-- Posted Monday, 4 May 2009 | | Source: GoldSeek.com
By Howard S. Katz
Dear Mr. Norris:
We saw last week that the writers for the Times had, over the past 30 years, produced a succession of predictions on various aspects of the economy which were completely and totally wrong. Indeed, if one considers the major turning points of the financial markets, the Times was on the wrong side of every single one. In each case, it cost most of its readers large amounts of their money, and the most recent case was responsible for the Times itself losing $2.3 billion and falling into its current financial difficulties.
Indeed, we saw that both Times economists and establishment economists in general have gotten so badly mixed up that they have confused up and down. When most of the people get richer, they call this a recession/depression. When most of the people get poorer, they call this a boom. There is a simple explanation for this, but a little history is a prerequisite.
The early Americans were very influenced by Adam Smith, whose major work was published the same year as the adoption of the American Declaration of Independence. Adam Smith taught that the only proper role for government in an economy was to protect the rights of property and contract. Any other government intervention in the economy, even if intended to help, was counter-productive and made the country poorer.
Once, under the rule of King Louis, XIV of France, a group of businessmen complained about the King’s policies. King Louie’s response was, “But I am only trying to help you.” The businessmen replied, “Leave us alone.” And from that day the policy of government just leaving the economy alone has been described by the French phrase, laissez faire.
The two leading Calvinist/Anglo-Saxon countries, Britain and America, quarreled a lot at that time. But they both agreed on Adam Smith and pretty much followed his principles over the course of the 19th century. What happened was that these two countries became fabulously wealthy (by comparison with all previous countries in history and all other countries of that day). This was expressed, in America, by millions of people immigrating to get a share of this wealth. It was expressed, in Britain, by dozens of countries allowing the British to conquer them so that they could be governed by British law, and the British gained an empire upon which the sun never set.
There is a story told about Galileo Galilei after he had discovered that both a heavy and a light weight will fall at the same speed. The majority of the world community of physicists disagreed with Galileo and argued that the heavy weight would fall faster. So Galileo arranged a demonstration. He dropped two weights, one heavy and one light, from the leaning tower of Pisa. When the two weights hit the ground at the same time, Galileo’s opponents were convinced, and the truth of his theory was acknowledged.
Well, what else could they do? It happened right in front of their face. How could they deny what they saw with their own eyes? And yet denying what they had seen with their own eyes seems to be a qualifying condition for getting one’s degree in economics. After the policy of laissez faire had proved so successful in Britain and America during the 19th century, the economists of the world turned viciously against it:
- freedom of religion? right on;
- freedom of speech? three cheers;
- civil liberties? all in favor;
- freedom of economic activity not a chance.
I had a chance to see the ability of modern economists to look reality right in the face and pretend it does not exist. I was a gold bug in the late 1960s, back when gold was $35/oz. We were criticized unmercifully by establishment economists. We were insulted and ridiculed by the Times and by Henry Reuss, chairman of the House Banking Committee (who predicted that the price of gold would fall from $35 down to $6 or $8 per ounce). Gold only dipped below $35 (to $34.90) for one brief week. Then it turned and made one of the great moves in financial history. By Nov. 1979, the price of gold was $500/oz when Fortune Magazine published an article by Martin Mayer (“The Message from the Gold Markets,” Nov. 5, 1979) in which gold bugs were called a “lunatic fringe.” The idiots who had predicted a fall in the price of gold were called “the recognized oracles.”
I closed my eyes and thought back to Galileo’s famous experiment. I could see the established physicists of the day walking away from the demonstration saying, “I don’t have to admit that I was wrong. It couldn’t have happened, and therefore it didn’t happen. Galileo, after all, is on the lunatic fringe. We are the recognized oracles. If we all close ranks, then the public will never know that it happened.”
Now Mr. Silk, it is your job as an economic reporter to bring to the public the real economic experts. But in this job, you, and the other members of your profession, have failed badly. One after the other you (pl.) have taken people like John Kenneth Galbraith, Henry Kaufman, Ravi Batra and Glassman and Hassett and told the public that they were experts. The result was that you misled millions of Americans, who bet their money on your advice. You have failed at your job.
On the other hand, in 1980 most of the top mutual funds (10 year record) were gold funds. Was there anybody who called these people experts, even though they were the top funds in the nation? You have failed at your job, Mr. Silk.
What is wrong in economics, Mr. Silk? Google John Kenneth Galbraith. In 1948, Harvard University awarded him a chair of economics. They didn’t exactly want to have Galbraith teaching economics at their school; so the Manhattan Bank (later Chase-Manhattan, later J.P. Morgan Chase) gave them a nice chunk of money. The chair is even named, The Paul Warburg Chair of Economics. Warburg was the former head of the Manhattan Bank.
Now answer me this, Mr. Silk? What is the Manhattan Bank (which is far right wing) doing promoting the career of an economist who is far left wing? Does it add up? Let’s do a little mathematics. On March 9, 1933, F.D.R. (left-wing) gave the bankers (right-wing) the privilege to create money out of nothing (i.e., legalized counterfeiting). The bankers made a lot of money out of this privilege. So the bankers needed some economic “experts” to tell the public that, when the bankers created money, it was good for everyone, that the bankers weren’t creating money for their own selfish gain. They were “stimulating the economy.”
Strange it was that before the Fed was created, when the bankers’ privilege to create money was very limited, that the economy of America was the greatest in the world. At this time, the average American working man increased his real wages by 60% every 30 years. (Over the past 30 years, the average American working man did not increase his real wages at all.) At any rate, the bankers needed this message taught in American universities. So they bribed the top schools (like Harvard) and got these banker-economists appointed to teach economics all over the country. To maintain their cover, these economists went out of their way to criticize the banks and call them bad names. The bankers didn’t mind…so long as the economists provided the intellectual cover for the government policies which put money in their pockets. So the left-wing economists stole wealth from the American people and gave it to the right-wing bankers. And everyone was happy.
Yes, the bankers were happy because they were rich. And the economists were happy because they had prestige. And the working people were happy because all of their authority figures told them that they were getting richer…even though they were getting poorer. The name for this system was “The New Math.”
Only one part of this equation did not compute. When your daddy sent you to college to get an education, he paid his money for you to get the truth. You did not get the truth from your economics professor. You got a pack of lies.
And this is why everything you do comes out wrong. You tell people the stock market is going up. It goes down. You tell people that the price of oil is going up. It goes down. You tell people that the price of gold is going down. It goes up. You see, the economists of the nation were supposed to tell the American working man that he was being robbed by the bankers. But the economists dropped the ball. They let the working man down, and that is why real wages have declined since 1972 – the longest such period in American history.
Take, for example, the “recession” of 2001-02. The word is in quotes because, as we have seen, the periods that you call recession/depression are periods when the country is getting richer. Thus the word makes no sense. But if there were only one lie, it would be easy to discover. Rather there is one lie, then another lie, and then a 3rd lie on top of that, sort of like the layers of an onion. Here we are at the 47th lie. The American auto industry has collapsed. The great spirit of “can do” which characterized America a hundred years ago is gone. And everywhere we see failure.
What you are really doing, Mr. Silk, is helping the bankers to practice their privilege of legal counterfeiting and steal from the common man. When the country has what you call a recession, you beat the drums for the Fed to “stimulate the economy,” which is a fancy phrase for printing money and infusing it into the banks. As I said, let us take a closer look at the “recession” of 2001-02. First the media set up a cry that a recession was coming. Business got scared and started to cut inventories. This cut in inventories caused a decline in real GDP. Thus, by predicting a recession, you actually caused a “recession.” Then to fight this “recession,” the Fed started to lower interest rates and create money, and the housing bubble and the sub prime crisis were the result. You had done your job to make Goldman Sachs rich.
But you slipped up. After initially reporting a 2 quarter decline in real GDP for 2001-02, the Bureau of Economic Analysis revised some of its GDP numbers. The two consecutive quarters decline disappeared. The final report shows a sideways movement in real GDP but no 2 quarter decline. (Of course, I know that you have 17 different definitions for recession. That is how confidence men operate. Nothing is what it is. But that pesky 2 quarter definition, which came from your own establishment; just won’t go away. It is the wrong definition, because real GDP does not measure the economy. But people cling to it because at least it means something.)
So here you were, hoist by your own petard. Your own authority figure, the BEA, said that there was no recession using your own 2 quarter definition. Caught in your own trap. What did the banker-economists do? They threw a hissy fit. They did the same thing that they had done in 1979. They said, “If we all pretend that it never happened, then it will never have happened. So by covert agreement, NO ONE IN THE FIELD OF ECONOMICS PUBLISHED THE FACT THAT THE B.E.A. HAD REVISED ITS DATA. You can go to their web site and check out the revised data for 2001-02. There was no recession and not even a “recession.”
Do you remember the child’s story, The Emperor’s New Clothes, by Hans Christian Andersen? Well, I am the little child in that story who says, “The Emperor has no clothes.” And you are one of the townspeople who says, “If we all pretend that it is not happening, then it won’t have happened.”
So what can we say about the current “recession,” Mr. Silk? It comes from the same people who gave us the “recession” of 2001-02. It comes from the same people who tried to give us the Great Depression of 1990. Should we believe these people? I don’t believe a darn word they say. They are hacks for the bankers. They always say the same thing: “Print money. Ease credit. Print money. Ease credit.”
Now if you control the entire nation’s media, then you can scare people and create false, speculative moves. But at the One-handed Economist, it is my job to report what is really happening. That is why I spent the year 2008 in gold. My record for the decade (starting 1-1-00) is almost twice as good as the average U.S. diversified equity fund. I know that the bear move of 2008 was a fraud and a cheat (47 layers thick). And therefore, commodities will rebound and make up all their losses. Too bad the Times does not know this.
Last Thursday Chrysler filed for bankruptcy, and GM may be a month away. The American auto industry, once the leader of the world, is a wreck. For its first half century it achieved great things. Then, in the late ‘40s, the government took 2 steps, 1) showed that they were protecting the industry from competition via the attack on Preston Tucker and 2) forced unionization on the industry. From that point, it slowed its forward progress and entered a long period of stagnation and decline. The energy and innovation of the first half of the 20th century is gone. Now it runs to government for a bailout. And on Saturday, Bob Herbert blamed the Republicans because they are the party of freedom – sort of 2 lies in one. The Republicans have recently socialized several banks and started the auto bailout. Indeed, they socialized Amtrak back in the 1970s, and it has been sucking money from the American people for almost 4 decades. But there is something ugly and evil about a human being who is opposed to freedom. His soul is like the sewer Times Square used to be in the 1970s and ‘80s, before Rudolph Giuliani cleaned it up. You all walked through that sewer every day, brought to you by a series of Times endorsed mayors, and it never dawned on you that this was the world you were trying to bring to the rest of America.
Now you have done your job for Goldman Sachs. You have got the Fed to ease. Short rates are at (virtually) 0%. People will start to speculate in houses again. They will find a few stock groups to turn into bubbles. Wealth will flow from the average, hard working American to Wall Street and the bankers. But those who follow the One-handed Economist ($300 per year) will see through your lies. These people will learn how to protect their wealth. If you want to learn more about my views on your world, visit my blog at www.thegoldbug.net. This week’s blog is an open letter to Ron Paul. We gold bugs had the answer back in the late 1960s. It was the same answer Adolph Ochs had when he took over the Times in 1896. The gold standard. But the Times betrayed Adolph Ochs, and it betrayed America. Sad, sad, sad.
Sincerely,
Howard S. Katz
-- Posted Monday, 4 May 2009 | Digg This Article
| Source: GoldSeek.com
