Depression in the USA - Deflation verus Inflation

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Relax: There Will Be No Depression

Kenneth J. Gerbino

I want everyone to relax. You are being bombarded with numerous facts and figures that look pretty bad, but the facts are being interpreted with emotion and hype and hysteria. The predictive value of mis-emotion is usually chaos. There will be no Great Depression.

First, let's review what happened in the last few years in simple terms:

The Federal Reserve manipulated interest rates below the real market rate for over a decade, creating dislocations in the normal markets.
Low interest rates forced retirees and savers to abandon safe investments and buy into all sorts of higher risk investments, including the stock market. (As a grandmother of one of my employees said many years ago, "I can't afford to live on 3% interest when I use to get 6%"…a sad but true story).
Easy money created speculation and an artificial business expansion as the good times rolled.
The dot.com bubble was the first sign of trouble from the recent easy money regime. The solution: more easy money to bail out Wall Street and avert further panic.
Commercial banks are allowed to become investment banks as Glass-Steagall is repealed. Commercial banks can now invest and speculate globally outside of their normal areas of expertise.
Real estate booms, as new and creative ways to lend money appeared. Lending became a no brainer as loan packages could be sold away to another institution covered by a new insurance scheme (Credit Default Swaps). Therefore credit worthiness of customers became less important. Lenders became undisciplined. Who cared if the loan defaulted if the loan was "insured?"
Other exotic derivatives were concocted by the investment banks and commercial banks to make more fees and profits. Tried and true centuries old banking policies 101 were thrown out the window
The government pressured financial institutions to lend money for homes to millions of borrowers who were not only unqualified but high credit risks.
The excessive and low interest rate loans for homes fueled an even more over-heated and extended housing boom and housing price inflation - creating a housing bubble.
The over-the-counter derivative market went beyond $300 trillion and no one cared. $400 trillion - no problem. $500 trillion - no big deal.
Wall Street and the establishment press and authorities did not pay attention to the hard money newsletter writers who were screaming bloody murder about derivatives: Schultz, Skousen, Dines, Wood, Daughty, Sinclair, Casey, Katz, Turk, Taylor, Adens, Coffins, Lundin, Morgan, Ruff, Roulston, Grandich, Nadler, Bonner, Day Russell, Mauldin, Sinclair and others.
Complacency was everywhere. The Dow was over 14,000. Wall Street and Main Street thought the economy was "fine," paper money was "working" and debt levels were high but no big deal, the Fed was in control. So far so good.
The banking industry usually gets hit hard when the economy gets hit hard. But this time the major commercial banks were also speculating along with the investment banks.
Huge losses from leveraging and speculating in stock and bond markets as well as derivatives start showing up at the largest commercial and investment banks in the U.S. and abroad.
A national nightmare now is confronting Washington.
Global stock markets collapse and credit markets seize up everywhere. Many foreign countries are as bad off as the U.S.
The financial pyramid was brought on by easy money. We are now faced with global investment losses and economic numbers that are at dangerous levels, and foretell a drastic future.

But the future will be the exact opposite to what Wall Street and Main Street think will happen.

Why There Will be No Depression

The Fed, U.S. Treasury and foreign central banks will print their way out of the problem. A bad solution to a bad problem.
The U.S. is in a recession. This is the natural reaction following the huge economic paper money binge that has taken place the last 15 years. The major banks, insurance companies and investment houses are in real trouble. The pain is too much and the government will print the money to bail these institutions out.
3 million people are losing their homes. They should never have bought the homes in the first place. These people will go back to being renters. The homes are still there, they have economic value.
Investment bankers that busted Lehman, Bear Stearns and Merrill and lost their jobs will form hedge funds and buy many of these homes for 30 cents on the dollar. Then they will sell them in a few years for 50 cents on the dollar to people and other funds. Some people will move into a home and get a good bargain. Funds that buy these 50 cents on the dollar homes will sell them in 2-3 years for 70 cents on the dollar. Life goes on.
Banks and investment houses that lost money on these homes are already being bailed out. The losses are being covered by the printing press or debt from Washington
Unemployment: This is bad. In the U.S. we are at 7.2% and going higher. We are not at 10.8% ('82 recession) or 9% ('74-'75 recession) and may not even get to these levels. Sophisticated investors say, "Unemployment is being low-balled by the government, it's much higher". I agree. But check out Shadow Government Statistics' website run by brilliant economist John Williams (who should be a White House Adviser). This shows that the "shadow or real" unemployment number could actually be 17%. Sounds like a disaster. But back in 1994, the "shadow" unemployment number was 15%. So what happened in 1994? GDP was up 6.2%. The S&P 500 the following year was up 34%. There was no Depression from this horrendous unemployment. Official U.S. unemployment hit an 8-year high in 1992 at 7.8%. The solution to this was a 14% increase in the money supply (M1) and the stock market went up 6%. Do not panic because of unemployment.
There are still 144 million people getting paychecks. This means the economy is not dead yet. They will either spend the money or save some of it. When they save it, sooner or later the banks will lend to someone to buy or build or invest in something.
The average wage earner in the U.S. makes $47,000 a year. Multiply this by a possible 12% official unemployment rate which would be considered a disaster in this country, and you have the following: 18 million people out of work. Using $47,000 per person, this would equal about $850 billion a year of lost income and GDP. That would be a huge hit to the economy.
But wait a minute. Unemployment insurance for a $47,000 worker is about $400 a week. That reduces the $850 billion considerably. Also, the Government will simply print more money to handle this. They could print half the amount of the possible lost GDP - $425 billion. Using Washington logic, this would effectively handle half the consequences of 18 million unemployed people. Then it would be like there were only 6% unemployed. Printing or borrowing $425 billion would not be difficult compared to what they are already doing.
The great recessions of 1974-5 and 1981-82 resulted in the following: GDP increasing on average 15% within 36 months, the stock market booming the following year, and unemployment going down dramatically the following two years. Why? Because they increased the money supply and "bailed out" everyone with paper money.
The 74-75 recession had an 85% (that is eighty five % and not a typo) decrease in the price of the average NYSE stock from the previous high in 1973 and the Dow was down 41%. In 1982, the Dow Jones dropped 34% from its previous high. Both these market wipe outs were handled by the money supply being increased by 12.6% in 18 months in 74-75 and 14% in the 81-82 period.
The money supply increases in 2009 and 2010 could reach 50%!
So far, with bailouts, guarantees, the stimulus packages, $2-3 trillion of new money is already a foregone conclusion. This will equal a 25-35% increase in the money supply. The U.S. government will print as much money as is needed. They have panicked and are now going overboard. It is obvious that whatever happened in the past is going to happen again.
This means that we are not going to have a Depression but a huge paper money induced boom. It will be artificial and inflationary. It is all in the works right now.
Finally, if we were going to have a so-called Depression, why is copper above $1.50? Copper for delivery in December of 2009 and 2010 is above $1.60! You have heard the expression Dr. Copper. It is because as this commodity goes - goes the industrial world. It has always been a great economic indicator. Copper prices would be at 60 cents if a Depression was coming. Copper above $1.50 is saying, despite all the horrendous layoffs and headlines, that there is a lot of life left in the global economic patient.
The financial system will be temporarily "saved" by paper money but working people and savers will be eventually crushed by this currency depreciation. Capitalism and free enterprise will get another bad rap when inflation rips through the system. Honest capitalism and classic free enterprise does not include paper money….the cause of all modern day economic problems.

What to Do

Expect Inflation not a Depression.
Expect a boom to start sooner than later.
Know the past and respect logic, not headlines.
Am I telling you all is OK? No. I am telling you things are as bad as you think. But the authorities are using this crisis to bail out the system with paper money and because of that, the economy will once again go into a so-called boom that will be very inflationary. If you think a Depression is coming you will have your assets in the wrong place at the wrong time.

What Happens Next

The economy stagnates for another 9-12 months then turns around.
Unemployment goes down with the induced economic upturn.
The stock market rallies but never gets above its old highs.
Inflation comes back with a vengeance.
Commodities resume their bull market and turn the deflationistas into inflation believers.
Interest rates will go up with inflation and probably to much higher levels.
The stock market will go down when interest rates start going up.
Long term bonds will become the worst investment in the world.
The dollar will go down but so will other currencies as many world governments print their way out of their economic woes as well.
Gold will go to new highs.
Housing and real estate will recover but higher interest rates will slow this sector down considerably in the future.
The gold and silver mining stocks will become the best performing sector on Wall Street for many years.
The price of oil will go up due to inflation and global production declines of 5-8% per year from most of the largest oil fields in the world.
The U.S. "recovery" will help the world recover and almost all countries will have another artificial economic expansion from all the paper money they have printed as well.
China and India will create more shortages of basic materials and commodities by the sheer size of the populations and their economic and industrial progress.
The U.S. will have even more economic dislocations from all the new paper money and debt taken on by Washington.
The country gets set up for the next horrible recession some time in about 3-4 years.
A Depression is impossible in the old sense of the word. If one describes a depression as the loss of purchasing power of the wage earner (a correct definition), then we have been in one for the past 50 years since wages have not kept up with the cost of living. But since everyone is thinking breadlines and the 1930's, I will stay with that picture for our definition. It is not going to happen.

Also, remember that the $2-3 trillion bail out numbers you are reading about can easily be bumped up to $4-5 trillion. Why not? The reason for the increase is simple….."We are heading into the Greatest Depression in history." As long as this misguided concept gets press and the NY Times, the media and politicians buy into it, then the government has a green light to create as much money as is needed.

Next week I will finally get to the promised article about deflation and inflation.

For more articles on the economy, gold and mining stocks please visit our website at www.kengerbino.com



Kenneth J. Gerbino
26 January 2009

Kenneth J. Gerbino & Company
Investment Management
9595 Wilshire Boulevard, Suite 303
Beverly Hills, California 90212
Telephone (310) 550-6304
Fax (310) 550-0814
E-Mail: kjgco@att.net
Website: www.kengerbino.com



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[MrDevine]

Yep, another BUY GOLD post. Where do these guys get off?

[MrDevine]

I do agree with some of his sentiment though. But since GOLD is priced in US dollars, its value is irrevocably tied to that currency. Until you can buy stuff with it, gold doesn't make sense.

[lakedaemonian]

I'm in agreement with the iTulip "disinflation" doctrine.

I expect food, precious metals, energy, and other strategic commodities to rise consistantly over time within the next 12-26 months.

I expect residential property to continue to fall as well as commercial property to get destroyed.

I see cash or cash-like the same as democracy...it's the "least bad" option at the moment.

I expect that to change in the next 12-24 months as inflation inevitably flows through like a flood extinguishing the credit destruction fire and drowning Joe Bloggs.

[tricha]

I'm in agreement with the iTulip "disinflation" doctrine.

I expect food, precious metals, energy, and other strategic commodities to rise consistantly over time within the next 12-26 months.

I expect residential property to continue to fall as well as commercial property to get destroyed.

I see cash or cash-like the same as democracy...it's the "least bad" option at the moment.

I expect that to change in the next 12-24 months as inflation inevitably flows through like a flood extinguishing the credit destruction fire and drowning Joe Bloggs.

Happy Weekend reading folks.

__________________________________________________ ____________________________
_____________________SPECIAL REPORT________________________
The Day the Earth Stood Still
Some years ago when Kay and I lived in Washington, D.C., we went to see a new science-fiction movie, The Day the Earth Stood Still, at the RKO Keith Theater, located across the street from the White House. As the movie opens, a huge flying saucer is landing on the ellipse, south of the White House.
Ironically, at that moment in the real world, some police cars or fire trucks were going right past the theater with their sirens blaring, at the same time we were watching this huge flying saucer land on the screen. It sounded like there was actually something serious going on.
As the movie progressed, the actor, Michael Renney, came out of the flying saucer with a huge robot and announced that he was an ambassador from a Federation of Planets who were worried about the war-like tendencies of this planet and were there to impose peace on us, which he later did by stopping all electronic and electrical devices – elevators, airplanes, trains, cars, etc.
When we left the theater, I had to reassure myself that everything was still working – that we could still get on a real-world bus or streetcar and go home and it would all work normally.
I‟ve never forgotten that dramatic day. What we have seen in the last few weeks equals what happened – the earth has stood still.
Wall Street, no longer exists, and is a hiss and a byword. Merrill Lynch is a distress merger, as well as Washington Mutual. Fannie Mae and Freddie Mac are sick, Bear Stearns and AIG are gone, and Lehman Brothers is bankrupt, Citibank is near collapse. The government has taken over almost everything we used to call "Wall Street."
How did this all happen in a few short days? What happened? Whose fault is it? What should you invest in? Is there opportunity here?
It started with a naked Democrat-driven political decision in Congress in the „80s that they could acquire more votes if they could make it possible for people who couldn‟t afford them before, to buy homes, usually poor minorities, so they will vote Democratic. So, starting in the 80‟s, Congress began talking about "red lining," which means that banks would write off certain parts of the community for disapproval of mortgages because most of the home buyers could not qualify financially or credit wise, and the banks worried if their loans could even be repaid.
Soon Congress passed criminal penalties for banks and mortgage companies that would turn down a mortgage for any reason, legitimate or not.
Mobs from the radical, left-wing activists (ACORN?) would sit outside the offices of the CEOs of banks to intimidate them so they would grant mortgages that they should have declined.
So people who really could not afford mortgage payments or didn‟t have a down payment or good credit could get a home mortgage, and could suddenly become "a homeowner." Bankers then offered Adjustable-Rate Mortgages (ARMs) with low starting rates for two to five years, after which the interest rate would jump up, and stupid home buyers did not
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read the small print in their contracts to be sure they could make their higher future mortgage payments. Mortgage companies saw a chance to earn commissions by approving these easy sells. That created a huge bubble of real-estate sales, and the Federal Reserve kept rates as low as one percent for years, and buyers believed home prices would keep going up. If they had to, they could just refinance the homes. Because they had no skin in the game (no down payment), they had nothing to risk. Then, surprise! Interest rates rose slightly and suddenly people found that their adjustable mortgage interest rates had gone up, and they couldn‟t pay them, and foreclosures began to soar as home prices fell. As real-estate prices topped out and foreclosures grew, the inventory of unsold properties started to rise. They could not refinance or sell their homes. Home values plummeted, and they still are as this is written. People with no cash invested in the homes thought "I can just walk away from it; I can‟t lose any equity, because I don‟t have any." A wave of foreclosures swept across the country. Vacant, foreclosed homes in their neighborhoods drove down the value of all homes, even for those people who were current on their mortgages. Soon millions owed more than their homes were worth. Mortgage Backed Securities Now the plot thickens. Bankers and brokers bundled their mortgages into bond-like instruments called "Mortgage-Backed Securities" (MBS) and sold them to investors and big financial firms, giving them more cash to loan again to new buyers. Mortgage-Backed Securities became the basis of the balance sheets of the world‟s largest financial institutions.
The credit-rating agencies gave them AAA ratings because they felt they were secured by real estate, so the world‟s largest banks and other financial institutions bought them in droves for their portfolios. AAA? Why not! They were paying higher yields than almost anything else. When it dawned on some that some of these mortgages were not worth the paper they were written on, forecloses rose. The value of the underlying security, the real estate, began to be in question. The financial institutions that added Mortgage-backed Securities to their balance sheets found they could not accurately determine the real value of their portfolios. GAAP How did giant Wall Street institutions fail so abruptly? GAAP (Generally Accepted Accounting Principles) accounting rules were modified so financial institutions had to "Mark to Market" their assets. If the market had no bid nor ask, no one knew what the MBSs were really worth, so the market for them dried up. Some bank assets were marked to "zero," so their assets just disappeared overnight. Banks would not loan or borrow from each other, because their balance sheets were now suspect. I had said in The Ruff Times: "The issuance of mortgage-backed securities began to decline with less money inflow into the system, and home prices began to fall faster, throwing the whole bubble into reverse. Since the viability of the related paper assets was dependent upon rising real estate prices and asset valuations, the entire edifice began to crumble." The turmoil at Bear Stearns is illustrative. Bear Stearns had made lots of money speculating in subprime real estate, buying subprime loans and selling and buying mortgage-backed securities.
Though the amount of money involved in the Bear Stearns crisis was relatively small, the implications of the phony and suspect MBS values sent shock waves reverberating through a system chockfull of such phony valuations, trillions upon
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trillions of dollars of bank assets which are based on low valuations and unpayable debt. Reduced flow into the financial system and the vaporization of bank asset values has created the "credit crunch" which is causing all the panic. Businessmen are finding that the money they were counting on is drying up. Hedge funds are failing left and right, others are taking heavy paper losses, and still others are stopping investors from withdrawing their money. The very system itself is vaporizing, because the value of their assets is suspect, to say the least. The entire global financial system has collapsed. Consolidations have disguised failures by the movement of bad assets off their books via the derivatives markets, and phony accounting – with the complicity of regulators and guilty politicians who encouraged this corruption. Some big banks are bankrupt several times over, protected only by the illusion that the assets on their books have value, but those illusions – which are all that kept the banks open – have faded. As the level of panic rose, the central banks (the Fed?) turned on the spigots. They panicked when they realized the dimension of the losses facing the system. Irrational fear is now calling the shots. The politicians panicked, the markets panicked, the banks panicked, the central banks panicked. This game was over. In October, 2008, Wall Street and the securities industry were socialized by Congress, and the Democrats used $700 billion, allegedly to buy up the bad mortgages that people can‟t pay, and alter the terms to stop foreclosures so everyone, no matter how unworthy, can own a house they can‟t lose, whether they make the payments or not. When large amounts of the portfolio on their balance sheets could not be valued (marked to a non-existent market), banks began placing whatever value they thought they could get away with, and their accountants often gave them zero value. Overnight, when large portions of their balance sheets disappeared, the banks didn‟t have enough assets to meet the statutory requirements for cash reserves.
Almost overnight, big institutions that had invested heavily on these mortgage-backed securities began to fail. That‟s when Wall Street imploded. Goodbye Merrill Lynch, Lehman Brothers, Washington Mutual, Bear Stearns, etc. With no market to determine the real worth of the assets on their balance sheets, they had to mark these assets down, sometimes to zero, and trillions disappeared from balance sheets overnight. When a bank or brokerage house balance sheet is deeply impaired, they have to raise additional capital. When that is happening to everyone, who will loan you money? Consequently, the assets just plain disappeared, and the normal credit system froze up. Root of the Problem Congress and the Administration decided to bail out these firms that had bought all these bad mortgages and whose balance sheets had disappeared. But government money is not without its strings, so government took equity position as part of the price of their loans, and took control of Wall Street. At the same time, Barrack Obama, who was elected President, had made a trillion dollars in additional new promises, and they had to get the money from somewhere. To sum up, this mess had three roots: 1) a political decision to buy votes; 2) the unprecedented view that everyone should own a home, whether they could afford it or not; and 3) the accounting rules had tightened up. In my book How to Prosper During the Coming Bad Years and in my newsletter, The Ruff Times, I tell you how to profit from the inevitable consequences that had been brewing for years and were accelerated by these recent events, creating serious systemic weaknesses in society. And I‟ll explain why the real long-term consequence will be runaway inflation. The ones who did it to us are politicians – legislators. But this is not just a Democratic issue; a lot of ignorant, weak-kneed Republicans forgot their conservative principles and were enablers.
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And guess who we asked to fix the problem? The ones who had caused the problem! If they want to find the villains, they should look in the mirror. The average American has no grasp of the real facts, so they are easily buffaloed. The real solutions are politically impossible. We must allow the foreclosures (voters) to continue until the market "clears." The villains would be unmasked. Lots of luck! My role is to tell you what will really happen and then help you middle-class Americans deal with the world as it really is and profit from it. This is close to being a problem beyond the ingenuity of human leadership; so big and perverse that they decided they had spend billions to buy up bad assets from banks and stop foreclosures, bailing out improvident borrowers by buying their mortgages and readjusting the terms so they don‟t get thrown out of the home they can‟t afford and should not have bought! It may kick the bankers‟ problem down the road, but it won‟t fix America‟s problem. Everything you have been reading about and seeing on TV is aimed at saving the tattered reputations of the politicians who created this problem, and the really dumb borrowers. The consequence will be inflation after a few months of price deflation, with its accompanying recession and unemployment Throwing Money at Problems Eventually Equals Inflation The only way Congress knows how to try to fix an economic problem is to throw money at it. They create the money out of nothing. They vastly expand (inflate) the money supply to try to stop deflation because it could cause a 1930‟s-type depression. One of the immutable laws of the financial universe is that when you expand the supply of a paper currency, you create monetary inflation, often and sooner or later, this inevitably causes price inflation (currency dilution), with deflation in the interim.
The politicians won‟t even consider the only valid solutions. But I know how to profit from what is happening! When the government throws money at a problem, they eventually create monetary inflation. This flood of money dwarfs anything we have seen in our lifetimes. If you understand that reality, you can now profit from the sure thing – monetary inflation. One day we will wake up in the grip of huge price inflation. But as Will Rogers said, "Invest in inflation, it‟s the only thing that‟s going up." In this artificial environment, you can easily turn small amounts of money into big fortunes if you know a few simple things to do. What to Do When I saw what was coming, I saw the need to write a book; but rather than writing a whole new book, I simply updated the humongous best-seller that I wrote back in 1978 (2.6 million copies) because the principles were again the same for the 21st century. This report updates it still further as of November, 2008. Will the principles that worked in the „70s work again? These principles are as close to eternal as financial principles can be. Advice How can your family cope with the coming inflation? Prices will eventually rise sharply due to big price inflation! Normal commerce is crippled by inflation. The commodities you ordinarily to buy whenever you want, at the price you want, may not always be there, as inflation drives up the cost of fuel so the trucks will find it harder to pull up to the back door of your local store and restock the shelves. You must turn a liability into an asset. Prices will rise higher and higher. How do you turn this into an asset? Store things now while they are still relatively cheap, then consume them later at higher prices. This includes every commodity you would buy at your local store, ranging from food, to diapers, to soap, to auto parts, to everything else.
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How do you survive in an age of Inflation? 1) Get out of debt, and pare down your consumer spending; 2) eventually exchange your cash and dollar-denominated holdings for inflation hedges; 3) if a politician promises to give you money, run don‟t walk to vote against him/her; 4) keep the old clunker for a few more years; don‟t buy a new car; 5) recognize socialism is here to stay; 6) the real-estate bubble has caused the biggest burst bubble in the history of bubbles. Government is trying to maintain our sick society by saving home buyers (voters) from their own stupidity. Socialism Socialism is government owning or controlling the means of production, like when they own large chunks of Wall Street banks or offer General Motors many billions of dollars if they agree to make small gas-sipping cars consumers won‟t buy, compounding their government-imposed collapse. 7) Social Security, Medicare and Medicaid, are unsustainable and can only be maintained by creating money, so we have a lead-pipe cinch guarantee of more inflation in the future.
Prices will not go straight up. Take gas for example. The price has recently plummeted. Oil may fall to as low as $40 per barrel temporarily, but that doesn‟t matter. If inflationary prices retreat temporarily from time to time (price deflation), you can buy now at low prices to later consume at higher prices. The Stock Market Avoid blue chips and most mutual funds, as they are an endangered species. The recent decline in the Dow is a harbinger of the future. The stock market has many independent pieces, and some aspects of the stock market should prosper. 1) Uranium mining stocks. In the quest for cheaper energy, we will have to build nuclear plants. If they proceed with the nuclear plants that are on the drawing board or under construction today, there is only half enough uranium above ground to provide their needs. So buy the mining stocks. 2) Oil Service Companies such as Schlumberger and Halliburton. We will drill for oil off shore, and the companies that build and service the oil rigs will do very well indeed. In the meantime, we will watch with interest as Congress throws money at the problem, creating runaway inflation.
I repeat again what Will Rogers said, "Invest in inflation; it‟s the only thing that‟s going up." __________________________________________________ ______________________________
Howard J. Ruff, the legendary author and financial advisor, has re-edited and re-issued his 1978 mega best seller, How to Prosper During the Coming Bad Years, still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times financial newsletter. This is a Special Report, written in December, 2008.

[tricha]

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Howard S. Katz is author of the One Handed Economist, a financial newsletter with timely market advice that integrates technical analysis with insights about Austrian economics and analysis of Federal Reserve Bank policy. For additional information see http://www.thegoldbug.net.

Monday, January 26, 2009

THE HISTORIC MOMENT


by Howard S. Katz
1-26-09

When I survey current events, I often have to pinch myself. I have a sense that “this cannot be happening” for the simple reason that people cannot be this stupid. But it is happening. I am talking here about the public reaction to the inauguration of Barrack Obama.

In fairness to President Obama, I must distinguish between the man himself and the public reaction to him. I was very suspicious when Obama started getting large votes in the Democratic primaries. He had none of the qualities usually required for successful politicking in America. He had no name recognition. Hillary Clinton, for example, had been in the public eye since 1992. People saw TV reports on her and read her name in the newspapers. No matter what policies you advocate that is a very good start to get a large number of people to vote for you in an American election.

Neither did Barrack Obama have an issue. He had a record which put him on the extreme left of the Democratic Party, and he ran a campaign based on meaningless clichés. “Change,” as he used the term, had no meaning, and all the people echoing it could not point to specific policies. What was it that Barrack Obama wanted to change from, and what did he want to change to? So no strong constituency was voting for him because of an issue (such as the right to own guns or homosexual marriage).

All of this became clear in the period leading up to the inauguration. The top media in the country could not contain their joy. Time magazine expressed this by a cover showing Obama in the pose of F.D.R. (riding in the back seat of a convertible smoking a cigar). In the minds of the editors of Time, this was a high compliment. They still do not know that F.D.R. was a Wall Streeter whose goal was to enrich his old buddies at the expense of the working people of the country. The enormous rise in stock prices since his election and the decline in the real wages of the average American since 1972 are the fruit of his policies.

The message that came through, again and again, was, “We are so happy. We are relieved of our white guilt.” The background to this is that for most of my life a continual stream of hate has come from the intellectual left directed against America. A fellow alumnus of mine put it well in the title of his book: “Harvard Hates America.” It was true and remains true today.

Now none of this directly has anything to do with race. Harvard and the intellectual left hate America because they are (ideological) Germans. And all this dates from central Europe in the year 1875. In that year, a party based on love was founded in the new country of Germany. This party was called the Social Democrats. They argued that the government should be like a big father who loved his subjects and gave them something for nothing. The Social Democrats became more and more powerful. In 1880, they forced the German chancellor, Otto von Bismarck, to institute a part of their program, socialized medicine, and, circa 1890, came up with a fraudulent retirement program we today call social security. In 1912, the Social Democrats became the largest party in Germany and took control of the German legislature. They did not formally control the government because Germany was still, officially, a monarchy. But the Social Democratic politicians were much smarter than the Kaiser or his officials and effectively controlled the German government. In 1914, they plunged the world into war by supporting Austria’s aggression against little Serbia and attacking neutral Belgium.

After being defeated in this first test of strength, Germany was unrepentant, acting like a spoiled child. You have probably heard about the issue of how the mean Allies imposed reparations on defeated Germany after the war and how unfair this was. This is pro-German propaganda. You have probably never read that a victorious Germany imposed reparations upon France after the Franco-Prussian war of 1871, and these reparations were speedily paid without complaint. After World War I, the U.S. lent Germany the money to make her reparations payments, and these loans were never paid back.

After World War I, Germany transited from the country of love to the country of hate. A Social Democrat named Adolf Hitler led this movement toward hate, and by 1933 he had won the allegiance of the majority of Germans. (Pro-German propaganda in this country makes much of the fact that Hitler did not get an absolute majority in the 1933 election. But Germany, as every other European country, was a multi-party country, and it was virtually impossible for any one party to get an absolute majority. In reality, the party with the largest plurality would form a government, and in 1933 the Nazis got 44% of the vote. This was a very, very large plurality. Further, there were two smaller parties, the Catholic Party and the nationalist party who, a few months after the election, voted with the Nazis to abolish democracy in Germany and make Hitler dictator. These parties had programs very similar to that of the Nazis. They simply had cultural or religious attachments which led them to express their support for Hitler in a different way.)

Those people who have complained about my attack on the philosophy of love have to deal with this case. It is a textbook perfect example. A country was converted to an explicit government based on love. (When Bismarck adopted the Social Democratic program in 1880, he called it his Christian program.) In a little over 50 years, it turned from the country of love into the country of hate. Then it went on a rampage and murdered 50 million human beings.

A similar thing happened when Rome became Christian in 394 A.D. And a similar thing happened with Jesus of Nazareth himself. The history of brutality and destruction which constitute the Middle Ages are simply variations on this theme.

This long and sorry period (more than a thousand years of ignorance, poverty and savagery) came to an end when John Calvin taught people that nothing one could do on earth could get one into Heaven. However irrational this idea may appear, it led the followers of Calvin to disregard the philosophy of Jesus (the motivation for which was admission to Heaven via the Catholic Church). The Calvinists started paying attention to the Old Testament instead of the New. They reinvented democracy and became the first people in modern times to say that human beings had rights. They founded many of the modern sciences. They created wealth beyond the imagination of previous generations. They cured diseases, introduced romantic love and created a society where the average person did not have to live in fear of his fellow man.

As the Calvinist countries (America, Britain, Holland and Switzerland) began to spread freedom and democracy around the world, a key event was the French Revolution. The French Revolution gets a bad press, and there are certain aspects of it fit for criticism. But on the whole this was a period when the French were adopting the (American) ideas of freedom and democracy. The bad in the French Revolution came from the fact that no society changes its social institutions instantaneously. The change from the evil society of the Middle Ages to the good society of the 19th century took several hundred years, and to judge the French harshly because they could not do the equivalent in 2-3 years is being unfair.

The French Revolution threw Europe into turmoil. French armies defeated the greatest powers of Europe. The French were energized by freedom. It was a new world. But the people of central Europe set their face against this new world. They hated freedom and democracy. In 1866, they formed themselves into the new country of Germany, and, as noted, in 1880 they founded the welfare state. In 1933, they chose Adolf Hitler to be their leader. In 1939, they set out to make themselves the master race, and, as noted, from 1939-1945 they killed 50 million human beings.

To bring this back to President Obama, in the 1930s the apostles of love came from Germany to America, and they infiltrated the teaching of (what they called) the social sciences. They managed to get rid of the real professors of history, psychology and economics and started teaching their package of lies to American students. (Traditional education from the end of the Middle Ages through the 19th century consisted of the sciences and the humanities; there was no such thing as social science.) Part of this package is a set of lies deliberately intended to slander America, and the only reason race plays a part is that ethnic hatreds are so intense in central Europe that the Germans thought it would be easy to stir them up in America.

For example, it is routinely argued that the Anglo-Saxon colonists starting in the 17th century began a campaign of eradication against the American Indians. (I don’t call them native Americans. A native is a person who was born in the place he is native to. I am a native American. Most of the readers of this blog are native Americans. The Mongoloid peoples who inhabited what is today the United States are native Americans, but this phrase does not distinguish them from any of the other native Americans of our time.)

To make the case that the European settlers eradicated the Indians, one should, logically, start out with the population of Indians in the land area which is today the U.S. in the year 1620. The best estimate I have seen here is 800,000. The next question is how many Indians are there in this same land area today? There is a difficulty here because basically what happened to the Indians is that they intermarried with the white population. Thus there are today a great many half Indians, quarter Indians, eighth Indians, etc. The only valid way to calculate the Indian blood in the U.S. today is to take half Indians and divide by 2, quarter Indians and divide by 4, etc. The only figures I have seen on this show upwards of 5,000,000 (genetic) Indians in the U.S. today. These modern Indians live in houses, not teepees. They drive cars. They have central heating and hot and cold running water. They watch TV and may even read this blog on their personal computer. Any fair assessment of the situation would have to say that it was a good day for the Indians when the Pilgrims landed at Plymouth Rock.

Another left-wing lie intended to raise racial hatreds refers to the old institution of Negro slavery and its aftermath. At the time of the American Revolution, the revolutionary party made major advances in human liberty, and they succeeded in abolishing slavery north of the Mason-Dixon line. But as noted, social advance cannot occur in just a few years. It is unrealistic to expect another age to come complete with the institutions of our age. We owe those (good) institutions to the good work of many great men who struggled for them through history.

Slavery was a human institution pretty much going back to the dawn of history. One of the few good things to happen in the Middle Ages was the abolition of slavery (meaning that Europeans did not enslave each other and were too weak to enslave more distant nations). However, slavery returned to European society in 1453 when it was sanctioned by the Pope. The Pope of that day was angry at the Muslims because they had conquered Constantinople, and he sanctioned the enslavement of a Muslim by a Christian.

It turned out to be too hard for Europeans to enslave Muslims; so they adopted the easier alternative of buying Negro slaves from the east African coast (where the various tribes would fight with and enslave each other). This was how slavery got its start in the British colonies of America.

The American South at that time was populated mostly by Cavaliers (less Calvinist than the Puritans in New England). These people were reluctant to change and did not understand economics. Their argument at the Constitutional Convention of 1787 that the economy of the South depended on slavery was intellectually destroyed over the period 1788-1860 as the North, using free labor, far surpassed the South in economic growth.

The Civil War is a painful period in American history, mostly because of several important mistakes by Abraham Lincoln (whose only claim to greatness was that he was assassinated). But it was part of the larger march toward freedom which was enveloping the world at that age. While slavery was unequivocally wrong, judging America as a whole and in comparison with other nations, she has much to be proud of and has to be rated as the finest nation in the history of the world.

The South, angered by its defeat, was unable to blame Lincoln, who was now the martyred hero. So they directed their hatred against the former slaves. This is the origin of that racial bigotry which disgraced America from the end of the Civil War to the age of Martin Luther King. (To return to my theme of Christianity and love, please note that it was the most Christian part of the country which was the heart of this period of bigotry.)

That period is now over. If we judge America by the standard of other nations, then Americans have a great deal of which to be proud and very little of which to be ashamed. America is the greatest nation on the earth, the greatest nation that is now and the greatest that ever was. Slavery was a blight upon mankind and existed through all previous ages, and the freedom movement, which got its great impetus from the American Revolution, abolished that blight. America is the land of freedom and democracy. It is the land of private property and freedom of enterprise. Americans took this land and turned it from a place of scarcity to a place of the greatest bounty in human history. By the early 20th century, it seemed that Americans could do anything: build the Panama Canal, defeat Hitler, cure polio.

When Bill Clinton’s disgraceful treatment of women became public in the late 1990s, the political left (refusing to apologize for having supported him) propagated an old slander against Thomas Jefferson, saying that he had had a child by one of his Negro slaves. (The idea here was that everybody, or every President, does it.) This allegation completely failed of proof and belongs in the gossip columns. Jefferson tried to get slavery abolished in Virginia (but failed), and he condemned the slave trade in the Declaration of Independence. (He was unable to free his own slaves because of Virginia law; had he done so they simply would have gone into slavery with another, unknown, owner.)

The neo-Germans on the political left hate the Declaration of Independence and everything to do with America. They still want to go back to the Middle Ages, where we were all ruled by a king and most of the people were serfs. They don’t dare to say this openly, but they have spent most of the past generation slandering America, and evidently Time, Newsweek and a large part of the population has fallen for their lies.

Martin Luther King’s message was to judge a man not by the color of his skin but by the content of his character. But the modern left is telling us that all whites in America are guilty of the sin of a few southern aristocrats of 2 centuries ago in owning slaves. That is, we are guilty because our skin is white (even though many northerners fought and died to free those slaves). This is the same bigotry that persecuted Negroes from 1865-1964. Only its object has been changed. But then hate is hate, and love is love, and there is not as much difference between them as most people think.
# # #

Howard S. Katz

[tricha]

Monday, January 19, 2009

WHAT IT’S ALL ABOUT


by Howard S. Katz
1-19-09

In this blog, I want to present an overview of my philosophy in the hope that it will help readers understand my comments on specific issues. Man is the animal who perceives reality by means of abstractions. A principle is a statement about abstractions. Therefore, it is very important for each of us to understand the correct principles if we want to achieve the good things of life.

The first question that every human being addresses when he enters life is what kind of a world is this in which I find myself? And this is the most important question he will ever consider because almost all other questions depend on the answer to this one. Further, as per paragraph 1, the answer to this question must be framed in terms of principle.

The first explanation of the world which human beings accepted was animism. This is the view that events happen because every object has an animate spirit, and the spirit wills the event to happen. For example, why does a volcano erupt? There are two explanations.

• The volcano is an animate being. This volcano spirit gets mad, and the volcano erupts.
• Deep under the earth’s surface is very hot rock in a semi-solid, semi-liquid form called magma. Occasionally this magma breaks through a weak point in the earth’s crust, and the result is an eruption.

You are familiar with these two ideas as the religious world view and the scientific world view. However, the issue goes deeper than that.

The form of animism we meet in the very earliest reports of human society is called polytheism. Here the inanimate object is associated with but distinct from the spirit, which is usually represented as a human being or an animal. For example, the spirit, or god, of the sun is conceived as a charioteer who pulls the sun across the heavens. The reason that the sun rises and sets so regularly is because the god of the sun is very reliable in his habits.. The god of the sea is given to fits of temper, which is why there are storms at sea. The goddess of the earth is kindly and bountiful, which is why the earth brings forth food.

About 1500 B.C., a radical movement arose in ancient Egypt which rejected animism and declared that events happened because of cause and effect. We say today that lightening does not strike because Zeus is angry and is hurling thunderbolts; rather, the rapid movement of the clouds causes friction, which creates static electricity (much as happens when you shuffle across a rug or rub your comb against certain fabrics. The lightening bolt is simply the discharge of this static electricity and is similar to the spark which jumped from your finger to the electric light switch. in the old-fashioned wall-to-wall carpeting.

This ancient Egyptian movement was what we would call atheist. It argued that events happened because of cause and effect not because of the will of a spirit or god. However, this atheist movement found it too difficult to persuade people of the radical idea that there were no gods. So it compromised and argued that there was just one god. In this form, it was successful, and the Egyptian pharaoh, Amenhotep IV, converted to this new monotheism and became a worshiper of Aton, the god of the sun. In line with this, he changed his name to Akhenaten (spirit of the sun)

Akhenaten’s reign is a bright spot in ancient Egyptian history. There is an artistic revolution as the human figure is depicted realistically. His writings show that he was deeply in love with his wife. The preoccupation with war and conquest is gone.

But Akhenaten’s revolution did not last. His nephews who succeeded him (the second of which was King Tut) were weak. The old polytheist priests organized a revolution and reestablished polytheism.

Moses was a prince of Egypt in the province of Gosen (Goshen) in northeast Egypt. He was a believer in Akhenaten’s monotheism and probably understood the more radical atheistic position. Just at the time when the old polytheists were victorious, he devised a plan for political action.

The English “Moses” is derived from the Hebrew “Moishe,” which in turn is derived from the Egyptian “mose.” “Mose” was a name fragment, meaning son of (similar to “mac” in Scottish names). So undoubtedly, Moses had a long Egyptian name which the Hebrews could not pronounce and shortened to (the equivalent of) “Mac.” I prefer to think of Moses as Mac because religious people today have reinterpreted these events from the view of a body-soul dichotomy, which distorts the character of what happened.

As you know, Moses led the Hebrew people out of Egypt. They invaded the land of Canaan. (:It wasn’t called “Palestine” until 1400 years later when the Romans made up that name to establish the fiction that the Jewish people had never lived there.) Monotheism then spread through most of the world from Judea/Israel, and most of the people in the world today owe their basic world view (which they value above anything else) to these events.

Thus far, I have described Moses’ and Akhenaten’s causal view of the world in terms similar to the conflict between science and religion of the past few centuries. This is partly accurate, but it does not fully state the enormous change in human thinking which occurred at this time.

For example, when Moses sought to teach his new causal view of the world to the Hebrews, his first thought was to explain to them how to act. This is perhaps the second most important question of human existence. Since we are living in a world governed by the law of causality, the way we must act is in accord with the law of causality.

• The law of causality says (with regard to inanimate entities) that every event must follow from its cause, and every cause must have its effect.
• The correct principle of action in a causal universe is that you must live in accord with the law of causality. You must expect to receive the consequences of your actions (the effects of their causes), and you must treat other people by giving them the consequences of their actions. This was later called (by the Greeks) the idea of justice.

Let us go back to my favorite example of the lazy farmer and the industrious farmer. The lazy farmer produces a small crop. The industrious farmer produces a large crop. But the lazy farmer wants to escape the consequences of his laziness (starvation). So he steals the crop of the industrious farmer. Thus we see that the moral principle, thou shalt not steal, follows directly from the principle of justice, which itself follows from the causal view of reality.

Notice that the law of causality is immutable. We cannot prevent each cause from having its effect. But the principle of justice is not immutable. We human beings have free will and can choose to act in accord with justice or against it. Any human society is free to establish the principle thou shalt not steal or the principle thou shalt not resist the thief who comes to rob you. But in this case, the principle of justice operates on a higher level. Once stealing is legalized (e.g., the bank bailout bill of last October), then the people of that society give up the hard work of producing wealth and concentrate on stealing from others. The victims of the robberies then simply give up and stop producing. Indeed, they too may become thieves. (This was a common event in the 4th century A.D. when the new Christian Roman Government pretty much outlawed most productive activity and abolished property rights.)

A modern person who identifies with and supports the law of causality immediately applies it to physical objects (mechanics). But Moses and the ancient Hebrews immediately applied the law of causality to the science of morality and developed the concept of justice.

Further, Moses added to the concept of monotheism some ideas of his own which indicated that he had in mind the original idea of the causality movement – to do away with the idea of gods or spirits altogether. The god that Moses taught to the Hebrews had no place. Every other god had a place. (The Greek gods lived on Mount Olympus.) Further, the god of Moses had no physical shape. (Later it was said that man is made in the image of God. This is a contradiction, but most people are not bothered by it.) Now something that isn’t anywhere and doesn’t have any shape doesn’t really exist, does it?

There is a passage in Exodus which is very relevant here. Moses meets God at the burning bush, and God tells Moses to bring forth the children of Israel from Egypt. Moses at this point still thinks of himself as an Egyptian prince. He belongs to the group which is oppressing the children of Israel. If he announces to them that he is their leader in a project to bring them out of Egypt, they are not at all likely to believe him. Maybe he is just a nasty Egyptian trying to lure them into making a break for freedom intending to turn them over to the authorities. How can he prove to them that he is sincere and get them to follow him?

Moses decides that, since he has spoken to God face to face, he can prove that he is sincere by telling them God’s name. So he asks God:

“Behold, when I come unto the children of Israel, and shall say unto them, The God of your fathers hath sent me unto you; and they shall say to me, What is his name? what shall I say unto them?”

Exodus, Ch. 3, vs. 13.

A reasonable question. But God’s answer has puzzled biblical scholars right up to the present day.

“And God said unto Moses, I AM THAT I AM: and he said, Thus shalt thou say unto the children of Israel, I AM hath sent me unto you.”

Exodus, Ch. 3 vs. 14.

What is God saying here? He is saying that he does not have a name. He has no place. He has no shape. And he has no name.

And to top it off, he asks you to do what you would do if he did not exist (act in accord with the law of cause and effect). It is hard to avoid the conclusion that Moses was trying to gently ease the children of Israel into the idea that there was no god (were no gods).

As a result of this idea (that God has no name), the Jewish religion, to this day, has a lot of confusion about the name of God. Modern Jews believe:

• God has a name, and it may be written, but it must not be spoken (except by the High Priest in the olden days on very special holidays.
• When a modern Jew comes to the name of God written in a prayer, he substitutes “Adonoi” (the Hebrew form of Aton, the god of Akhenaten).
• Since Hebrew does not use vowels (except for children and beginning students of the language), the name of God is written only with the consonants, which are YY (or YHYH, where the two H’s are silent).

Since the destruction of the Temple by the Romans, the name of God has not been pronounced; hence the vowels have been lost. When the Roman pagans converted to Christianity and decided to worship the Jewish God, they tried to learn His name. They went to prayer books written for children. But due to the rule that what was supposed to be pronounced was “Adonoi”, the vowels were those for that word rather than for God’s name. Thus, the early Christians, not having much of an idea of what they were doing, put together the consonants from “YHYH” and the vowels from “Adonoi” and got a nonsense word, “Jehovah. (The first Y was changed to J and the second to V.)

Whenever the idea of justice entered a human society, it caused a burst of energy. This idea was brought from the Israelites to the Greeks by the poet Hesiod in the 8th century B.C. This caused the flowering of classical Greece in the 6th century B.C. Rome was an offshoot of Greek culture, and the Roman empire resulted from the fact that the Romans focused almost entirely on politics and are the first nation in history to declare that human beings had rights.

Plato hated the idea of justice, and his supposed search for justice in The Republic led to the belief that justice could not be defined. Actually Isaiah had an excellent definition of the concept of justice in Ch. 3, vs. 10 and 11 (500 years before Plato was born). All Plato’s followers had the right to say was that they did not know how to define justice. But this ignorance was somehow twisted into a kind of knowledge. As Platonism became more and more influential in ancient civilization, Plato’s attack on justice undermined the concept of Roman law and led to the collapse of Rome.

Christianity was one of these neo-Platonist movements which mounted an attack on the idea of justice. Jesus’ argument about love said that love was opposed to and superior to justice. (Today you will hear people advocate justice tempered with (meaning compromised with) mercy. When the Roman people adopted Christianity in 394 A.D., they immediately declined into an orgy of hate, cowardice and violence. Civilization then collapsed in western Europe, and every measure of human values declined for 500-600 years.

John Calvin revived the concept of justice by teaching people that the Old Testament should be elevated in importance above the New (because you can’t get to heaven). The 17th century English Calvinists carefully studied the Old Testament and many of them were literate in Hebrew. (William Bradford, the second governor of the Pilgrims and their historian, could read and write Hebrew and kept a Hebrew diary.) In the 17th century, they began a movement for democracy, which succeeded in 1689 with the passage (by Parliament) of the English Bill of Rights (the ancestor of the American Bill of Rights a century later). The American Revolution of 1775-83 was simply an imitation of this English democratic movement carried to a more consistent conclusion. Today a neo-Platonist attack on justice is destroying democracy and freedom in America with results which will be devastating to all of our lives.

# # #

Howard S. Katz can be visited at http://www.thegoldbug.net.

Posted by theGoldBug.net at 11:53 PM 3 comments
Labels: cause and effect, egyptians, howard s. katz, jewish history, moses, philosophy

[Dr_Who]

IMF says Aussie now in recession and still contracting.

[macduffy]

A small glimmer of optimism being shown by a slight upturn in shipping rates?

http://www.dryships.com/pages/report.asp

[tricha]

Caught that too ... There's been a few other positives coming out of the supply chain too. I'm beginning to suspect that the 'wholesalers' are re-positioning inventories and materials ... Early days tho but a must watch indicator.

Just an FYI - be careful of panamax only fugures as the shipping lines are also sending stuff around the end and the trend may be/is(?) increasing. I need to do a bit more reasearch on this. If anyone already has, please share.

I can not find any positives anywhere, it's rattling down the pipe. From the US, across to China and it's now hitting Australia hard.
And that's the big question, where to find protection.

And below relates to most States in the US.

20,000 jobs may go in California

Cash-strapped California will start notifying 20,000 state workers on Tuesday that they may lose their jobs.