Plato was Right on One Thing

I read a very good blog post by Mr. Janusz Korwin-Mikke today, which translates into English something like this:

"Who rules in Poland?
If we listen to Mr. Janusz Palikot [a prominent Polish leftist politician] we would be under the impression that the Roman Catholic Church rules Poland. If we listen to Fr. Tadeusz [a prominent Polish priest and media owner] we would be under the impression that we are ruled by Jews. Or perhaps: Freemasons. The Freemasons, on the other hand, suggest that the European continent is being ruled by "The Great East" - a rival, leftist organization, which seeks to impersonate the Masonry. The Catholic Church states we are still ruled by post-Communists - and the socialists think our rulers are the nasty capitalists.
The capitalists say that the labour unions have all the influence. But the unionists think that liberals have taken over.
Oh - and I forgot - there are also some people called politicians who claim that the real rulers are the bureaucrats[...]"

Mr. Korwin-Mikke is a great man, a true leader of the classical liberal and Monarchist causes in Poland (which is probably why his political party has been unconstitutionally banned from this year's parliamentary elections). What he has correctly observed in the above segment is the Ship-of-State phenomenon first described by Plato is Book VI of his famous Republic. In this case, I would strongly suggest that people like Mr. Korwin-Mikke (or Ron Paul, for that matter) are those star-gazing philosopher kings. The ship ruled by Democracy can never take any course, but a disastrous one. It will be full of quarrels, fights, and agitation. Violence will break out periodically. The history of the democratic state is the history of oppression, taxation, and civil war.

So here is the whole original Plato from Book VI, read and learn:
"Imagine then a fleet or a ship in which there is a captain who is taller and stronger than any of the crew, but he is a little deaf and has a similar infirmity in sight, and his knowledge of navigation is not much better. The sailors are quarrelling with one another about the steering --every one is of opinion that he has a right to steer, though he has never learned the art of navigation and cannot tell who taught him or when he learned, and will further assert that it cannot be taught, and they are ready to cut in pieces any one who says the contrary. They throng about the captain, begging and praying him to commit the helm to them; and if at any time they do not prevail, but others are preferred to them, they kill the others or throw them overboard, and having first chained up the noble captain's senses with drink or some narcotic drug, they mutiny and take possession of the ship and make free with the stores; thus, eating and drinking, they proceed on their voyage in such a manner as might be expected of them. Him who is their partisan and cleverly aids them in their plot for getting the ship out of the captain's hands into their own whether by force or persuasion, they compliment with the name of sailor, pilot, able seaman, and abuse the other sort of man, whom they call a good-for-nothing; but that the true pilot must pay attention to the year and seasons and sky and stars and winds, and whatever else belongs to his art, if he intends to be really qualified for the command of a ship, and that he must and will be the steerer, whether other people like or not-the possibility of this union of authority with the steerer's art has never seriously entered into their thoughts or been made part of their calling. Now in vessels which are in a state of mutiny and by sailors who are mutineers, how will the true pilot be regarded? Will he not be called by them a prater, a star-gazer, a good-for-nothing?"

Are we libertarians not often called star-gazers and dreamers with no realistic world-view whatsoever? We are the philosopher kings.

Faulty Anti-Gold Economics

Recently I nailed a man named Bartosz Turek on this blog for praising Communist Dictator Edward Gierek's housing policy. I think it's time for another "real economist" to bite the dust. A few days ago my sister sent me the following anti-gold article. And here is my rebuttal to each of the author's main points:
1. Valuing gold is impossible - What kind of fool could write something like this? There is some kind of anti-vault argument used here (prejudice against stuff we put in vaults? - that's usually valuable stuff!). If this is true, it is also impossible to value diamonds, jewelry, works of art, etc. Gold's value is measured like the value of any other good on the market. It is a normal commodity. What I would like to ask the author is the following: How do you value money?! That seems like the tough question to me! After all it's just little multicolored pieces of paper!
2.Knowing when to sell is even harder - Agan, this is true for every investment in the history of the world. Stocks and government bonds work the same way. But, as I mentioned a moment ago, gold is safer because it has intrinsic value (unlike pieces of paper, whether bonds, currency, or stocks).
3. Trading costs are high - Again, at the risk of repeating myself too much, how is this not true for every single thing a person buys or sells? For example, if everyone wants to buy milk at the same time (i.e. bull market is milk) transaction costs will be high. This is true of everything including money itself (dollar, euro, frank, etc.)
4. Gold provides no income - I have two objections to this. For one, it may or may not be true. If the world demand for gold suddenly increases then indeed holders of gold to gain money through increase in their asset value. And even if this does not happen - gold is meant to be used as a hedge against loss, not as a money-making extravaganza scheme. Certainly people have a much better chance of gaining wealth (or at least not losing it) when they hold gold, versus the chance they have for the same results when holding money, bonds, or stocks.
5. Buffett doesn't like it - Another two ojections. First, Warren Buffett is a puppet of the government bailout machine. He supports all kinds of crazy things which I wrote about extensively before (here). And second, this is an argument from authority! Just because someone is against something in opinion doesn't make it wrong! Personally I wouldn't be surprised if Mr.Buffett owned quite a lot of gold (in secret of course).
6. Gold loses to inflation - Wait... what? Property values are subject to huge inflationary booms (this is why we are in a crisis!), so they are in no way a better investment than gold. And how does gold inflate? I mean it is mined out of the ground... but this tiny inflation of supply is a miniscule when considering the comparative advantage. Namely, gold is a very solid asset to hold. It is not subject to rapid and crazy price fluctuations that land or some other commodities are.

In other words the author, Mr. Neil Faulkner, is wrong. Maybe his aim is to persuade people to sell gold so that he can buy it up? I don't know. In my own opinion gold is the best hedge any average citizen can grab hold of to protect himself from serious economic troubles which are surely coming.

As the great Ron Paul once said, gold has retained its value and purchasing power for over 6000 years now. So to Mr. Faulkner and any other anti-gold buff out there: Can you came another asset of commodity which has done half as well? With the possible exception of silver, of course!

Sputnik Is Back! - "Investing" in Education and Green Energy

I must say when President Barack Obama was giving his State of the Union Address I saw it for what it really was - a Soviet-style speech made to concur with the party line and a load of propaganda. I especially loved how the President used language in order to hide his real intentions. There were many populist applause phrases (when the entire Congress clapped and cheered for no apparent reason) which mentioned "efficiency", "fairness", and "liberty". But much more important were some of the places where the President mentioned his actual plans for the future. Here are a few observations:
1. Newspeak has arrived! Back in December I wrote that one of the main trends in this new year was going to be more use of Orwellian style Newspeak by the government and people associated with the current power structures. In fact President Obama used one word which I explicitly predicted will be one of the most used euphemisms of 2011 - "investment" (my prediction, here). By investment he meant, of course, them spending our money.
2. It was clear to me that the President's main goal, as always, is to micromanage the US economy. He seemed envious of China (describing their education system as better than the American) and yet he did not seem to understand that what currently gives China the upper hand in the market is the liberalization of the Chinese economy. The extra freedom Chinese citizens have is a big help to them when they have to compete against over-regulated over-taxed American businesses.
3. I am very worried about the President's promises to mess up the energy sector. "Green energy" handouts to government cronies seem imminent, further fueled by the fact that the President seems sure he can put 80% of the US on renewable energy by a year in which he will be out of office for some 20 years! In other words, he is claiming to be a seer (tarot or crystal ball I wonder...).
4. I am also worried about further meddling in the education system. I once wrote about crazy socialists in England who wanted to extend school days and eliminate holidays (basically stealing children from their families - here). I am very afraid some kind of like educational reform might take place in the US - the President was adamant about the fact that it is education systems which are advantageous to China and India (I have never heard such an absurdity).
People really seem to think Sputnik-like initiatives will save America. It is just the opposite.
The greatest US statesman of modern times, the Honorable Ron Paul, once summarized the current US situation in both accurate and eloquent terms by saying the following: "A government out of control, unrestrained by the constitution, the rule of law or morality. Bickering over petty politics as we descend into chaos. The philosophy that destroys us is not even defined. We have broken from reality a psychotic nation. Ignorance with a pretence of knowledge replacing wisdom... We are now in the midst of unlimited spending of the people’s money. Exorbitant taxation, deficits of trillions of dollars spent on a failed welfare-warfare system. An epidemic of cronyism."

The Fed is screwing us again!

Price of gold at over $1400 per ounce! The predictions of all the Austrian economists came true (every single one of them thought the dollar would drop down that low before the end of 2010). When will the masses (yes, I use this socialist word for those who do not deserve to be called individuals) finally start listening to people like Peter Schiff, Gerald Celente, or the Ludwig von Mises Institute? Just to clarify the situation - strong gold means a weak dollar. I wouldn't be surprised if the dollar lost value against the consumer price index as well. And why is this happening right now? Because the US Federal Reserve announced they will buy up another $600 billion worth of government debt. People who hold the dollar are not stupid. They see the supply of their assets rise on the world market thereby reducing the value of their own holdings. So, they get out of the dollar. The safest asset has always been gold, since other currencies can also diminish in value. On that note, I wouldn't be surprised if the dollar lost value against pretty much all currencies like the Euro and Swiss Frank and, to a lesser extend, other currencies pegged to the US Dollar.
Needless to say this is terrible news for the American people. Their currency is falling fast with little hope for recovery. They can buy less and less with their money. Individuals with large cash holdings (savings perhaps) or on set incomes (pension, Social Security, etc.) will see huge loses. And the government will in theory have to pay this debt off too, using tax dollars which will need to be collected (of course these future tax dollars will be worth less than the borrowed dollars, but this doesn't change the fact every American will need to pay them). The Fed is continuing to debase a currency which is now already worth only a small fraction (0.03) of what it was worth when the Federal Reserve was created.
Luckily I personally do not have any US dollar cash holdings to speak of (but some of my family members do!). It worries me that the great and proud American people are being drawn into the same pit as the Zimbabweans under Mugabe...

All who love America and Freedom should take up the cry "End the Fed!" with greats like Representative Ron Paul.