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February 12, 2008

The Plague of the Witch Doctors
by Nelson Hultberg

"Here we are yet again in the midst of another 'global economic crisis'," says financial analyst, Nicholas Vardy, editor of The Global Guru. Vardy is not reporting, but mocking. For he is one of the establishment cheerleaders respected by Wall Street, and he does not look kindly upon those considered to be bears in today's world. There was a lot of castigation in his latest missive to us in the hinterland (2/5/08). So what I wish to do in this essay is investigate some of Vardy's derisive barbs and see how substantive they really are. His comments are in italics; my answers follow in regular font.

Before you liquidate your financial assets, buy gold bullion, and move to a cave in Montana, you may wish to consider that current predictions of global economic collapse may be simply hyperbole. It has happened before.

Yes, hyperbole accompanies all economic crises in history, most of which do not result in collapse. But the presence of hyperbole does not negate the disastrous policies that create the potential for a collapse. It is the policy sources of the potential collapse that we must investigate here, not the tenor of the voices exclaiming its coming.

Comparing economic statistics is inevitably a "glass is half empty" versus "glass is half full" kind of game. Both Pollyannas and Cassandras can marshal endless statistics to support their version of events.

True both of us can marshal support statistics. But we both cannot marshal credible historical, philosophical, economic and moral arguments to support our case. When we incorporate history, philosophy, economics and morality together, the Cassandras have the far better case. In the following, I will present these kinds of arguments.

Good news came from the consumer sector (spending increased by 2%), business investment (jumping 7.5%), and exports (up 3.9%). It was declines in residential investment (down 23.9%) and in inventory investment that almost wiped out those gains. All of this indicates that the economy stands less at the precipice of the next Great Depression than at a cyclical purging of excesses.

Many of us in Bear Country don't insist that a Great Depression is coming. In fact we insist that what is coming is NOT going to be a depression as we have known such a phenomenon in the past. This time, it will be different because our political and monetary authorities have learned some things from their last escapade in economic humbuggery during the 1930s. In fact Bernanke is a devout student of that period and his Fed has acquired several new ways to shore up the Keynesian system. So things will be extended this time. Not healed, or solved, just extended. And in the process, exacerbated. We bears see Bernanke and the Fed as nothing but gussied up monetary witch doctors with an array of fiscal gimmickry (such as derivatives) and crypto agencies (such as the WGFM), which they can draw upon to defend their paper paradigm. But it is not a defense that can last. It is a defense that, every time it is trotted out, loses a little of its impact. Thus a day of reckoning is coming.

Actually we are experiencing the "day of reckoning" right now; have been for the past seven years. The Great Depression this time is going to be a long period of stagflation comprised of numerous severe Dow plunges followed by WGFM-engineered dead cat bounces. The plunges, however, will be deeper than the bounces can recoup, and thus the Dow and the Dollar will greatly deteriorate over the next 10-15 years. Our standard of living will erode as the authorities try to cover it all up via Washington's rendition of Enron, the BLS.

Thus instead of a dramatic mega-crash like in 1929, economic conditions will just relentlessly worsen for all Americans as Wall Street and Washington convince a credulous citizenry that during the "dead cat bounce" periods nominal growth is real growth, and that during the "severe plunge" periods our misery is the necessary price we must pay to bring about the ideal of One World Government. This will take place because our political and monetary authorities do not possess the courage to face the real problem that afflicts us -- massive debt -- and then provide the appropriate remedy, liquidation. What's more, due to many decades of collectivist brainwashing in the West, they do not possess the desire either. They seek to further centralize government control over our lives. And if systemic debt is overwhelming us, then such turmoil can be exploited to panic the people into relinquishing more and more of their freedom every year. Turmoil, misery, and debt thus become tools for our government's Mad Hatters to smuggle us into their Brave New World.

The current din of criticism against Bernanke is a lot like baseball fans, screaming "throw the bum out" at the game or venting their frustrations on post-game AM radio talk shows. But it's a lot easier to criticize than to step up to home plate and swing the bat.

This is what investors will NOT be doing for a while -- stepping up to the plate and taking lusty swings. In a recession, everyone pulls in their horns and goes to the sidelines. This is the natural, prudent, intelligent thing to do. Yet Vardy is trying to turn virtue into vice and make it look like all "bears" are a bunch of armchair quarterbacks with no stomach for playing on the field in the snow and cold. Don't buy it. The place to be in a raging blizzard is safely hunkered down inside a warm and well-stocked cave. Do we have a blizzard coming? Can't say for sure, of course. But when the temperatures are dropping to zero, and the winds are howling like the ghosts that haunted Ebenezer Scrooge, it is best to head for the cave rather than charge out to frolic in the night.

To assume that Fed policy is based on responses to such criticism would be as absurd as for baseball star Alex Rodriguez to walk over and hand his bat to an obnoxious, beer-swilling critic in the bleachers of Yankee Stadium to take his place at home plate.

On the contrary, we don't think noisy responses from bear critics are what drive the Fed at all. What drives the Fed is false Keynesian economics, authoritarianism, hubris, and the desire to drive around in black limousines. It's pretty much the same thing that has driven all humans that have climbed the political and banking ladders for the past 3,000 years. Anyone who has read a modicum of history knows that the political elites and monetary elites have been conspiring with each other for centuries. It goes back to the ancient money changers playing up to the Kings of Judea, to the smelters of gold and the Caesars of Rome meeting behind closed doors. Conniving power lusters are common to the human race, and that is what we have in abundance in Washington these days -- contemptible power lusters who have thrown out all sanity and common sense to govern our Economy as if it is the board game of Monopoly. Only in this case, the role of the bank has been rigged to favor its Wall Street cronies with lavish injections of "liquidity" every time they throw a bad number on the dice.

The reality is that few of Bernanke's most vitriolic critics were even smart enough to make it into an introductory economics class taught by Bernanke at Princeton -- let alone to run the world's most influential Central Bank.

How naïve! This is not a matter of "smartness." Bernanke's intellect will not be able to protect against the coming downturn if it is a full blown recession / stagflation period. This is a matter of Natural Law manifesting. It is like a Great Northern blizzard, and all the IQ in the world will be no better shield than a fish net against the freezing snow. Smartness won't get Bernanke very far at all. Nature does not take kindly to humans driven by hubris instead of humility; and it is hubris that has driven Keynesians for the past 70 years in America. This is retribution time for Nature, while it is mea culpa time for Keynesians and their fellow travelers among the neo-con establishment (Kudlow, Cramer, et al come to mind regarding the latter).

Thankfully, airline pilots guiding a plane through rough turbulence play to a less vociferous crowd.

This conveys the notion that Bernanke is a wise and benevolent operator that has been honorably given the job of directing his fellow citizens through economic blizzards and avalanches that are just "out there" and not of his and his ideological comrades' doing. These heroic chaps at the Fed are thus riding to the rescue of us know-nothings in the hinterland, and flying us off to the safe havens of Big Brother's wonderfully planned Great Society.

Not so. The economic hazards that Bernanke is now facing are not just "out there." They are of his and his ideological mentors' own doing. It is the Bernanke-Greenspan-Burns-Keynes mindset that has created the Great Northern blizzard that Washington and its apologists are now saying they are going to fly us through in their ideological biplane. I say, "No thank you." I prefer Montana where they have steel structured storm cellars dug deep into the ground so as to ride out Great Northerns. They have loads of provisions and gold. Guns too. They're no nonsense people out there. They have watched the greed and stupidity of Washington / Wall Street types like Kudlow and Cramer for over 35 years now. They see their hubris, their blindness to the big picture, their lust for celebrity, their disingenuous twisting of critics' complaints, their shallow understanding of ideology's power, their ignorance of Natural Law, their imprudence regarding the next generation, their gullibility regarding "liquidity" (e.g., if we call the counterfeiting of money by a fancy term, it will somehow not be criminality), etc., etc.

Here's the reality....The Fed can't stop a downturn, but it can help it be short and shallow. This is a complex, fast-changing situation. Let's give the Fed and the U.S. government some credit for acting swiftly and decisively.

The Fed is not a "swift and decisive captain at the helm of the good ship Gibraltar." It is a mafia gang of ideological thugs who have been handed a printing press that pours out green pieces of paper because 70 years of sham economics in the school system have bamboozled Americans into believing paper money is wealth if we call it wealth. But as any economist knows, money itself is not wealth. If money was actually wealth, then the government could just print up a million dollars for everyone and wipe poverty off the face of the earth. Money is just a substitute for wealth, a store of value for it. True wealth is the goods and services that we have produced. It can never be created with a printing press.

So are things really that bad?...The Fed has shown that it is willing to act quickly to reverse course and hike interest rates once it is clear that the economy is through this bout of weakness.

Yes, the Fed may be able to whipsaw us again into another bout of "boom times," and then whipsaw us back to higher rates. That's the plan, I'm sure. But I doubt it will work this time around. The mortgage mess, the derivatives overload, the insidious termites of debt, the plague of protracted foreign wars, the cerebral decadence and fraud of our intellectual class all add up to the Lilliputians not just tying Gulliver down, but poisoning him in the process to keep him down for a long time. I would say the Fed is going to be whipsawing us into a long bout of "stagflation" rather than "boom times." And since the Fed will not want to assume responsibility for bringing on such fiscal insanity, it will cover its connection to the bad times with a lot of doubletalk and sophistry. The boys at the Fed are good at sophistry to cover up the ideological criminality that launched their cartel back in 1913 and which is the cause of this long train of monetary debasement promoted as "new economics." Unfortunately our establishment media are very bad at deciphering sophistry.

Here lies the real nature of the Keynesian economic paradigm. It is a grandiose endeavor in SOPHISTRY and IDEOLOGICAL CRIMINALITY. This, in a nutshell, is the economic history of the 20th century. A band of collectivist ideologues (with the philosophical prescience of John Law and the moral compass of a pack of wolves) hijacked Western civilization. They have not guided our airplane bravely through the treacherous storms of reality. They have created the treacherous storms themselves. This is what human beings get when they attempt to extract more from life than they are willing to put in.

The philosopher, Richard Weaver, wrote in 1948 in his great classic, Ideas Have Consequences: "Are you ready, we must ask them, to grant that the law of reward is inflexible and that one cannot, by cunning or through complaints, obtain more than he puts in? Are you prepared to see that comfort may be a seduction and that the fetish of material prosperity will have to be pushed aside in favor of some sterner ideal? ....These things will be very hard; they will call for deep reformation."

That life is largely inscrutable is the conclusion wise readers of history come to once they get past fifty and have rid themselves of the callow ignorance of their youth. But thankfully despite this mysterious aspect to life, there still are numerous and profound realms of truth that are perceivable. One of these truths, which so many of us have such difficulty remembering, is that all men and women come into this world with a tendency to wickedness. It's what the ancients in biblical days referred to as "original sin." Modern intellectuals don't buy into biblical wisdom anymore, and as a consequence are having a tough time explaining why their social institutions are such grotesque and fraudulent affairs. Perhaps if they were presented with the above biblical wisdom in the words of a modern philosopher, it would sit better with them.

Richard Weaver referred to original sin in this way: "There is no concept that I regard as expressing a deeper insight into the enigma that is man. Original sin is a parabolical expression of the immemorial tendency of man to do the wrong thing when he knows the right thing. The fact of this tendency everyone should be able to testify to, not only from his observation but also from his personal history."

This is what our politicians and media of the present day need so desperately to rediscover about the human condition. Men and women are born with a tendency to do wrong even though they know the right. No one escapes this tendency. This is why Jefferson and Madison tried to tie down our government with the chains of the Constitution. They knew that men and women could never be angels. They would always be naturally and relentlessly "self-serving," and if they were not given a moral compass in their youth along with a Constitution in their adult years, they would regress to their barbaric beginnings. Is this not what we have wrought today? Is this not what our bevy of Keynesians and fellow travelers are all about? Are they not merely serving themselves with a lot of sophistry, a lot of "doing wrong when they know what is right?"

After all, Kudlow, Cramer and friends certainly know that paper money is not wealth. They know that cranking up the printing press and "injecting liquidity" is not a genuine cure for what ails the nation. But perhaps they have been able to con themselves into believing that somehow Bernanke's dross can be gold if we call it gold. If that's the case, then they and their comrades are indeed guilty of "doing wrong when they know the right," for self-con is the first and greatest sin. So it's either that Kudlow, Cramer and the establishment media are embarrassingly stupid, or they are crudely sinful. My guess is that it's the latter.

Not that this writer is any great shakes in the virtue department. He is, like all humans, afflicted with many failings. But one of his failings is not blindness when it comes to observing our financial media prancing around Wall Street these days and our Washington mountebanks wallowing in capitol graft.

The grafters and sophists have won over the modern world; that is for sure. In the universities, in the corporations, in the legislative halls, and in the courts, these despicable humans prevail. The clear thinkers and freedom advocates are definitely outnumbered. We don't have bevies of pulchritudinous babes to act as shills for us on the big television networks. We don't have billion dollar advertising budgets. We don't have connectivity to the Washington corridor. We have only one thing going for us. We have the truth on our side. But that, in the end, will be the determinant, for truth is the real power infused so mysteriously and majestically into the universe.

Tyrants have never understood this throughout history, which is why their lives are such ugly and ruinous affairs. The real glory of life is to find the truth, muster the integrity to accept it, and then summon the courage to fight for it. This is something about which our establishment media haven't a clue. They are, no doubt, sitting in their watering holes tonight fashionably sipping their cocktails and wondering if the bears could possibly be right. But they will quickly dismiss such apprehensions as childish boogeyman-under-the-bed fears. They're not interested in truth as the glory and the meaning of life. They're interested in celebrity as a means to strut in front of the chattering classes.

Nelson Hultberg
Americans for a Free Republic

Nelson Hultberg is a freelance writer in Dallas, Texas and the Executive Director of Americans for a Free Republic www .afr.org. His articles have appeared in such publications as The Dallas Morning News, Insight, The Freeman, Liberty, and The Social Critic, as well as numerous Internet sites. He is the author of Why We Must Abolish The Income Tax And The IRS (1997) and Breaking the Demopublican Monopoly(2004). He is presently finishing a book on political-economic philosophy entitled The Golden Mean: The Case for Libertarian Politics and Conservative Values.

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