banking system is
saved from a liquidity and solvency standpoint and the sheeple
do not loose their homes, cars, farms and bullion (HARD assets
all). Their jobs, pensions and 401(k)s are another matter entirely.
But as the Mexicans, Russians, Argentines and countless other
societies have done, Americans will evolve and survive the new
economic realities. But smile, all is not bad. Your unsecured
debt is likely to be forgiven for pennies and the term of your
secured debt (which has been cheapened due to hyper inflation)
will be endlessly renewed.
The above is all made possible because America incurs its debt
denominated in US dollars the very currency it prints. It
will never have a problem paying its debts in full FOR FACE VALUE
not for the equivalent purchasing power initially received.
Would Argentina have a crisis if it had borrowed in contracts
denominated in its currency?
I see this. So do many of you. So do the creators of the Euro
and the producers of the essential element of modern economic
life - oil. If they choose to not enforce debt contracts secured
by gold (so that GOLD may be priced and traded in a purely physical
free market), I accept this and will employ my capitalistic talents
according to this new reality. If they choose to "gun"
the price of gold to US$30,000 or so (in order to recover some
of the trillions in purchasing power that they lost for three
decades while holding depreciating dollar assets), I accept this
and will employ my capitalistic talents according to this new
reality.
Are they "thieves"? I think not. They are experienced
actors in the economic arena trying to avoid the mistakes of past
monetary regimes and protocols. Furthermore, I don't fault them
from trying to gain an advantage over the competition and to restoring
their equity lost to America's "exorbitant privilege".
In all contests, there are winners and losers.
Will the Euro succeed? Yes, in a while for a while warts
and all. Will the Euro later fail? Of course it will. That is
why holding physical gold is a time-honored necessity.
Before the name calling starts, I declare that I too am a moral
relativist which is to say I am pragmatic given any fact
set. I prefer to survive the coming economic storm rather than
complain it's not fair based on moral values that are not mutually
shared by all actors in the arena.
One man's thief is another man's Robin Hood.
Best regards,
The Traveler
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