August 28, 2012
- In politicians and central bankers we trust: The Washington Post’s honest and upfront reason to bash the gold standard (plus, one they won’t disclose…)
- Is the housing market turning up… or is the fraudclosure hangover about to come crashing down?
- Because you can’t keep a good metal down: Why even mainstream experts are setting a surprisingly high gold target
- The broken-window fallacy brought to life… more jury duty experiences from readers, plus an update on Addison’s call to serve… Niall Ferguson stirs the pot… and more!
“The case for the gold standard fails both practically and morally,” declares The Washington Post editorialist Charles Lane this morning.
Pardon our indulgence for a second day. But what is sure to be a slither in the Republican Party platform — a new “gold commission” — is generating an outsized response.
The gentleman doth protest too much, wethinks. If nothing else, we’re intrigued by the details…
As a member of The Washington Post’s editorial board, Mr. Lane’s position is hardly a surprise. Warren Buffett owns a substantial stake of his employer.
Buffett’s father, Howard, was a fervent gold bug. The son, not so much. “He’s made a fortune of historic proportions in a credit-fueled fiat boom,” Addison points out via IM this morning. (To say nothing of how he’s benefited from the post-2008 bailouts.)
“We can only hope,” Buffett’s dutiful minion goes on, “that this iteration of Republican pandering to the gold bugs bears no more fruit than the last one.”
Credit Mr. Lane for understanding the source material. His first two paragraphs link to the latest Forbes post on the subject by 5 regular Ralph Benko. And they link to The Case for Gold, Ron Paul’s 1982 “minority report” of the Gold Commission appointed by President Reagan.
“As history abundantly demonstrates,” Lane declares, “the gold standard would not immunize the economy from financial crises. Imposing it would, however, render the central bank powerless to respond to them, as it could not readily expand credit or act as lender of last resort to solvent institutions.”
[Ah, yes, those wise and all-seeing central bankers. They lend only to solvent institutions, the kind Mr. Buffett invests in, right?]
“The central purpose of a monetary standard is trust and honesty, not stable prices,” Dr. Paul wrote three decades ago.
“The reason gold is superior to all forms of paper is that it provides this truth and honesty, permits and encourages savings [and] enhances economic growth.”
Credit Mr. Lane again for understanding Dr. Paul’s argument on its own terms. It’s about trust. And whether fiat currency and the politicians and central bankers who manipulate it can be trusted.
For Lane and his fellow Posties, the question is beyond dispute: “The case for the gold standard… rests on assumptions about human nature that are not only deeply pessimistic but unduly so…
“What’s repellent here is not so much Paul’s loopy assessment of costs and benefits; it’s his radical pessimism, his aggressive and indiscriminate distrust of humanity.”
How dare the good doctor distrust the politicians and central bankers. They have only the best interests of humanity at heart! Why, Dr. Paul sounds as retro as Thomas Jefferson talking about the nation’s founding document. “Let no more be heard of confidence in man, but bind him down from mischief by the chains of the constitution…”
In crafting the Kentucky Resolutions of 1798, Jefferson anticipated the irony of the GOP platform plank: Government officials appointing the proverbial “blue-ribbon panel” of government officials to solve a problem created by government officials.
Despite a lengthy conversation this morning on the merits of such a commission, we continue to have our doubts — should it even come about — that it would have any more impact than the last one. Although, for the record, the last one did leave a considerable legacy in The Case for Gold.
Dr. Paul and Mr. Lew Lehrman’s minority report from the first Gold Commission “remains to this day one of the scintillating documents of recent public policy,” writes economic historian Brian Domitrovic in Forbes. “It might as well be a blueprint for 21st-century monetary reform.”
That is, Dr. Paul’s warning in the 1982 introduction to their findings is still relevant to events today: “Scheming, speculation and sophisticated tax avoidance have replaced productive efforts, savings and planning for the future.”
We would welcome a gold commission… if we had any faith the political class would and could voluntarily part with their control of political money and the government purse strings.
[Ed note. For relevant background, we’d love to put The Case For Gold in your hands. But we don’t want you to despair that you’re helpless. That’s why we’ve created a unique “package deal” with Addison’s The Little Book of the Shrinking Dollar — packed with 47 ways to preserve your purchasing power while politicians give gold lip service.
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In another can’t-contain-the-excitement day on Wall Street, the major indexes are once again going nowhere.
The Dow, S&P and Nasdaq are all down fractionally; the Russell 2000 is up fractionally.
The housing market appears to be stabilizing… for now. The Case-Shiller home price index jumped 2.3% in June — the second-straight monthly increase.
All 20 cities in the index turned in gains. Detroit leaped 6%.
The broader national index — issued quarterly and with a considerable lag — is also out this morning. It registered a 6.9% jump from Q4 2011 to Q1 2012… and 1.2% year over year. But good luck discerning a trend from the chart…
Precious metals dipped overnight, but are recovering to where they were 24 hours ago: Gold at $1,670, silver at $30.89.
Even mainstream analysts believe gold is set to continue its recent run-up.
Bloomberg News surveyed 15 traders and analysts at a conference in Hyderabad, India, on Saturday. The consensus: $1,800 by year-end. That would be a 15% gain for 2012.
“Gold is set for a 12th year of gains,” says Bloomberg, “as the European sovereign-debt crisis boosts haven demand amid speculation of further policy easing by central banks, including the U.S. Federal Reserve, which may be considering a third round of so-called quantitative easing, or QE3.”
Timing is everything if you’re looking to add to your stash. Yesterday, we got word from our friends at the Hard Assets Alliance: Their offer to waive the account setup fee will expire this Friday.
If you’re interested in taking advantage of the simplest online method to buy, sell, store or take delivery of precious metals, you’ll want to check out the Hard Assets Alliance right away. Please note we may be compensated once you fund your account, but we would not alert you to this offer unless we believed it presents an outstanding value… and it does.
“Aw, you guys have it all wrong,” writes one of our regulars about the bridge in China that collapsed. “The Chinese have simply been reading Bastiat and took his ‘broken window’ story a little too seriously. Just like all leftists seem to do.”
The 5: The problem comes when the money runs out: The Chinese government keeps announcing “stimulus” measures, but “many of the new stimulus projects appear to simply be restatements of existing commitments,” reports the London Telegraph, “and there was no indication of how they will be funded.”
“I am almost always the first to be excused,” writes a reader carrying on a curiously popular thread in the 5’s mailbag, “when the attorneys begin deciding who they don’t want on a jury.
“Caucasian, educated, self-employed male. Seriously, I am almost always one of the first to go.
So I simply accept that I am not wanted in the jury system and that the desire is for those most easily influenced or bamboozled, versus those who can truly discern innocence or guilt.”
“The last time I was summoned for jury duty,” writes another, “I was initially seated on a jury that was going to decide a murder case in which a woman had persuaded her lover to kill her husband with a crossbow. Not the brightest bulb in the chandelier, since (a) there aren’t that many shops selling crossbow bolts, (b) the shop had the credit card receipt for the purchase of the bolts, and (c) the shop owner identified both the woman and the boyfriend. The boyfriend had pled guilty and turned state’s evidence.
“Anyway, after the usual voir dire questioning, the defense attorney used one of his peremptory challenges on me. When the judge asked why (a question the attorney need not answer, since they are peremptory; hell, if he doesn’t like the color of my tie, he can challenge me), the idiot defense attorney said, ‘I don’t like engineers or accountants on my juries. They’re too logical.’ You should have seen the look on the judge’s face after he said that!
“Almost needless to say, his client was found guilty, based heavily on the boyfriend’s testimony. The defense attorney was an idiot to even answer the judge’s question, and I don’t doubt that he managed to poison the remaining jurors against his client with that remark.
“Perhaps as an accountant I’m ‘too logical,’ but that attorney was certainly ‘too stupid.'”
“Not to be one to tell people how to shirk jury duty, but…” writes a third with a ploy all his own. “I never fail to bring both a shirt pocket copy of the U.S. Constitution and Bill of Rights and my copy of the Juror’s Rights and Duties, by the Fully Informed Jury Association (FIJA). I wear them both in a shirt pocket, openly visible. Oh, and I was an engineer, for my entire career. Strike 3!
“I have never gotten through the first, initial screening, even though as a retired guy, I am available for jury duty and only 10 miles from the regional courthouse.
“One thing the attorneys don’t want is a truly intelligent, or informed, Jury member. So they
select for the stupid, the uninformed and the type of person who probably gets their news
from Oprah or Conan O’Brien.”
The 5: “The first time I was called for jury duty in Baltimore city,” writes Addison by way of reporting on last week’s events, “I was seated for a murder trial. We sat for a day, during which written, taped and oral testimony of a witness to the crime was recorded… only to find out the witness couldn’t have been at the scene. He was in jail at the time.
“The second time I sat in on a personal injury suit against the city of Baltimore. A woman had tripped and fallen on an electrical grate while attending a function at the city’s convention center.
“Her attorneys labored to justify some $125,000 in compensation for the accident they were seeking. Every one of the jury members was swayed. Half wanted to up the amount.
‘Wait,’ we wanted to know… ‘haven’t her medical bills been covered, her lost wages and disability been paid? Hasn’t she already received a settlement based on the very costs they are totaling up to justify an additional settlement?’ Since no one on the jury could know the answer, we sent a written note to the judge, as instructed, asking how to account for the previous settlement.
“The note came back saying under Maryland law, we weren’t allowed to ask that question. The faction of the jury who wanted to up the settlement prevailed.
“Alas, on Friday, my expectation for further courtroom hijinks went unmet… I was dismissed at 4:30 without having had my number called. Bummer.”
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. “I saw Niall Ferguson’s Vancouver keynote,” writes a reader who bought our Vancouver package. “Enjoyed it, but didn’t expect he was going to ruffle so many feathers within a month. Just another example that Agora rides the bow wave of current events. Kudos to Bonner.”
Yes, Ferguson stirred the pot with his Newsweek cover story (“Hit the Road, Barack”). The Vancouver presentation was less partisan, and thus more insightful. And Bill Bonner’s presentation on “the declining marginal utility of stuff” offered an outstanding glimpse at his next book project.
Readers who bought our audio/video package have already downloaded the MP3 audio files; streaming video of all the sessions, loaded on a members-only website, will be available soon. And if you’re interested, there’s still time to sign up.