The Revolting Masses

         Over the past few days, it has been hard to ignore the emerging revolt in Egypt, regardless of what you think of its usefulness, or whether or not you believe the rioting masses will be able to bring about meaningful change. One of the images that will stick with me, though, was that of thousands and thousands of Egyptians swarming around police armored vehicles, forcing a retreat. A kind of tidal wave that should remind anyone how authorities and governing structures can be swamped in a matter of minutes. Another image that made an impression on me was of a young woman confidently, without any fear, saying that she was prepared to die rather than obey the government-imposed curfew.

            It also did not take long for some in the media to draw the connection between the economic situation in Egypt and the country’s political crisis. Why are people so angry? Two reasons made it to the top of the list: 40% of Egyptians make less than 2 dollars a day and inflation is 17%. When you make 2 dollars a day, food and energy inflation increases are impossible to absorb. Protests, riots, revolts are common throughout history, but as our world descends further and further into depression (oh- I’m sorry- even though the U.S. is in recovery), there will likely be more political and social unpleasantness straight ahead. 

          

Don’t Be Thinking You Are Any Different

            One reporter stuck in Cairo during the unrest lamented how the super rich in Egypt have no clue how miserable life is for the majority of Egyptians. That’s true, of course, but Americans or Westerners shouldn’t be too quick to mount their high horse regarding plutocrats and insensitive elites. I warn people who make these comments to look in the mirror first, or at least in their own backyard, before delivering stern moral judgments on others. Besides, for most of the twentieth century “democracy” is the last thing many Americans really wanted in the Middle East if that “democracy” even hinted at the oil spigot being shut off. I think many Americans are in deep denial regarding what makes their cars run, what provides their cheap food, what provides all of the “stuff” they take for granted. 

            Do Americans ever wonder about how this amazing country, no matter how great, still  isn’t all that different from other empires through history? Built and nourished with cheap labor and forged with military occupations, a lot of eggs were broken to make this country what it is. There are winners and losers, there are the haves and the have not, there are the rich on their yachts and the forgotten poor in the streets, there is the quiet desperation of laborers and the arrogance of people who believe they are untouchable, who are certain they can helicopter off of the burning platform when things turn nasty. 

            Speaking of people who can helicopter off of burning platforms, this week in Davos, Switzerland we got to watch the moneyed interests and public servants argue over how to rearrange deck chairs on the Titanic while sipping hot cocoa at a tony Alpine resort. On the one hand, witness the ridiculousness of bankers complaining about more government oversight when it was governments and their people who bailed out the bankers. But on the other hand, observe governments and their people acting like they had no idea that banks are legalized agents of fraud only condemned when the latest ponzi scheme taken part in by the average person blows up.

  The U.S Dollar Reserve System, Nazis, and Imperialism

            The GATA (Gold Anti-Trust Action Committee-gata.org) released a report last Thursday concerning the manipulation of the gold price by central banks and governments. GATA likened the Dollar Reserve system to the Nazi occupation of central Europe: in the 1940s the Germans ran huge trade deficits while ramming Nazi paper down the throats of the occupied. Nice job GATA-- as someone on a message board said, welcome to the No Fly List! But GATA should be commended for speaking truth to power regarding the monetary aspects of imperialism, and the report is also a must read for any concerned holder of Dollars. Many people claim that government meddling in the gold market ended with the demise of the last remnant of the gold standard in 1971- GATA claims otherwise. Whether or not you buy all of their arguments, the GATA report is a reminder that the Dollar Reserve System, as with all imperial currency systems, will not last forever. Nor was this reserve system particularly fair or above accusations of abuse and corruption. Governments will try to hide debasements: they will always- like a good magician- try a sleight of hand. They seek to obfuscate. Governments and their corporate allies own the conventional media, and they will try to dissuade you from turning to those assets which are outside of their system.

            The GATA report reminds us that the Dollar Reserve System makes people in the developing do real work, ostensibly in exchange for military protection and a deeply “liquid” bond market, while Americans can sit back and relax. If you study history, there has rarely been a fair monetary exchange: there have always been those closer to the fount of money creation, the favored few. But for how much longer will American dollars and American bankers be the favored few? At what point will revolt come, perhaps not as dramatic or as violent as what is being witnessed in Egypt, but revolutionary and shocking- a thief in the night, a “rogue wave,” washing away the fiat currency castle made of sand.

                       

  DOW 12,000 Comrade!  Prost!

            And while speaking about truth, let’s not forget, for the record, that the American Bailout Nation is a Socialist State. Most of us are socialists now. Americans have little or no savings that could sustain them if the government mortgage market, credit system, government handouts, social security, medicare, or (relatively) cheap oil and commodities brought about by the Dollar Reserve System went away. If Americans have any savings, these savings are “insured.” We have our insured bank deposits, our insured municipal bonds, and a kind of “insured” stock market since Ben Bernanke admitted that he is trying to use the Fed to jawbone the S&P higher. Oh, and lest I forget, Quantitative Easing is intended to insure that US Treasury prices don’t drop. Its just candy canes and lollipops for everyone it seems! DOW 12,000, whippee! Boy I wish I could have this kind of faith that we can all win with investments, that we can all be first, and that I don’t have to worry about mere financial concerns because the government is there to save me. 

            Too few people seem to be able to connect the dots that these “debts” will alternatively be inflated away or destroyed as this credit bubble deflates. I don’t care what anyone says about a precious metals bubble- only a fraction of the wealth in this country is legitimately held in physical gold or silver. I’m sorry to say it, but gold and silver are still a joke to the majority of Americans. A good example of the joke otherwise known as precious metals investing came last week from the ability of one guy with a mere 10 million dollars to bring the price of gold down 20 dollars in a day when his leveraged paper bet blew up. This speculator was allowed to control over 800 million dollars of gold futures with his 10 million dollars! Yes, you read that correctly. And you wonder why GATA is so angry about the way gold and silver are priced in New York? These markets are either played like a roulette wheel for bored rich people, or they are dumped on by corrupt entities who arrogantly defy the free market. Gold and silver are too small to count anyway, they will tell you. Gold and silver are “uninsured” by the system, after all. Never mind that deposed Tunisians were rumored to have taken tons of gold out of the country- gold is just for Tunisia and other poor little countries with thoroughly corrupt financial market and a bought-and-paid-for political class. Not the United States.  Not by a long shot… right?... Right?

            There are two ideas that are like nails on a chalkboard whenever I hear them. One, the United States and its dollar are basically invincible, and two, something like what happened in Egypt could never happen to those of us in the civilized, modern, privileged, “first world.”

            When you feel sorry for those Egyptians rioting against corrupt, decadent leaders, be careful you aren’t saying, “God, I’m so grateful I’m not one of them.” One day you may wake up and find yourself part of the revolting masses, too.