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September 05, 2004

You Are What You Eat?
by Rob Kirby

Ever heard that cliché before? Better yet, do you believe it? As I've aged I have found that my tastes have 'evolved'. While the major food groups were not invented yesterday and were almost always represented on my plate at the diner table growing up - my consumption was generally dictated by my own narrow tastes. More recently, the self styled 'meat and potatoes' diet I grew up with has given way to a more sophisticated (I would like to think worldly) palate. This has come as a result of my sampling the offerings of other cultures. Admittedly, new and different tastes have enhanced my enjoyment and appreciation for food. I view the change in my tastes as maturation or progress, others might refer to the change as inevitable.

I wonder if any of you have ever stopped to consider the information or 'news' you consume? Aren't our thoughts, beliefs and actions the result of what we have been taught, read and shown? Isn't Western thought overwhelmingly predominated by the 'core teachings' that communism (or other brands of fanaticism/totalitarianism) is bad and capitalism (free markets/speech) is good? In today's Western world there are no doubt few who would question this claim. Empirical evidence supports the contention, the Berlin Wall has crumbled and Communism has clearly failed. The only 'fly in the ointment' in this line of thought, the seeming resounding success of China (who at last count was still a communist country) which every enlightened western economic power is lining up to 'get a piece of.' Methinks Capitalists simply rationalize this anomaly as 'the price of progress.' Many of the elitists who stand so much to gain from fraternal commercial liaisons would even argue that the best way to bring about change is by engaging them (China) and demonstrating to them the benefits of our fine system. They justify the resulting seismic shifts in the fabric of our society as being inevitable and necessary under the cover of productivity enhancement. The key thing here, in my mind, that they need a reason to 'hang a hat on' - for things not being as they should. I ask, is this progress or is it simply inevitable?

Another 'core concept' in the mantra of economic Capitalism is that safety is achieved through diversification. The mainstream financial press drums this into our heads every day of our lives. This sound reasoning has led to another progression - namely that I expand the sampling of news I consume. In my 'meat and potatoes' past the Talking Heads of CNN/CNBC and a national daily newspaper sufficed. Now the menu includes not only the former but daily doses of delicacies such as Jim Sinclair, Steve Quayle, Drudge, Le Metropole Café, Financialsense, Rumor Mill News, Safehaven, Peoples Daily News (China) Online, Gold-Eagle, Al Jazeera Online, The ContrarianThinker and Kitco's Gold forum. Like my taste in food has grown more diverse and varied, my preferred method for consuming information is now a multi-sourced smorgasbord. With the aid of hindsight, I now know this was both progress and inevitable.

The upshot of consuming news from such a wide range of sources is that I personally feel 'better informed' or dare I say - empowered. The downside - I don't necessarily 'like' everything I see and hear. A lot of old perceptions I held about the way the world works have been discarded, others have received their fair share of scrapes and bruises.

The beauty of a free market economy; one is 'free' to choose between macaroni and cheese or salami on rye with cheese for their lunch. Both are good fare and the ability to choose enhances the taste all the more. The question that I have is: On our current course, will there come a time in the not too distant future when the cost of bread, cheese or salami will be too prohibitive to make a sandwich of any kind? Where things tend to get awry is when the custodians of the "fiat system", or gatekeepers, revert to their instinctive carnal greed and 'crank up' the printing presses. History is littered with documented cases of just this type of abuse. A reader of one of my earlier essays felt compelled to write and share his thoughts with me:

"One day because of an unknown catalyst the foreigners will start sending the trillions of IOU Nothings back here. And when they do it will make currency collapse that will dwarf anything anybody outside of places like Argentina has ever seen. Just to give you an example I was born and raised in a communist country and have see a price of bread jump from 4 to 8500 units in 16 years and later chopping of 12 zeros from the worthless currency."

- S.B. 2004

Everyone I meet and greet and talk to claim they do not want to live in a world like this. Given a choice, neither do I. When I step back and think about it, I doubt that any of the folks in communist countries or Argentina really had a "life like this - described above" envisioned for themselves or their children either? So whose choice was it? Does anyone notice any similarities? I ask, was the denigration into the "real" situation outlined above the result of progress - or was it simply inevitable?

One myth I have found it necessary to 'discard' is that the capitalist system as we currently 'know it' is constituted of free markets. I find this necessary because I live in the real world. Regulator's insistence that our markets are "free" started off leaving a very sour taste in my mouth. Now, I can no longer swallow it at all. A large and continuously growing body of irrefutable evidence points to abuse at the highest levels and outright fraud. It suggests that our once sacrosanct financial markets and economic reporting at the core of the capitalist system might actually be a huge ponzi-scheme. As sure as vodka comes in three or more flavors, my current level of understanding is that financial markets are rigged and managed to such an extent that it would make the central planners of the former Soviet system jealously drunk with envy.

We now live in a world where people applaud and cheer when the value of their paper assets and baubles appreciate in value yet hiss with disdain when the price of oil (energy) does likewise? We are told that inflation is non-existent or benign - yet everything meaningful costs more? Jobs are supposedly being created hand over fist and are plentiful - unless you are trying to find one? We are told that the National debt/consumer debt and leverage is no reason for concern - yet interest rates are held at 'emergency' low levels? We are told that our economy is strong - yet we increasingly sell less to the rest of the world and the dollar declines?

From an historical and current perspective one of the most precious and universally accepted stores of wealth is gold - yet its biggest holders seem obliged to notify the world in advance that they will be discharging their 'vast' supplies with increasing regularity regardless of price? Acceptance of this proposition alone is tantamount to treason to the core value of free markets and capitalism, namely one always tries to maximize the value of that which is precious, rare or dear. One of the loudest voices in the world of those who would lessen gold's global importance is arguably one of the worlds greatest 'gold bugs' - namely Fed Reserve chairman Alan Greenspan. Yet, he has written and published work on his understanding of just how important the gold price is in a free market economy? Confronted with these empirical truths I ask myself, is this progress or are we simply witnessing the inevitable? Now I ask, dear reader, where is it going to end?

Rob Kirby
Kirby Analytics

Copyright © 2004 - 2006 Rob Kirby

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