RANTING ANDY – Saturday morning, just back from my weekly head-clearing pickup soccer game. It’s been a crazy week in many ways, and I’m looking forward to a bit of R&R this weekend.
The backlog of “horrible headlines” remained long all week, so it was difficult to focus on some of the deeper topics I’ve wanted to discuss. That backlog is just as long today, an incredible statement considering the Dow has risen 1,400 points in the past three weeks. Of course, per the numerous RANTS written during that period, the rally appears to be 100% generated by the PPT, which is just as talented as smoking at Dow shorts with chart-painting buys as smoking out gold longs with chart-painting (often naked) short sales. I’ve listed some of today’s “horrible headlines” below, and saved others for next week, worthy of more detailed comments.
(Dunn is the CFTC commissioner who voted Wednesday for position limits, but was considering retirement and possibly changing his mind. Boy, that didn’t take long!)
Now that my “horrible headline” introduction is finished, I want to add depth to what I wrote in HUMAN NATURE, PART I. In that RANT, I discussed how mankind is “programmed” to take the easiest road to financial gain, often utilizing illegal, immoral, or unethical paths. This trait has been repeated for time immemorial, and will continue as long as man walks the Earth. On Monday, I referred to traders that have for years profitably traded alongside the Cartel (which gives blatant signals of its intentions), rationalizing their “successful trading” with every reason other than the real one – explicit, or implicit, knowledge of illegal Cartel activity. “Speak no evil, hear no evil” explains why traders do not rat out the Cartel (except Andrew McGuire, of course), why German citizens allowed the Holocaust, and why political and religious fanatics are unable to reason with their “competitors.”
Put another way, I have been watching “Forensic Files” for the past decade, a TV show documenting how forensic evidence has been used to solve murders. One would think it’s reasonably easy to “get away with murder”, but in fact the opposite is true. Approximately 61% of U.S. murder cases are prosecuted, nearly all with a FINANCIAL motive. Family, friends, and colleagues are the most likely to be murdered, nearly always with MONEY, either directly or indirectly, as the central issue, and nearly all of the 39% of unsolved murders are drug-related, i.e. also due to MONEY. Ditto for white collar crimes, such as the ones perpetrated by Washington and on Wall Street, as well as civil cases, such as the ones my wife and I watch constantly on “Judge Judy.” Plain and simple, if financial gain is possible, by hook or crook, the average person will rabidly pursue it, particularly those in the greatest amount of need.
The inspiration for this RANT is the article below, written last week by the brilliant Michael Lewis, author of Liar’s Poker, Moneyball, and The Big Short. Titled “California and Bust”, it is a shocking commentary on the disastrous, ongoing financial collapse of America’s largest state, not to mention the world’s eighth largest economy, with as much public debt ($373 billion) as Greece ($454 billion), but more so when including the debt of its 400 or so incorporated municipalities, several of which are the focus of this article. I urge you to read it, if you want a real-life microcosm of how rapidly mankind destroys itself when given access to so-called “free money.”
The popularity surge of the Republican party in the 2000-2009 decade was due to the quest for MONEY. Despite financial policies no different than Democrats over a period of decades, if not centuries, an effective PR campaign has portrayed Republicans as “rich” and Democrats as “poor. These categorizations have no factual basis, from either an empirical standpoint or the backgrounds of the parties’ respective leaders. However, not only do people want to BE rich, they want to be VIEWED as such, and will even make up constructs to prove that point, no matter how flawed. Not ALL people are focused on materiality, but as a whole mankind puts MONEY atop its list of priorities, and will do nearly anything to get a hold of it.
I bring up the Republican Party of the 2000s due to the many parallels it had with California. California is the largest state in the union, with the best weather, and is home to both movie stars and many of the nation’s most dynamic technology companies. The state appeared invincible ten years ago, and consequently saw a tremendous influx of both population and investment capital, just as the Republicans did in the earlier Bush II years. California’s leaders felt they could do whatever they wanted, including the championing of environmental improvement ventures requiring huge capital investments but yielding limited, if any, tangible benefits. The largesse started from the top, as depicted by the incredible, unwinnable budget battles Arnold Schwarzenegger faced when he took over as governor in 2003, trickling down to the smallest municipalities, such as Vallejo, population 120,000, which filed for bankruptcy in 2008 with debts of roughly $200 million and a nearly equal amount of unfunded pension liabilities.
The most notable aspect of Vallejo’s demise was the staggering greed and, to an extent, blackmail, perpetrated by its civil servants, particularly the police and fire departments. Flush with cash from real estate and sales taxes, charitable contributions, and other inflows typical of a boom economy, the city’s leaders played an expensive game of chicken with its finances, robbing the citizens blind under the typically human assumption that someone else would clean up the mess, per below:
“The real nail in Vallejo’s coffin was the city’s labor costs. Under the 2008 labor agreement, the average police officer walking the beat in Vallejo was paid $122,000 before overtime, according to city documents. An average sergeant made $151,000; a captain, $231,000. The average firefighter, meanwhile, brought in $130,000 before overtime.”
Not too shabby for civil servants, whose skills serve the community but do not provide goods or services capable of generating income!
The state of California and its multitude of municipalities is a glaring example of financial mismanagement, and I ASSURE you the situation will DRAMATICALLY deteriorate in the coming years. Unfortunately, its story is no different than the experience of the majority of U.S. states, municipalities, and citizens, as well as nearly all Western nations and a handful of Eastern ones as well.
Breaking from the gold standard was the cause of ALL such problems, as it gave the printing press keys to Central Banks the world round, particularly the Federal Reserve with its “reserve currency”, the dollar. Once the gold constraint was broken, POLITICIANS were free to lobby for as much free money as possible, trickling down to the public, in Vallejo’s case civil servants such as firefighters and police officers. The system was doomed to collapse of its own weight, but became exponentially worse when BANKERS such as Robert Rubin weaseled their way into the system, funneling such “free money” into legalized racketeering ventures (care of repealing the Glass-Steagall Act) such as derivatives dealing.
The story of human history is long and varied, with numerous twists and turns covering thousands of years. One never knows what will happen next, but the one consistent aspect is HUMAN NATURE never changes. Individuals can express both positive and negative traits, but as a group the mass of humanity is quite predictable. Without CRIMINAL LAW, anarchy quickly emerges, and without a GOLD STANDARD, hyperinflation is certain.
In today’s world, the lack of a gold standard has brought us to the brink of ruin in just 40 years, and frankly the criminal justice system itself is in a dire state, particularly given the growing control of our lives federal government agencies are unconstitutionally taking. Yes, the Dow is up 1,400 points this month due to GOVERNMENT MANIPULATION, but the aforementioned trends continue to careen out of control, and it shouldn’t be long before the next “Lehman Moment” emerges, devastating what is left of citizens’ already meager savings and job prospects.
Only PHYSICAL GOLD and SILVER, FOOD, and OTHER LIFE NECESSITIES will guarantee your survival, albeit in a vastly more difficult world fraught with numerous, at the moment unknown, incremental challenges.
P.S. Apparently, Bill Murphy wiped the floor with Jeff Christian at the Silver Summit manipulation debate in Spokane yesterday. Keep your eyes peeled on Kitco for a link to the replay, which I will post in a RANT as soon as I see it!