-- Posted Monday, 22 July 2013 | | Disqus
The lovely Miss Puddy once again accompanied me on another trip back to the mother country.
As most of you know I am a 7th generation French colonist living in Louisiana. I was the first generation in my family not to learn French as my primary language. I speak very little French even to this day but the mere sound of it reminds me of my long gone Grandmother along with numerous other aunts and uncles. I can remember my father enjoying visiting with his family when I was a child just so he could once again talk the language that he first learned as a child. My mother never spoke French therefore it was never spoken in our home as I grew up. My father only learned English when he began primary school. He said he got in trouble many times for not knowing how to speak English but he caught on quickly as he was punished at school for speaking French. My, Grandmother, however, struggled with English and was always more comfortable speaking French. My wife teases me that France is certainly the home of my ancestors. She says that she sees my nose on everyone there. I think that is a compliment but I am not sure (I take it as one at any rate).
One of the two conference themes in France was, "You have to know where you come from to know where you are going." It stressed that for family offices, family businesses and just families in general to survive there needs to be a strong sense of family. Family stories, family get-togethers and family history are vital in order to keep families strong. As we traveled back to the mother country I found myself wondering how brave my ancestor must have been to strike out from centuries of culture to a wilderness frontier. He was probably a 2nd son that was not meant to inherit. I know he was a doctor, so he was educated and probably could have stayed in France and had a comfortable life but that was not his choice. Looking back, a comfortable choice has never been in our family tree. We have always been farmers, bankers and businessmen who took risks, adapted and worked hard. This is our family heritage. I only hope I prove worthy to carry on in our family tradition.
The second theme of the conference was, "The market is not a simple machine that can be easily manipulated, but is a highly complex system." The federal reserve feels that it can turn a dial and flip a switch and voila, everything is fixed. Several years ago on another trip to London the lovely Miss Puddy accompanied me to a visit to the Bank of England. The museum at the Bank had a great interactive exhibit that explained it all in very simple terms. There was a cutaway wicker backer that you stood in while watching a monitor that showed a hot air balloon floating across the countryside. You were to fly the balloon by reaching up and alternately turning on and off a gas valve. When you lost altitude and wanted to go up you reached up and opened the gas valve that fed a burner and filled the balloon with hot air. You then closed the valve and allowed the balloon to cool and drift back down when it rose too high. You simply stood in the basket and watched the countryside as you flew along opening the gas valve and rising and allowing the balloon to cool and drift back down. After a while it was pretty easy to fly along at a constant altitude. That was exactly what the Bank of England did or so they explained. When the economy was loosing altitude according to their statistics they would lower interest rates and gas the economy. When the balloon heated up too much and rose too high they simply raised interest rates (closed the gas valve) and allowed the economy to cool off and drift back down. Everyone left the bank's exhibit feeling that it was really quite simple to operate the entire economy and that (at that time) Mervyn King had things firmly under control.
The truth, however, is that economies are very complex systems. While spending time in Paris one of our favorite things to do was simply sit at a sidewalk cafe and marvel at the 12 million or so residents in the greater Paris area. Just to watch everyone on the sidewalk, in the subway and driving around going about their daily business was mind-boggling. Somehow they all had a place to sleep, managed to eat and drink as well as work and go about their daily business. Whenever we went to a cafe there was always food and drink just for us. It seemed all of France grew grapes, raised ducks and brought them to that particular cafe just for us every day. All of this was accomplished without government bureaucrats directing the goods to our table; or to the tables of the other 12 million people there. Somehow the magic of the free market delivers not because of the government but mostly in spite of it. If you have never read, "I Pencil" then I encourage you to do so. Then read, "Hammer", which describes Armand Hammer's adventures in post revolutionary Russia and the acute shortage of pencils that caused him to build a pencil factory there (among his other adventures). The amount of hubris shown by the federal reserve is staggering. To begin with, their altimeter is faulty on their balloon that reports the altitude of the economy. Take employment statistics just for one single example. After 6 months if you have not found a job you fall off the statistical charts and do not exist anymore. If you were a chemical engineer, lost your job and were finally forced to take a job at McDonalds flipping burgers the BLS considers you just as employed as before. There is no way to measure under-employment. The GDP is supposed to be a measure of goods and services. If I trade my cat for your dog then there is no impact, but if I sell you a one million dollar cat and then you sell me your one million dollar dog the GDP just increased by 2 million dollars. The more you work in business and report these numbers to the government and the more you delve into the reports from the BLS the more you realize that they are little more than a WAG. During the Truman administration they tried to count boxcars of goods to try to get a better handle on the GDP number. Someone suggest building smaller boxcars to pretty up the numbers. In China the government has been accused of falsely reporting their economic numbers. Perhaps they are being too generous by accusing them of lying. Perhaps they just don't know. Some people try to measure total sales tax numbers to get a better handle than official BLS numbers. Some people even try to estimate total electrical generation over a given period to estimate an increase or decrease in economic activity. The other day the US sold several million dollars of scrap gold to the Rand Refinery in South Africa. They have quite a surplus of refining capability as their gold mines have slowly been declining. The sale of that scrap gold collected from people throughout the US was hailed as an advance in our balance of trade. According to the BLS when we export our scrap gold swept up from the bottoms of jewelry boxes throughout the country by a struggling middle class we are making progress on our balance of trade. When we sell whole factories and have them dismantled and shipped overseas the BLS numbers show we are in better shape but are we really? The very numbers that the federal reserve looks at in their models are flawed. That is why the altimeter in their balloon example is broken. They don’t know the correct altitude. They don't even know up from down, needless to say how to make the economy go up or down.
And is a down economy a bad economy? Excess debt builds up in an economy. People and businesses make bad decisions. Buggy whip companies go out of business and computer companies start up. Creative destruction is a good thing in a constantly evolving healthy and dynamic economy. All of which is hard to measure. Government cannot even run itself. The DOD cannot account for a significant portion of its own budget. This is the same government that wants to try to control the economy from the top down. No complex organization or economy can ever be controlled from the top down as efficiently as from market forces or Adam Smith's "invisible hand". Central planning has always led to shortages and misallocation of manpower and resources.
The very idea that they think they know what they are doing should scare the hell out of every intelligent citizen out there.
Step back and look at the big trends. Make your long-term generational bets and stop day trading. Think in terms of 20-year and even 100-year cycles. The market will win out eventually. The accumulated debt and bone headed decisions of the last 100 years must be allowed to wash out. The economy will never advance with this ever-increasing drag of excessive debt. In the Old Testament the books of law mention the 50-year jubilee where all debt is forgiven in order to keep excessive debt from building up. Excessive debt must be extinguished somehow for the economy to break free and run forward. The good news is that after this debt is finally allowed to wash out I believe the economy will make some of its greatest advances ever. The other side of this mess will be a great time to be alive. Have faith and in the meantime, try to have a little fun with your family.
Larry LaBorde,
Larry sells precious metals at the Silver Trading Company, LLC. Visit us at www.silvertrading.net. Worried about storage issues? Ask us and maybe we can help.
-- Posted Monday, 22 July 2013 | Digg This Article
| Source: GoldSeek.com
