Sunday, June 26, 2016

Will the Last American to Leave the Mainstream Media Please Turn the Lights Off

Last week, equities traders based a rally in the European equities markets on the mainstream media’s mistaken claim that Brexit would fail.  The tumble on Friday corrected the mistake, but markets have further to fall.  On Kitco, Gary Wagner asks the last Brit to leave the EU to turn the lights off, but the same needs to be said about those who still listen to the mainstream media, specifically including the financial news, which predicted the Brexit vote’s failure. 

Following Brexit I reviewed several of Kitco’s commentators’ predictions. Kitco commentators are nonconformists in that they tend to be goldbugs who are skeptical of pro-Fed propaganda.  Nevertheless, echoing the mainstream media, their consensus was that Brexit would lose.   The media’s psychological effects are powerful even among skeptics, and it cost them. The best way to handle the media is to ignore it; rather,  base opinions on key facts and right theory.  If John Oliver and the New York Times agree, run away.

I had been short gold, losing money, until about two weeks ago.  Having decided to think for myself and ignore the advice of a technical analyst to whom I used to subscribe, I last week bought Barrick Gold (ABX) and Silver Wheaton (SLW) and invested in Everbank’s gold and silver accounts. Also, I have been holding and losing money on small short leveraged ETFs on the stock market (VXX and SPXS) as well as a small short position on gold, about 10% of the long positions.  I now am in the green on ABX, gold, and VXX but in the red on SPXS and SLW, but this may be a good time to buy both.  Kitco says that the 30-day change in the gold price is  +7.48%.

In the short run, a week or two, gold might go up or down depending on difficult-to-predict technical reactions.  I suspect that it will continue to go up.  Markets usually take a couple of weeks to digest abrupt change.  The long run, though, may have arrived, so I am going a little longer on gold this week. 

Brexit has limited economic significance, but it might have important psychological significance. That’s not only because of the media propaganda but also because Brexit poses a threat to the globalist banking establishment that has increasingly guided world policies since the days of Alexander Hamilton. 

A vote that makes clear that democracies are capable of resisting banker subsidization will cause discomfort to the  markets.  If the public is willing to reject the false claim that a rising stock market means a better life for all, investors are going to see less subsidization and lower returns.  My guess is that government subsidization has boosted stock and bond market returns by 40 percent over the past century and has reduced real average earnings by as much, especially since 1970.

As well, confidence in the current monetary regime is likely to weaken, resulting in weakened demand for interest rate-driven equities and strengthened demand for gold and silver.

Silver may awaken.  The ratio of the gold price to the silver price is currently about 74.3. According to Provident Metals:

Since 1687 – as far back as the records reach – the gold-to-silver ratio vacillated between roughly 14 and 100. Around 1900, the ratio steadied, remaining relatively flat.

Indeed, prior to 1900, the gold-to-silver ratio hovered around 16. This was likely because many countries were using gold- and silver-backed currencies. For instance, France and the United States (among others) assigned statutory limits on what the ratio could be.

Also, the U.S. Geological Survey estimates that there’s 17.5 times more silver in the Earth’s crust than gold, which could provide another explanation for the pre-1900 gold-to-silver ratio average.

My conclusion is that gold will continue to be the chief focus of those interested in finding a hedge against the profligacy of the world’s banking, monetary, and government regimes.  However, silver seems to be undervalued, and I’m in both.  

Friday, June 24, 2016

Bravo Brexit

Seth Lipsky, America's best journalist, has posted an excellent editorial about Brexit.  Lipsky writes:

No doubt some will attempt to write off this vote as the fruit of xenophobia and bigotry. We wouldn’t gainsay the suggestion that these strands exist (elsewhere than in Britain, too); yet we doubt Brexit would have prevailed had that been what it was about. This triumph began to take off precisely when Mr. Johnson and the Tory minister of Justice, Michael Gove, as well as leaders like Lord Lawson, Thatcher’s chancellor of the exchequer, began pushing to the fore the principles of liberty and property and sovereignty.

Lipsky posts this video of Margaret Thatcher, who says in her 1988 speech to the College of Europe,   "We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels." (A transcript of Thatcher's speech is here.)

I add that during World War II Bertrand de Jouvenal wrote about the relentless process of centralization that had occurred since the late medieval period.  Hamilton's attack on federalism began at the United States' birth. Although not all libertarians are decentralists, it seems to me that centralization ineluctably leads to authoritarianism, and by their own nature the centralizing Democrats have been, since the New Deal, the chief authoritarian force in America.

This is the excerpt from Margaret Thatcher's speech that Lipsky posts:

Thursday, June 23, 2016

Britannia Rules the Waves

At 11:44 PM Bloomberg news is reporting that the UK has voted to leave the EU. The pound sterling has fallen by more than nine percent, and global markets are roiled. Nevertheless, the future is brighter than it was a day ago.  Hail Britannia.

Democratization and Economic Elites

One of the hallmarks of  the twentieth century was  widespread benign or democratic imagery  that cloaked authoritarian, elite institutions. The entire left-wing edifice, starting with the USSR's,  followed this pattern.  Communism and socialism claim to be people's ideologies that favor workers, but socialism leaves workers poorer than do systems that recognize private property rights.

In America the wolf in sheep's clothing took the form of Progressivism.  Progressivism claimed to (1) uncover and eliminate corruption, (2) expand the scope of democracy, and  thereby (3) offer a counter force to big business. It also, however, (4) advocated the institutionalization of experts.  Plank (4) undermines planks (1) through (3) because expertise is not democratic. It is, of course, necessary, but it can lead to corruption and serve big business if it is abused.

The institutionalization of a banking elite occurred alongside Progressivism. In the beginning, in 1913, the Federal Reserve Bank's importance was publicly minimized, but a war, a hyperinflation, and the 1919-1920 depression ensued within a few years.  Banking insiders were placed in charge of the Federal Reserve Bank, and the collapse of 1930 occurred while Roy A. Young, former vice president of Citizens National Bank, was chair.  Beginning with the appointment of Arthur Burns in 1970, leadership of the Fed was handed to elite economists. Currently, chair Janet Yellen is an emeritus professor from Berkeley.

The pre-Progressive American system aimed to balance aristocracy, rule of elites, with democracy, rule of the people.  However, its definition of "elite" had a democratic character. The people determined who the elite were by electing them to the state legislature.  The state legislature then determined who the senators were to be. The people directly determined who the congressmen were to be.

Progressivism, under the guise of expanding democracy, gave direct election of senators to the people. Eliminating the democratically defined elite element was the wolf in sheep's clothing because a much narrower elite was now given free rein.  Rather than democratically elected legislators selecting senators, candidates with the largest campaign coffers could manipulate public opinion.

The result of Progressivism thus has not been democratization but a narrowing of elites to a small core of banking interests.  The banking interests use higher education as a screening device for admission, creating an authoritarian, pyramidal social structure whereby those from the most elite universities are authorized to think, and all others must participate in obedient groupthink.  Dissenters are called names ranging from "reactionaries" to "birthers."

Much as communism claimed to be a doctrine of the people, but its function was to suppress, murder, and impoverish the people,so Progressivism claims to be a democratic doctrine, but its function has been to create income inequality and an authoritarian society.