2013 to Be Bad, "God Knows What Will Happen in 2014"
Many people are concerned with the recent extreme divergences between their experience and what the media is reporting—a fifth, supposed, “summer of recovery,” versus the reality of real income declining 8.1% annualized in Q1 of this year, alongside the looming specter of rising consumer prices.
We think the best way to get a grip on reality is to take a step back, and turn to those who clearly and consistently explain the fundamental drivers of economic cycles—people with a track record of understanding and warning those who will listen BEFORE catastrophe strikes.
Seth Klarman, founder of the Baupost Group and author of Margin of Safety, Risk Averse Investing Strategies for the Thoughtful Investor (which since has become a value-investing classic), mirrors the sentiment of Americans and Europeans today:
What is Happening, and Why
The “and why” part of this is often harder to understand than simply looking into the data to truly see what is happening.
What is happening is real economic contraction, disguised by vanity metrics.
But the reason why this economic crisis is happening has much more to do with your children losing their freedom and personal liberty (the only type of liberty).
Jim Rogers is another who has had the ability to foresee and simplify what the consequences of our modern power structure mean for freedom on Main Street.
In 2010 he began to promote an eCongress, in which our elected representatives would no longer “go to D.C.,” but would stay in local communities, video conferencing for committee meetings and hearings—thus maintaining accountability to constituents and limiting K-Street lobbying influences.
Rogers also knows the world and its history, and recognizes the same old tricks being retried today. An astute investor, he led the Quantum hedge fund to a 4200% gain in earnings over the course of the 10 years he co-managed it.
Then in 2010, the Mises Institute announced the Gary G. Schlarbaum Prize for a lifetime in defense of liberty would go to James Beeland Rogers:
It is no coincidence that it is those individuals with a solid background in free market economics who have accurately predicted and publicly described what was taking place in the global economy, and why.
WealthCycles.com founder Mike Maloney is another of those visionaries, rhetorically asking in September of 2005, “Do we have a housing bubble?
The 13-minute embedded video below captures remarks made by Jim Rogers in 2012. Looking into the future, he explains why 2013 will be bad, and why only “God Knows What Will Happen in 2014.”
But not until then will things "start to fall apart, [as] Ms. Merkel wants to be re-elected,” explains Rogers
He also says, the "euro as we know it won’t survive," but is careful to say “as we know it,” meaning the euro may survive in the end; this is unknown, as it is a political decision. But the euro’s survival is possible only after the world’s monetary system is restructured. For the euro, a restructuring could mean an infusion of safe assets, such as the gold the nations already own.
Rogers also makes the very poignant observation that there are an average four to six years from slowdown to slowdown, citing 2002, 2007/08, and now 2013/14. Here is what that pattern looks like, plotted against the Chicago Federal Reserve’s National economic Activity Index (CFNAI).
As we get closer to discovering where we are, and why, we turn to the 2008 Schlarbaum Prize honoree, Pascal Salin, who named his lecture for the occasion of the award “Austrian Economics – The Ultimate Achievement of an Intellectual Journey.”
For the recipients of a prize dedicated to the lifetime defense of liberty, this is a very notable lecture title.
Tying in Professor Salin to Jim Rogers, we turn to Austrian economist Jorg Guido Hulsmann.
Hulsmann explains Professor Salin’s career, saying, “He has earned great distinctions and gained enthusiastic followers, not least of all because his patent intellectual prowess combines with the elegant civility of a gentleman of the old French school.
“Yet all in all, his output in English is negligible in comparison to the mass and quality of his writings in his native language. Here he displays all the virtues of an author who truly masters his language and excels in nuanced and elegant presentation. Pascal Salin hits the right points and the right tone. In France, this has won him a large readership and the respect of his opponents.”
Rogers is like Salin in that he too excoriates the immorality and economically moronic practice of “taking from the competent, and handing it to the incompetent” (Economic Fascism).
In Deflation and Liberty, Hulsmann makes it clear how and why falling prices improve the standard of living for all, with the poorest standing to gain the most (relative to income).
Hulsmann ties in much of what the old guard believes, in France, and in much of the intellectual financial community: concepts from John Locke, Arouet (Voltaire), Rene Descartes, Frederic Bastiat, John Stuart Mill, Thomas Paine, up to Degaulle’s Jacques Rueff, a student of Ludwig Von Mises.
The supply of money whether inflating or deflating, all directly ties back into one very important point common to our heroes: Liberty.
This means we as humans are free, are born free, and as such are not slaves born into a monetary system controlled by the few, for the few.
But without free choice in what to use as money, we are enslaved to those who own the money supply—whenever a portion of our labor is desired, the owners can take it.
There is no representation; it is a secret taxation, not by government directly, but by the private institutions to which they have handed monopoly over the money supply. The solution—simply the freedom to choose to use whatever money or monies one pleases—is prevented by legal tender laws—governments’ interest in preserving monopoly ensures a secondary, albeit illicit, source of “revenue.”
Thomas Paine explained it again (for a second time), like this, to the French when he headed overseas to help out the freedom movement beginning in 1800:
“As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power. There can be no such power in a republican government: the people have no freedom — and property no security — where this practice can be acted...
Investment guru Warren Buffet’s father said it more specifically in the title of his appeal to the world:
Warren Buffett does not want to upset the apple cart, acting as if he had no care for his father's dire lesson, but we maintain Warren could come clean as his age takes its final tolls.
If it is still not understood why Warren would shirk his father's lessons in public, at the detriment of humanity, please read the short piece Alan Greenspan wrote in 1966, quoted in part: “If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard…”
So, again, to understand whatis happening and why, Mike Maloney reminds us in The Hidden Secrets of Money – The Difference Between Currency and Money, what Winston Churchill once said, “the farther you look into the past, the further you can look into the future.”
The Hidden Secrets series gives you the tools to make your own crystal ball, as all who have studied real economics seem to possess, allowing you “to make this crisis, the greatest crisis in the history of mankind, into your great opportunity.”
Without free choice in what to use as money, we are enslaved to those who own the money supply—whenever a portion of our labor is desired, the owners can take it.