BEWARE, ROBIN HOOD IS BACK AGAIN . . .
Kurt W. Kamber
We all know the little story about the benevolent and legendary outlaw captain of the English robbing gang who took the law into their own hands and set their own rules of justice by distributing the necessities of life to the poor through looting the wealthy. Even among the contemporaries, they had admirers who felt that helping the poor justified any kind of action and method, be it within or outside the legal framework. Today, we find it an amusing anecdote which happened in the Medieval times; for us it was a kind of first redistribution system of wealth. Who would not be somewhat sympathetic to a system which would narrow the gap between abundance and poverty, between those who have - in our personal opinion - excess wealth and those who have nothing to live off, not even the bare necessities, who go hungry? Practically all religions preach not to forget the poor and encourage you to do good by sharing some of your prosperity with the needy.
During the boom time after World War II, the politicians of the industrialised countries perfected the commandment "Help thy Neighbour" through a sophisticated redistribution concept called "the welfare state". Who could be against such ingenious system promising to eliminate poverty, to provide first-class medical services to all regardless of personal means, to open educational opportunities to everybody from all walks of life: The impossible seem to come true; it was like the long-awaited, man - made miracle for mankind would happen, the promised paradise finally coming to earth. We no longer have to wait for the life after death. It looked like the laws of gravity were put out of order. Politicians and governments became more daring in the process, the voters ever more demanding and the appetite for the blessings of the welfare state grew rapidly out of proportions. The sky was seemingly the limit!
Eventually, reality caught up with our utopia delusions. We had to take note, that not everything that was desirable, was affordable; because prudence and thriftiness gave way to wasteful and fancy actions. Finally the welfare state system was derailed and went out of control. The logic and pragmatism would actually call for re-dimension to realistic levels. But who wants to give up the goodies so easily, without apparent real need for it? Who would practise solidarity when we were trained to be individualists? Which government could admit that they were wrong with their campaign promises and forecasts for the future? Instead of solving problems vigorously, it became trendy to outsmart reality by applying so-called medicine instead of remedy. Governments, i.e. central banks toy around with the money supply instrument since they are not limited to any form of restrictions; the conveniently reflate or deflate with the aim to keep an ailing economy in shape. Initially and under normal circumstances, inflation retards the crisis for some time. It stimulates production because of the divergence between the internal and external value of the currency in question. It makes the particular country more competitive through the devaluating effect inflation has. However, the seemingly positive factors do not stay with us for too long, because they swap in all likelihood into another and more dramatic inflationary spiral. The more frequently and the longer the tool of inflation is used the less impact it has on the real economy. It is comparable to an anti-biotic treatment: Initially the patient's situation is briefly improved but not healed. Then ever larger dose have to be applied making the fabric of the patient's resistance level weaker and weaker and finally putting him into a situation where he is unable to fight back; the inevitable will happen. An extreme money supply expansion is easing the debt burden through the devaluation effect, but is undermining the liquid asset (cash) value at the same time. Isn't it the re-incarnation of the Robin Hood concept? The government in its relentless determination to continue with redistribution of wealth at all cost, is robbing most people of their accumulated wealth by creating eventually a financial asset inflation which leads to an immobilisation of capital and does not lead to an expansion of the productive factors of an economy, but to senseless speculation. Finally it leads to the collapse of the economic system when the bubble bursts. It all looks like a rerun of the 1930 crisis!
During the boom time we all were able to grow with the expanding economy and multiply our assets. Aside from the good fortunes and luxuries we finally could afford, we were striving for more: We wanted as ultimate goal a secure life without set - backs, without real challenges, without endangering our wealth position!. Whether working or being without a job, we should not starve. We ought to get a sufficient pension once we retire without really saving for it. We should be taken care of in case of illness regardless of cost incurred and without looking after ourselves by living a healthy life.
We should no longer be responsible for our deeds! All of a sudden, we start realising that reality does not conform with our dreams any longer; that there are sensible limits we cannot overcome. It is becoming obvious that governments on all levels can no longer match our expectations and find it more and more difficult to keep on fulfilling the promises made by politicians. What should be done? The answer actually is easy and simple: Suffer the near-term pain and let the market remedy the situation for us! It is easily said but since our economy is hooked on credit, this advice is not really feasible without calling for disaster. So governments start to play a double game: With the monetary expansion and low interest rates, it makes the debt problem better manageable, but it is diluting the substance of asset value. Isn't it the Robin Hood concept all over again? Take from those who have and give to those who don't! The only difference now is that we are personally involved and our hard - earned savings are at stake!
Boosting the monetary aggregate does not solve the underlying problems in any way. In fact, in due course it aggravates the economic conditions of a country. The money supply created is most likely not used for investment in new production facilities, because in a stagnating economy overcapacity is prevailing. The surplus money goes into financial assets and the first signs of such type inflation occurs in the housing markets. At this point the vicious circle starts: The central banks have to keep on increasing the money supply to keep interest rates down and save the real estate market from collapsing. This constant money supply is creating an inflation of financial products, specially equities and to a lesser extent bonds. So we actually have a triple bubble creation eventually as a by-product to the monetary expansion.
On the other hand, we have a deflationary trend in the real goods market. As mentioned before, we have overcapacity resulting in an oversupply of goods and services. Subsequently prices are declining, salaries and pension income at best are stagnating making the average consumer less affluent and more cautious in spending because taxes, especially the indirect taxes increase, cost for health care increases, tuition fees and rents are going up; The authorities start to charge for services which were previously rendered free of charge. Once this wheel is starting to turn; it will accelerate ever faster and one day there is a big wash-out of all the imbalances that were created beforehand by mankind due to the illusion that we could always have record growth! Doesn't it resemble today's environment?
When will this all happen? Unfortunately, nobody has the crystal ball. It can be tomorrow, within a few weeks, within a few years or even further away. The only sure thing is that it will happen! How can I protect myself against this form of asset dilution? Only through a tangible value with a high degree of liquidity: Gold in physical form! It cannot be destroyed, it is a safe currency because it cannot be easily reproduced by simply printing an additional supply, but the crucial factor is that you need a politically safe storage.
If today's message is so clear and obvious, why not start your gold program now? If you want all the positive factors combined (competitive pricing, free safe-custody in a safe place and pay-out of annual bonus) with solid and highly reputable partners, then click on www.goldplan.biz and get your password under info@goldplan.biz immediately! Don't waste your time, it might be later than you think! Remember: Robin Hood and his gang are back again!
Kurt W. Kamber, Director Goldplan
NDB Administration Centre Ltd.
22 July 2003
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