the dollar vigilante blog

When The Insane Run The Asylum

[Editor's Note: The following post is by TDV Editor-in-Chief, Jeff Berwick]

“In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.” 

― Friedrich Nietzsche

Nietzsche was right. If you sat beside Ben Bernanke in his Washington Nationals box seats while he slurped on his ice cream cone and you had a general conversation with him, he probably wouldn’t come across as being insane. “That was a nice home run,” he’d say. You’d nod.

But it is people like Bernanke who believe in collectivist systems and top-down economics who are insane.

He believes that an economy should be overseen and manipulated, Soviet Union-style, by a few white men, preferably with beards, in a secretive boardroom. Here begins the real tragedy of the commons.

Often, those who believe that we need these types of systems are not the best and the brightest. Even if they were, there still is no way to do it any better than without the top-down system. And for decades the kind of people who think they can have gravitated to the rings of power, gathering mostly in high-priced lower education colleges and universities where they are taught by prior collectivists over decades things that are truly totally insane.

They believe that the more a group of people in a geographic region spend (which they call Gross Domestic Product – GDP) the better off everyone will be. This, of course, makes no sense on an individual basis. On an individual basis, the more you produce and save the better off you will be, but they have an insane belief that it is the opposite once there is more than one person involved (the supposed “paradox of thrift”, the habits of savings that benefit the individual become harmful to the economy when practiced en masse).

The fallacy of GDP has been thoroughly and inarguably refuted by many from the school of Austrian economics; a school I just call “real economics”. As Frank Shostack put it:

"We can thus conclude that the GDP framework is an empty abstraction devoid of any link to the real world. Notwithstanding this, the GDP framework is in big demand by governments and central bank officials since it provides justification for their interference with businesses. It also provides an illusory frame of reference to assess the performance of government officials."

People like Bernanke, and probably 99% of people involved in the financial markets also believe that the increase in prices in an economy can be best gauged by things like the US government’s Consumer Price Index (CPI).

This, too, has been easily debunked for decades. You cannot add up the prices of everything in an economy and come to a number that makes any useful sense whatsoever. Try adding up the price of everything in an economy, I dare you. How do you add up the price of a particular haircut, an apple, a new Samsung Galaxy Note II and a buggy whip? You can already see some of the problems. What if hairstyles change (it’s been known to happen)? The Galaxy Note II didn’t even exist a year ago, and while buggy whips used to be something of import, it isn’t really all the rave with the kids nowadays. And, besides that, once you have added up all these numbers, what do you divide it by to come to anything that makes sense? Would you add up the cost of those four things and then divide by four? Assuming for a moment we even knew what the average price of those products were, what would the number be? A hundred and fifteen? Only to insane people does that number mean anything.

Yet according to Ben Bernanke there isn’t any “inflation” (he calls inflation a rise in prices). Tell that to people buying gasoline in the US where the average price per gallon has doubled in the last eight years.

Even Ben Bernanke’s own cognitive dissonance shows in that he has admitted that his own son will graduate with $400,000 in student debt.

Oh, the average college tuition “inflation” rate is up nearly 500% since 1985? They must just be increasing the value of those educations dramatically… because, according to Ben Bernanke and his CPI, there isn’t any inflation!

But then again, the Keynesians have been wrong at almost every turn. Just look at Ben Bernanke on the housing bubble.

Or even Keynes himself versus the father of Austrian economics, Ludwig von Mises on the market crash of 1929.

ONE FLEW OVER THE CUCKOO’S NEST

Yet since the grand majority of people involved in the financial world all went to Keynesian economics-based lower learning “institutions”, those of us who don’t think collectively, who don’t believe that government and central banks are a power of good for the economy, look crazy.

After all, if almost all the big players in today’s fascist financial world don’t agree with us and the lemmings on CNBC don’t agree with us, and they’ve got fancy diplomas showing their deep indoctrination in Keynesian economics, then we must be wrong.

[Editor’s Note: TDV's Senior Analyst had already predicted the latest drought in gold and the gold stocks,  as had Vin Maru of TDV Golden Trader]

The same could have been said about the Soviet Apparatchick in the 1980s. Many a Soviet mother likely upbraided her child for even questioning the status quo. But if that child didn’t listen to his mother and grew up to get most of his assets outside of the Soviet Union and outside of the Soviet Ruble, and even got himself outside of the Soviet Union before the collapse, he would have looked like a genius. But until the collapse he’ll always look crazy to most.

WE’LL STAY OUR COURSE

Despite being deemed the crazy ones we’ll stay our course. Our position in gold and silver has certainly shown, in hard truth, that we have been and are on the right track.

And, with Ben Bernanke and the Fed having increased its total assets on its balance sheet by nearly 300% (from just over $800 billion in 2007 to nearly $3 trillion today) we are very comfortable holding the course in the gold stocks that TDV Senior Analyst, Ed Bugos, covers in TDV Premium.

 

At the recent Global Financial Summit in the Bahamas I was all but called crazy by a few of the speakers on a panel for giving my “best investment pick for 2013” as being gold stocks.

While it is possible it may take until 2014 to see massive returns, I submit that I am not so crazy for believing so. Whether you believe the coming collapse will take the form of the 1930s collapse or the 1970s inflationary collapse, in both cases, gold stocks were the best performing assets during both periods.

In that respect, we’ll soon find out who is insane and who is right. If you'd like to get the analysis and picks that will put you on the right side, just click here

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Anarcho-Capitalist. Libertarian. Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

 

 

 

 

GDP...the paradox of thrift...ah, Keynesianism! Where do you come up with stuff?

Of course this stuff is in service of the state. Keynesian economics isn't an objective view of the world and how humans really operate (that would be the Austrian school of economics)...No, Keynesianism was crafted explicitly to justify the state and its interference with human action. 

Regulation, debt and a central bank with state-granted monopoly on the issuance of money...These things are not the path to economic progress...but they certainly can provide opportunity for those who know where to look. 

In a free market, making money would be entirely about innovation and meeting consumer demand. But this isn't a free market. Not even close! So there is a ton of money to be made by exploiting the distortions caused by governments and enabled by Keynes and his legions of disciples. To let the Austrian view help you take advantage of those distortions, just click here

Regards, 

Gary Gibson
Editor, The Dollar Vigilante



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