To save a nation, what will it take? Part VI

We’ve been talking about inflation but it’s time to move on. We’re moving on but with a few parting words. I hope it’s clear to you that inflation just doesn’t happen without a cause. Nominal inflation can result from the natural result barter, but excessive inflation is the result of manipulation. Out of inflation many get poorer while many get richer. Out of inflation the poorer, which are the vast majority, become, because of necessity, more dependent on federal handouts. Out of federal handouts comes strings attached that we must learn to live with. Out of attached strings comes less freedom and independence. Out of less freedom and independence we become easier to manipulate simply by someone in the Federal Government, or in the coming world government, (Puppeteer) making us jump like puppets and live according to a universal script. If you have been observing the changes that are in the wind, and have paid attention to the happenings around the world, you will have noticed that the ultra rich, those folks who fly around the world in their private jets to meetings where we are not invited, have toned down their rhetoric, yet are spending their wealth to further their cause. Their cause is what we should be leery of.

Dona and I got a check in the mail the other day. It was from our benevolent State Government. Did I accept the idea that maybe they love us? No, I just sent them way more than they returned, so, in effect, I sent them big bucks, they sent me a little back. Yet, they didn’t have to did they? Even if it was in pretense to ease the burden of high gasoline prices. Frankly, I would rather have cheaper gas.

Did you notice, it came in the midst of an election?

I’m not saying that it wasn’t a clever idea in politics, I’m just saying that you shouldn’t begin a romance with the governor because of it. And it helps us discuss an aspect of inflation. You’ve heard it before and I’ll say it again, there are no real “Money Trees.” Sorry to say that because there are times that I could use one, but, in the long run, we are better off without one.

Why are we better off without a “Money Tree? OK, one thing I thought about; what do we do with the leaves of a tree in the fall when the leaves turn brown and begin to fall to the ground? We rake them up and burn them because they are worthless. It’s awful to think this way, but really, it’s more truth than fiction. And here’s why.

Money in itself has no value. It’s hard to think that way, but really, it’s only an exchange certificate. In other words, as long as it is circulating around you can exchange a dollar for merchandise that someone thinks is worth a dollar, or at least thinks they would rather have what you’ve got and the dollar is burning a hole in their pocket. But, don’t forget, there was a day when a dollar could actually be exchanged for an equivalent value of gold. In other words, the value of a dollar was locked to the value of gold. Its value didn’t run all over unchecked. But, in the wisdom of a president. Or the whim.

Soon after taking office in March 1933, President Roosevelt declared a nationwide bank moratorium in order to prevent a run on the banks by consumers lacking confidence in the economy. He also forbade banks to pay out gold or to export it. Also, he mistakenly thought that one of the best ways to fight off an economic downturn is to inflate the money supply. And increasing the amount of gold held by the Federal Reserve would in turn increase its power to inflate the money supply. But we have learned that increasing the money supply artificially only succeeds in decreasing the value of the dollar by an equivalent amount. You know, instead of buying the kids a two dollar pair of shoes, we buy the same pair for four dollars. As far as more gold in Fort Knox, well that makes the country appear more wealthy, but it does little to lower our prices at the super market. You could say that money manipulation works, but what I have experienced so far is that it doesn’t. Further, President Richard Nixon's actions in 1971 to end dollar convertibility to gold and implement wage/price controls were intended to address the international dilemma of a looming gold run and the domestic problem of inflation. This is to point out that government’s love to play with our money, has proven to cause confusion and hardship. “When you have a perfect free market, it’s difficult to predict the future, But when you have a market that is disturbed by government manipulations and money printing, it’s impossible to make any predictions.”

Marc Farber