first majestic silver

The Astrological Investor

June 23, 1998

The internet has established itself as the truly rising star of human communication that people have dreamed of since spoken and written words were first exchanged. It might be a limitation of imagination to believe that the only thing that could surpass the internet on this score might be mental telepathy itself. Except that downloading for archive or hard copy might be a problem there.

As democratic as the internet is, there has been no sacrifice of content. Indeed, its very ability to give anyone with a computer, monitor, and modem a platform from which to play to the world is what blasts through the barriers of pre-digested pap, drivel, and bland information, opinion, and intellectual entertainment traditionally foisted upon citizens by a small number of media industry operators and their busy hive of drones. Chief among the net features that provide grist for any thinking person's mental mill are so-called "chat groups" and forums devoted to specific topics and categories. There is no greater force for binding an intelligent, citizenry than communication and free expression of ideas. Thinking people realize they are not such freaks after all, nor are their fellows round them quite the bumbling nitwits they had presupposed for are too long. There is always something one can learn from another human being, even if it is what not to be and do, and this is the priceless gift of communication.

In a recent comment at a wonderful and respected web forum devoted to gold and the insights of gold investors and analysts, one recent poster chimed in with his oft contributed opinion that all of he "wave theories," including the historical Kondratieff Wave, subscribed to by some market analysts, investors, and observers, re total bunk and of little use in predicting markets, and that Fiat currency and the massive expansion thereof has been an important actor in arriving at today's unprecedented material prosperity. While this particular poster made other, very sound and intelligent comments in the same offering, most of which we could hardly is agree with, we felt stimulated to address these two flawed assumptions.

We DO agree that we are in the most expansive era of material prosperity for humanity we have known. This is very widespread and benefiting many people around the world, as well as in the "Western" developed nations. However, one cannot necessarily praise "Fiat money," as this poster does, for such prosperity. Prosperity always comes from the mind and hand of man. Money is merely a conduit of the flow and exchange of talents, abilities, and work. It could be argued that a true and pure gold standard would have not only afforded the same march of development, but would have more evenly and relatively preserved the purchasing power of each monetary unit over time, thus assuring for each generation not only the PRESERVATION of the purchase power of their savings, but an ENHANCEMENT of same. This would have been the natural law legacy of the young truly providing for the old by the value added to society of their thoughts and actions and work. In a Fiat money society, just the opposite occurs. The constant deterioration of the purchase power of the monetary unit insures the need for government to become the provider of "welfare" and old age subsidy, as the natural law has been circumvented by "fictional reserve banking" and manipulation of the monetary stock for political purposes.

Due to continued inflation of the money supply, Inflation itself will continue and rear its head down the road. The recent relative handful of years in which "deflationary" forces (misnamed) have appeared are drawing to a close. The expansion of capacity, ingenuity, communications, and connectivity which has served to equalize wage rates and production costs throughout the world, like water finding an averaged level when compartments of varying depths in a tank are opened up to each other, is drawing to a close. This heightened global activity in only the past decade has been, among other things, a marvelous counter to the continued expansion of money supply and credit everywhere in the world. The more extreme cases of which are starting to burst at the seams, as is evident in Asia currently.

While it's true that it can be argued prosperity reigns nevertheless, the "cost" of such prosperity, which would have been achieved freely anyhow with a true gold standard, is now the overweening power of the state and its intrusion into every aspect of human life - simply because it issues paper money arbitrarily. The proper order of things is for political purposes to be constrained and directed by free market forces, the true choices of free citizens. This is aberrated and reversed, and the citizen is enslaved by the state for an illusory pottage. The logical consequence of this has been a deterioration of the fundamental basics of living for all people, at the expense of a broader circulation of peripheral gadgets and garbage, entertainments and foolishness, waste and corruption. For these things, naturally, the People are not entirely blameless either.

There should have been plenty to provide homes, food and clothing, and quality education for all - yet these things are still lacking, and future generations are at risk. Monopolistic bureaucracy cannot provide the cost-efficient, consumer-responsive services that free institutions can. A far too heavy dependence on government for far too much of what people should be doing for themselves has separated citizens from their important foundational institutions, and left those institutions in shambles. Today government attempts to withdraw from some of the responsibilities it has taken on, now that its failure to properly manage foundational human institutions is evident. But it leaves a vacuum in the process, wherein "free" citizens have been left spoiled and ineffective by decades of dependence, consumerism, and childish thinking about the essential values of life. The societies of the world are now spiritually and culturally bankrupt. History demonstrates that economic bankruptcy is never far behind such a condition.

This condition has been arrived at, in great part, through the power of government fiat over the citizen's money. Wherever Fiat money is defended, more rational voices must be raised in protest. Size of the money stock by itself is no guarantor of prosperity. If there were only one million gold ounces of money in the world, then paper notes written against a thousandth of a grain would stand as currency as effectively, and more so for future and prior active generations, as a zillion paper dollars backed by a zillion gold ounces. It is the relative value, and the integrity of the purchase power of the monetary unit that Fiat money advocates fail to grasp. Whether out of ignorance, or malicious intent, this interpretation must be exposed for the specious logic that it is, and the vile corrupter of nations it has become.

As for those who disdain historical cycle waves of any kind, we would only offer the thought that this is the FIRST Kondratieff Wave in history in which NO nation on earth is on any kind of a gold standard. If this fact is so assiduously analyzed by us and many of our technical analyst compatriots, it is CERTAINLY not lost on Alan Greenspan, who is not merely a formidable fundamentalist, but a masterful theoretician, economic historian, and highly metaphysical thinker in these areas. It is not for nothing that the current "deflation" phase of the K Wave is being staved off, and perhaps stabilized, by the greatest monetary expansion in history.

We assert that the "Kondratieff Wave" is still very much in operation. We would simply point out that this time around there is a "wild card" influence that must be taken into account.

It would not be in any way too much to expect that a brilliant free market thinker and economist such as Federal Reserve Board Chairman Alan Greenspan would not see his opportunity to steer the economic ship of state through the dark seas of deflation at the trough of the K Wave with the simplest antidote and preventive - lots and lots of money and credit. All that would be needed to do so would be a suspension of a life-long ideology and a decision to play ball with the world as it is. Indeed, the longest business boom in recent U.S. history has rolled along with interest rates and wholesale prices steady to lower. The naturally price-absorptive tendencies of this deflationary trough leg of the K-Wave would have spelled total collapse under historically traditional mixed monetary conditions, except for the fact that no monetary system whatsoever is beholden to commodity or specie backing these days. There was a time that gold, and gold movements, were nature's final and unyielding control and remedy against currency manipulations and degenerations. So long as there was SOME official and obligatory relationship between a nation's paper and gold, there had to be an accounting sooner or later. Usually sooner.

Mr. Greenspan, in his headier Ayn Rand Objectivist days once wrote "The law of supply and demand will not be conned." But perhaps the Chairman has temporarily circumvented that bit of natural law by using it against itself. If over-abundant supply tends to depress the price of something, then interest rates could be dampened for a time by making sure that plenty of money is available. The oversupply might lower money's cost, or rate of interest, and prevent the emergence of the very thing that implodes stock prices and tips most people off to approaching inflation - rising rates and tight money. These are a few of the stock market's least favorite things, and, having boxed the nation's investors and stock bourses into a corner, at record and arguably overextended levels, it will be very difficult for the Fed to countenance any overt tightening. Such a move might create a stampede that would blow an overblown stock market out of the water.

The bad news in Asia is, for the time being, the "good news" in America. And not a moment too soon. Asian economic turmoil provides the justification, on many fronts, for continued U.S. liquidity expansion. A high money supply growth rate of 9% is not so damaging to the dollar when a good deal of America's competition is suffering defacto devaluations of 50%, 100%, and more. In the face of such devaluations, the dollar grows stronger each day. When stability comes to Asia, contrary to current psychology, is when the real trouble may very well begin.

In the 1960's, with similar interest rates and commodity price fluctuations, money supply expansion at 9 percent annually very quickly led to the Fed braking the economy abruptly. Coming as these bursts did in an upswing phase of the Kondratieff Wave cycle, this kind of money supply growth exteriorized inevitably, and periodically, as overheated business demand, commodity tightness, and financial speculation. Today we have only the financial speculation to gape at, as the natural tendency of the downswing of the K-Wave is to absorb the heat and light of an economy like a black hole. Mr. Greenspan's green-span has papered over the gaping mouth of that deflationary aperture, and is temporarily providing a pre-emptive cushion against its worst tendencies.

With nominal interest rates low as a result of Fiat money oversupply, investors have sought fatter returns than mere bank deposits could bring. They have jumped en masse into a paper financial market already set strongly to rising by institutional investors of the initial outpouring of lavish Federal credit creation. It is always the favorites of government, usually the banks and mainline financial institutions first, who are the initial recipients of inflation's unfair and uneven "advantages." After all, who "creates" the "money" if not the Central Bank? It is always the last recipient of the money, the average consumer, who suffers the most. In this case by paying an inflated price for the most inflated assets - in this cycle those stocks and bonds first purchased and bid up by the initial receivers of government created funds. These "investors" come lately will be left holding the bag. Later, they will suffer equally grievous losses when the monetized credit seeps into every nook of the economy and raises the prices of real goods while lowering the value of saved funds. The law of supply and demand WILL NOT be conned.

Just as this is the first downwave in K-Wave history in which there is no specie behind our paper note issue, so too, barring some earth-shaking revolution, will likely be the coming fresh upleg of the new cycle. Just as this down phase has been aberrated, and quite likely shortened, by a total fiat system in ways we cannot yet fully enumerate or imagine, so too will be the coming upswing. It will come in a world awash with credit instruments and inflated currencies. It will come in a world with even less of an underpinning in principles of financial discipline, natural law, and basic market metaphysics as in decades past. It will come without the required cleansing and washout of all of the excesses and economic and social perversities of the previous cycle. It will usher in a tornado-like vortex of money blowing to the wind, and gold and silver rising to undreamed of heights. As the yellow metal, the metal of the Sun and nature's true money, went from $42 to $850 between 1972 and 1980, it is not inconceivable that early enough in the new century gold will have risen from its current price to several thousand dollars per ounce.

In every case, historically, of boom and bust, it can be demonstrated that a true, direct, and pure gold standard, or any kind of commodity money standard did not exist. There was always some form of mixed standard, which inevitably lead to the leveraging of more and more credit upon an unchanging, or smaller and smaller real asset base. Now that asset base is gone altogether, and all that's left is the constant manufacture of more and more paper notes, backed only by the fool faith of their recipients. In recent years, the incredible proliferation of Yen in Japan in response to financial aberration has done nothing to right the economy. It has merely served to stave off the catharsis of institutional failures needed to start afresh. Japan's denial of economic reality is institutionalized itself! It is not a higher sea of money and credit that is needed to "stimulate" the Japanese economy. It is a retrenchment to sanity that is required. But today, the lunatics are running the asylum.

In a period of great prosperity, even those who would ordinarily have been left out of the relative mainstream of human progress can have TV sets, computers, cars, microwave ovens and more. The number of truly destitute souls among us has fortunately grown smaller. Compassionate citizens have labored to include and uplift them. Now that the means by which we do this reveals itself to be on shaky ground, all the more reason to consider afresh where true prosperity and economy, progress and value come from. It does not come from Fiat money. It comes from knowledge, principle, and discipline - moral and economic.

Perhaps as long as we all believe in Fiat money, this game of Musical Chairs can continue. Already the underclass, and now much of the "middle class," stand aside, having been dislodged from the game. Our children face deteriorating schools and declining educational and spiritual standards. Soon they too will have no place to sit down. Perhaps child labor laws will be repealed so that three or four people in a family can work to support a decent lifestyle, rather than just both Mom & Dad. When the music stops, as it inevitably must, the lone "winner" seated on the one remaining chair on the dance floor will be government, of course. Swollen with the remaining tattered booty of a gone civilization, there will be just enough for it to waste, but not enough for it to rebuild upon. Besides, it is not government that builds anything, anyhow, but rather free people with sound money. Money is merely symbolic wealth, and true wealth is knowledge, wisdom, health, honesty, uprightness, rectitude, and hard work. This does not come from government. It comes from God and The People. Why shouldn't our money?

A one-ounce gold nugget is rarer than a five-carat diamond.
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