Democrats the Party of the Socio-Economic Elite

I have been going through campaign contributions of a variety of elite Americans: Nobel Prize winners, honorary degree recipients from Ivy League colleges, Hollywood screenwriters, and top-ranked actors.  They are predominantly Democrats, and, if they contribute, they predominantly contribute to the Democratic party.  I'm now wondering whom, exactly, the Republican Party represents.  It doesn't seem to represent high-paid professionals, high-achieving academics, or famous entertainers, so it must be that the GOP is the party of the working poor--the so-called middle class whom America's federal government, led by the Democratic Party for most of the past century, has impoverished.  To show that the Democratic Party is the party of the average American, the case has to be made that America's bailout generation is selfless--that Oprah Winfrey and Paul Krugman do not think of themselves, even unconsciously, in their political decision making.  Such a claim is far fetched.  Pigs do not fly, but they do act in their own interest.
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Eurogroup's Jeroen Dijsselbloem: When Eurozone Banks Need Money, We Steal

Dutch Labor Party politician Jeroen Dijsselbloem   is head of Eurogroup  and president of the Board of Governors of the European Stability Mechanism (ESM), according to Wikipedia.  The ESM provides financial assistance to members in financial trouble.  "ESM member states can apply for an ESM bailout if they are in financial difficulty or their financial sector is a stability threat in need of recapitalization."

Reuters reports that Labor Party Politician Dijsselbloem has expressed open-mindedness to ongoing government stealing of bank depositors' money.  Reuters writes:

European officials have worked hard this week to stress that the island's bailout was a unique case - after a suggestion by a Eurogroup chairman that the rescue would serve as a model for future crises rattled European financial markets.

Murdoch-linked Newsmax's Tom Blumer accuses Reuters and Associated Press in earlier articles of mischaracterizing Dijsselbloem's remarks.  The media, including the Murdoch conglomerate, has consistently mischaracterized the US bailout, so it is not surprising that AP and Reuters now distort information about Europe.  

Dijsselbloem illustrates the special role of labor as handmaiden-in-theft to the global banking system. In American history labor was initially in favor of hard money and price stability, according to Arthur Schlesinger in The Age of Jackson.  The inflationist wing of the labor movement triumphed as the money center banks saw increasing advantage in centralization. Progressivism involved the integration of labor into the inflationist nexus, in part because some labor unions contributed to Populist calls for inflation during the late nineteenth century.  Labor began to see its role as aiding its members at the expense of most workers through the same inflationary process that aids Wall Street, real estate developers, and big business executives.   

That was after JP Morgan and other late nineteenth century businessmen's failure to consolidate industry through mergers and large trusts (now called corporations), and labor's concomitant failure to take wages out of competition by creating "one big union."  The collapse of  Teamster Jimmy Hoffa's National Master Freight Agreement in the 1970s coincided with a decline in labor's power as American financial interests realized that they could jettison labor's interests in exchange for currency subsidization from China and other exporters.  This followed the abolition of the gold standard and the freeing of the Fed to counterfeit with unabashed greed at Americans' expense.

Dijsselbloem's amoral willingness to steal from bank depositors is reflective of the labor movement's continuance of its willingness to engage in an alliance with the global banking system despite its raw treatment from the financial elite.  Like a whipped dog, the labor movement continues to back financial interests that have sucked its own members, along with the majority of American workers, dry.

Personally, I keep some money in banks, but small amounts scattered across several banks.  I favor small banks over large ones.  Commodity holdings, including gold, silver, and platinum, are more volatile in the short run, but avoid some of the risks of government stealing. (The US government stole the public's gold in 1933, though, so this strategy is not risk free.) Although smaller banks are less sophisticated when you need help with issues like trusts and estates, they are friendlier and more emotionally supportive.  

 With thieves like Dijsselbloem in influential positions around the world (his equivalents have been in power in the US for decades), a holding of commodities and cash as well as bank deposits is the way to go.

Sharad Karkhanis, RIP

Sharad Karkhanis, a political scientist, a librarian and a professor emeritus of Kingsborough Community College, has died.  According to Jeffrey Wiesenfeld, Sharad will be cremated in accordance with Hindu law.  At CUNY Sharad was the spearhead of resistance to union incompetence and corruption. He published a newsletter, The Patriot Returns, that he had snail mailed (paying significant mailing costs out of his own pocket); with the advent of the Internet, he emailed it to, he estimated, 13,000 CUNY faculty.  His newsletter featured biting humor that more often than not induced out-loud laughter.   Sharad pulled no punches in lambasting the Professional Staff Congress, CUNY's inept, corrupt, and extremist faculty union.  At one point Susan O'Malley, a PSC officer,  whom he crowned the Queen of Released Time because she spent little time teaching, sued him for libel (also here and here).

Sharad assembled a network of activists, both within and outside of CUNY, and he often served as a lynchpin for resistance to the PSC's bizarre initiatives.  He was a supporter of Israel.  As well, he attended the Ron Paul event in Manhattan with me and another friend in April 2011.

Sharad was a fighter who cared about what was right.  He visited me at my home in Town of Olive several times, making a long drive from Brooklyn. He was thoughtful and generous.

Sharad, you will be missed. RIP.

The Superbubble and the Wisdom in Owning Gold

Gold Prices Since '08--An 18-Month Stagnation Mirrors the 1983-2001 Era

Money Supply M1:  Obama Meant Change

Monetary Base--Can Be Expanded Tenfold  from Here

I have been subscribing to Przemyslaw Radomski's Sunshine Profits newsletter for four or five months. One of his Kitco articles is here.  He is a capable technical analyst who is predicting a gold-price turnaround. His short-term predictions may be correct, although there’s reason  not to be surprised if there are a few years of a hiatus in gold’s movement upward (the current hiatus has lasted 1.5 years, as the top chart indicates). Even if Radomski is right and gold rallies this year, there could be a several year stale period before another epic-scale rally occurs. That's not to say to sell gold because the Federal Reserve Bank and the federal government have led America to an unstable, casino economy.  Because the US monetary system is unstable, gold is a hedge.

If fundamental political and monetary patterns don’t change, then gold can see a much larger long-term upswing than the six-fold-or-so increase that has occurred over the past 10 years.   From 1981 to 2001 there were fundamental bullish reasons to buy gold, but the Reagan, Bush I, and early Clinton years' monetary expansion caused lower commodity prices. Gold’s price fell to a low of about $250. This occurred because Federal Reserve money printing increased competition among miners as well as manufacturers.  Mining competition increased supply just as the supply of consumer goods increased, resulting in intermediate-term price depression. Also, the Chinese absorbed American inflation by demanding dollars to buy treasury bonds.   

The Chinese policy continues, and now we see a new monetary expansion under Obama that dwarfs the Reagan-Clinton-Bush expansion (see the second and third charts above).  If the Chinese policy changes, or the initial depressing effect on commodity prices from the Obama monetary expansion ends quickly, a larger bull market can occur in gold in the intermediate term than occurred from 2001 to 2011.  

The 1980s and 1990s economy was something like the 1920s, with monetary expansion funneled into stock-and-real-estate bubbles rather than price inflation.  Because the prior, 30-year monetary expansion mutes the effects of the three QEs, and the Fed added the QEs to the 30-year expansion with no reallocation or liquidation of the (distorted) real economy, in the coming years we can expect larger bubbles or larger inflation than we’ve seen in the past.  Either may augur well for gold once a shakeout in the mining sector occurs.

Let’s say natural gas fracking and shale oil cause energy price declines. The result can be a more expansive economy.  Let’s say the Fed is reluctant to withdraw the bank credit and monetary base that it has created. (The money supply –M1—has gone from $800 billion in ’08 to over 2.4 trillion now, while the monetary base has gone from a little over $800 billion in ’08 to over $2.8 trillion now, as per the two above charts.)  In that case, the monetary base can be expanded so that the money supply is up to 10 times the monetary base. That will occur in an inflationary period. In other words, the $2.8 trillion in monetary base can become $28 trillion in money supply, leading to a more than tenfold increase in the supply of money.  

That’s not all because, first, the US federal debt is currently $16 trillion, $5 trillion of which is held by foreign holders. Let's say the US economy continues to stagnate. At some point there may be a panic in US debt.  If so, there will be sales of dollars in exchange for other currencies and assets, resulting in a large inflow of dollars into the US.  Also, according to this Fedral Reserve Bank report:  “Estimates by the Federal Reserve suggest that as much as 60 percent of the $760 billion in U.S. currency outstanding at the end of 2005, or roughly $450 billion, was held outside the United States.” In the event of a run on the dollar, large dollar holdings can be repatriated through demand for exchange at banks and purchases of US assets. The result will be a dollar collapse. 

Hence, holding gold along with  other non-dollar assets such as stock has a diversification rationale.  The Fed's hyper-expansion is having the same effect on the stock market that the 1983-2000 expansion had, but the economy is much worse off in terms of misallocation of resources.  In the past, monetary bubbles and their concomitant asset bubbles and inflation were followed by contractions, but that has not occurred;  Obama and Bernanke have invented the superbubble.

Investors are no better off than they were in 2003 and 2007, and the stock market is at similar levels.  Interest rates are near zero.  Although the Fed has caused valuations of future earnings to increase to nearly infinite levels, causing the stock market to escalate, stock market prices are constrained by the availability of money to invest.  Will banks continue to pump up the stock market in a kind of Ponzi scheme whereby the Fed prints money, uses it to buy treasury bonds, and the banks then use the printed money to pump up the stock  market?  Alternatively, can foreign investors carry the US stock market to ever higher levels?   It is not at all clear that the current stock market valuation is more than one more peak in a secular bear market that began in 2000.

Another problem with the stock market is that during periods of uncertainty, there can be sharp falls in valuations.  If, for example, there is a currency collapse, the stock market might fall because of the risk.  Hence, we see the wisdom in owning gold.