Tuesday, February 23, 2010

The Incredible, Vanishing Greenback

Dump it now, before your retirement, savings, and dollar-based assets vanish too.

    Vin Suprynowicz
    LewRockwell.com -

    The cyclical nature of life is reassuring. We are less afraid of the privations of winter because we're assured the spring will come again.

    Similarly, those who claim expertise in such matters – those currently encouraging us to buy stocks and government bonds, for example – insist that the market always comes back. Given a little time, everything will be the same as it was.

    Because this is reassuring, we cross our fingers and hope they're right. But they're wrong. Not the assertion that some specific companies and stock issues will again prosper and that some people will again grow rich. Of course there will always be winners – especially when government bestows on itself the power to choose who shall (their rich friends) and who shall not (you) be bailed out. No, I refer to the part about "things being the same."

    A cartel of private bankers was given control over our money in 1913, in defiance of the wisdom of Andy Jackson and Martin Van Buren. Frank "Pal of Stalin" Roosevelt ended the convertibility – heck, the private ownership – of gold in 1933. But everything was fine again in the 1950s and '60s, right? Then, after the ongoing devaluation of the dollar by the Federal Reserve forced Lyndon Johnson to also end the convertibility of paper dollars into silver in 1964, we had some tough times in the 1970s, but everything came roaring back in the '80s and '90s, right?

    Actually, we were lucky that the development of new technologies like the cell phone and the personal computer generated new industries and new jobs, helping to replace (and disguise the eclipse of) the old industrial giants: coal, steel, railroads and automobiles. (Note that the failed industries were systematically crippled by the innovation-suppression teams known as "unions"; the fast-rising replacements were not.)

    Still, everything was not the same. The vastly greater looting of our paychecks through taxation and regulation after 1964 meant that, where prior to 1960 a single blue-collar wage could support an American middle-class family in a freestanding house, after 1970 it took two incomes – husband and wife – to do that. The hidden but vast social cost of this new arrangement was that the schooling and nurturing of children was now turned over almost entirely to unionized government propaganda officers. The arrogance, the illiteracy and innumeracy, the knee-jerk collectivism and presumption that government can and must step in to solve every problem exhibited by the resulting generation-and-a-half has set the stage for the final decline not just of America, but of virtually all the remaining mighty nation states of the 19th and 20th centuries.

    The ruling elite in Washington is going to try to inflate its way out of its debt conundrum, attempting to pay off the government's foreign creditors with greenbacks that lose value right before your eyes, like an ice cream cone melting on a hot summer day. The process is already well under way. If you could once buy a silver dollar for one greenback, but it now costs 15 greenbacks, then the dollar is now worth seven 1960 cents. If gold once cost $35 an ounce and it now costs $1,100 an ounce, than the greenback is now worth about three 1940 pennies.

    What are the new technologies that will spark the next American economic renaissance? Not those subsidized by government – they're losers by definition. Rather, look precisely to those that can escape the stultifying mailed fist of government.

    It's already happening. In Las Vegas, it's rarely necessary to call someone to haul away old furniture, old computers, anything else you want to be rid of. You simply set it out on the sidewalk. Long before the monopoly, government-franchised garbage men come around, the stuff is gone. Groups of men – often illegal Mexican immigrants – prowl the city in pickups, snatching this stuff up. They have to know where to haul it to make a quick sale. Do you think anyone involved in this trade applies for city and state business licenses, does business with traceable checks, collects and remits state sales taxes, gets a paycheck with "withholding" taken out?

    The unemployed and the underemployed sell stuff online or at yard sales. The prices realized and the ratio of profit to labor may not be huge, but what do all these endeavors have in common? They avoid the "brick-and-mortar" store, which draws job-killing government tax men and code enforcement officers like a dead horse draws flies and maggots.

    Historians can now look back and pick a specific week in the fifth century when the Roman empire can be said to have fallen, but it must not have seemed nearly so clear-cut to those watching the Caesars debase the currency and raise the tax rates till farmers were better off just picking up and abandoning their fertile lands than trying to grow enough to pay taxes that were essentially more than 100 percent.

    We're now living in a system hardly to be distinguished from the greed, corruption and arrogance of ancient Rome. A government of "limited powers, specifically designated"? Ha!

    The great benefit of the election of Barack Obama as president is that he is such a pathetic, unqualified, teleprompter-bound clown. Not only has he left our foundering economy in the hands of greedy, crooked bankers, he's left it in the hands of the same gang of greedy, crooked bankers, from Goldman Sachs and the New York Federal Reserve Bank. He speaks of the need for austerity and submits plans for the biggest spend-fest and deficit in history, for all the world like a little kid preaching the benefits of bean sprouts while barfing in the corner after eating his entire bag of Halloween candy.

    Develop a second business or avocation – under the radar – even if you start small and part-time. Get used to buying and selling in non-regulated environments.

    Hold greenbacks or securities denominated in greenbacks only for short-term commerce. Buy guns, gold and particularly 90 percent "junk" silver coins.

    As for which other assets may hold their value over time: ammunition, primers, incandescent light bulbs, and Freon antifreeze remain viable. What's most important is to deal in something you know and love – I wouldn't attempt stockpiling and subsequent commerce in any collectible heavily dependent for its value on "grade" or "condition" unless you care enough about rare coins or collectible comic books to become an expert grader. Besides, collectibles are subject to bubbles: Take a warning from the current depressions in stamp collections and sports memorabilia.