Barack Obama A Long Time Ago, In a Universe Far, Far Away

Jawa Report (h/t Larwyn) posts this Star Wars clip:

Dan Friedman's Morning Laugh

Dan Friedman writes:

>"Barack Obama won the election because he saw what is wrong with this country: the utter failure of government to protect its citizens."

--New York Times, The Next President

It's good to start the morning off with a laugh. This has nothing to do with why he won this election, but it will be the reason he loses the next one.

Dan Friedman
NYC

But I'm confused. What's the New York Times?

Getting Rich from an Obama Presidency

The Democrats have inherited an inflationary mess from their sister party, the Republicans. A testimony to the Democrats' incompetence is that their leading economists are talking about the likelihood of "deflation" when the Republicans just doubled the monetary base on top of 2 1/2 decades of Republican monetary depreciation. Rather than make inflation into an issue, the Democrats complain that there isn't enough inflation. The reason is, of course, that their programmatic suggestions, to include Post Office- and New York City-Subway-style government health insurance and "spreading it around", require that our impecunious government spend ever more. As well, George Soros, Goldman Sachs, Morgan Stanley and Warren Buffett must be paid.

Here are a few pointers about inflation:

1. Buy without holding prisoners. It is time to buy the Lexus, Lincoln or Mercedes you have been thinking about. If you've been saving for a Lexus consider borrowing to buy one instead. Use the cash as a down payment on a leveraged investment.

2. If you are planning to retire, have some gold. My friend wants to keep gold under the mattress. He's holed up with a rifle, bars of gold and dry food. If you're not quite so paranoid, take a look at SPDR Gold TR (GLD) or Ishares Comex Gold Trust (IAU).

3. Consider a commmodity investment such as Powershares DBC Commodity Index Tracking Fund (DBC). This exchange traded fund tracks the Deutsche Bank Commodity Index, which is composed of light sweet crude oil, heating oil, aluminimum, gold, corn and wheat. Commodities have taken a beating this year with oil falling by more than 50% and gold falling about 34% (it is currently about 25% below its high).

4. Consider gold stocks. These have underperformed gold this year and so can catch up to the gold price as well as travel up along with the gold price during the Democrats' inflation. Some examples are Agnico (AEM), Eldorado (EG0), Kinross (KGC) and Randgold (GOLD).

5. Take a slice of Jim Rogers's thinking and buy his commodity index ETF, Market Vectors Hard Assets Producers ETF (HAP). Jim Rogers designed the index to take advantage of the global commodities boom. HAP began this past September (2008) and sold as high as 38 or so before falling to its current $23.93.

With an Obama presidency, it's going to be rock 'n roll time for commodities. Let's make some money!

Antiquity and American Decline

Ancient Egypt is best remembered for its massive pyramids, but few people realize that the pyramids were built during the first, most ancient 1,000 years of the 3,000-year long Egyptian civilization. The most famous Pharaoh, Ramses II or Ramses the Great, who lived in the 13th century BC and was likely the Pharaoh of Exodus, was followed by a 500 year political decline. The Nubians of what is now the Sudan conquered Egypt in the eighth century BC, about 500 years after Ramses II's death, and ruled for about 100 years before the Assyrians and then the Greeks led by Alexander the Great conquered Egypt. The decline of Egypt was due to political rather than economic causes. Egypt had become wealthy because of natural resources. The overflowing of the Nile provided rich topsoil and an abundant crop, making construction, a priesthood, royalty and development of mathematics and some sciences possible. Without the good fortune of the fertile soil due to the overflowing of the Nile, the Egyptian civilization could not have been so influential.

The United States has existed for 220 years compared to the 1,800 years that Egypt had existed by the time of Ramses the Great. Egypt's decline took 500 years, that is, 500/1800 = 27% of the time it took Egyptian civilization to reach its culmination in Ramses the Great. Arguably, American civilization is past its prime, so a comparison is difficult to make. However, let us say that the election of Barack Obama reflects the beginning of American decline. Then, if we follow the pattern of Egypt, the decline will take 27% x 232 years = 62 years.

The decline of Egypt, like the decline of Rome, did not occur at once. Arguably, America began to decline with the establishment of the Federal Reserve Bank and the Progressive era. If so, it would seem that America's decline has taken much longer than Egypt's in proportion to its brief time of glory in the nineteenth century. Unlike Egypt, America's success is largely due to its laissez-faire economic system, not to its luck of natural resources.

Perhaps America is closer to the Periclean democracy of Athens. That democracy lasted for less than a century before the Spartans defeated Athens in the Peloponnesian War and much of Athens was wiped out by a plague. The Athenian culture continued for centuries more and continued to make important cultural contributions. But after the fifth century BC Athens was no longer able to influence the world directly. Plato and Aristotle were post-Periclean, and arguably Alexander the Great (of Macedon), Aristotle's student, carried much of Athenian culture to the rest of the word, including Egypt when he was crowned Pharaoh. The Greeks saw themselves as carrying ancient Egyptian culture forward. Perhaps a younger, more vibrant society that has adopted at least some of American values, such as Estonia or Singapore, will become the leading nation of the next age.

Right at the time the Assyrians were conquering Egypt, Rome was founded. The fall of Rome took at least several centuries, and many would argue that Rome did not totally fall until Constantinople fell in the 15th century. In the third century Rome had shifted to more autocratic government (the process had begun in the time of Julius Caesar). In response to inflationary debasement of the Roman currency, Emperor Diocletian imposed wage and price controls. As well, the manorial system that led to serfdom began in late antiquity. To quote Wikipedia:

"Diocletian separated and enlarged the empire's civil and military services and re-organized the empire's provincial divisions, establishing the largest and most bureaucratic government in the history of the empire...Building on third-century trends towards absolutism, Diocletian styled himself an autocrat, elevating himself above the empire's masses with imposing forms of court ceremonial and architecture. Bureaucratic and military growth, constant campaigning, and construction projects increased the state's expenditures, and necessitated a comprehensive tax reform...

"Not all Diocletian's plans were successful; the Edict on Maximum Prices (301), Diocletian's attempt to curb inflation via price controls, was unsuccessful, counterproductive, and quickly ignored...The Diocletian Persecution (303–311), the empire's last, largest, and bloodiest official persecution of Christianity, did not destroy the empire's Christian community; indeed, after 324 Christianity became the empire's preferred religion under its first Christian emperor, Constantine..."

According to Kevin Greene in "The Archeology of the Roman Empire":

"Crawford believes that (inflation) really gathered momentum from the 260s, and that bronze coins continued to suffer rapid inflation in terms of gold, which rose from 48,000 denarii to 99,000 denarii per pound between the late third century and Diocletian's Edict of AD 301. The marked increase which seems to have occurred in the third century coincided with dramatic changes in coinage...

"In a series of complex graphic presentations, Reece has shown that in northern Italy between Augustus (27 BC - AD 14) and AD 275 the ratio of silver denarii to brass sestertii remained roughly in balance...Inflation seems to have gathered momentum during the third century AD, which provides some good examples of financial desperation, probably brought on by political and military difficulties.* The debasement of denarius is particularly dramatic; whereas under Augustus it was made of virtually pure silver, the gradual decline in purity and weight of the second century accelerated in the third, until it became a little more than a bronze coin with a small percentage of silver..."

The author provides a graph that shows that the percentage of silver in Roman coins fell from 3 1/2 in 318-320 to 1 1/2 in 337-340.

The Roman civilization was closer than Egypt to the US in that it was more outward looking and for at least part of its history was a republic. The decline of Rome took between three and eleven centuries. Arguably, today's western Europe is just an extension of Rome. French, Spanish and Italian are modernized Latin and much of European culture derives from Roman influence. However, if you mark the end of the Roman era with the two sackings of Rome in the fifth century, then the decline of Rome took about 200 years relative to its twelve hundred year history. If so, then if America follows the Roman pattern its decline will take 200/1200 x 220 = 37 years. Thus, the decline of the United States may well be finished within the brief course of the rest of my life.

*Bearus Stearnus, Diocletian's imperial bank, required subsidies.