A commentary from Rudy Fritsch…

Donald Trump is now the POTUS… unless he is impeached or assassinated. Neither possibility should be dismissed out of hand. The US deep state is in total panic over what is happening worldwide. Recall that Lincoln and the Kennedy’s were assassinated.

Hegemony and full spectrum dominance are threatened; and seemingly Trump is part of the threat… or not? Perhaps he is simply a tool being used by the Kissinger crowd to further the Anglo/American Empire’s agenda that has been in play for many decades, indeed since Nixon made his historic visit to China.

Kissinger’s idea is for the US to ‘befriend’ the third greatest world power, in order to confront the second greatest power… the power that presents the greatest obstacle to the hegemon. Back in the 1970’s the USSR was the second power, and presented the greatest challenge to US hegemony; China was as yet far from being the great power it is now. Thus, Nixon’s ‘befriend’ China to ‘contain’ the USSR.

Today China is the second greatest world power… if not already the greatest, especially from an economic perspective; thus the ploy to ‘befriend’ Russia and ‘contain’ China. Indeed, Trump has made noises about this very action; he has named China as ‘public enemy no. 1’, along with Iran, ‘public enemy no.2’.

Time will tell how all this plays out, but no matter what one thing is sure; the world wide crisis is deepening. As Winston Churchill put it, “The farther backward you can look the farther forward you can see”. Or, according to Santayana, “Those who do not remember the past are condemned to repeat it”.

Two authors who took a good long look at the past are William Strauss and Neil Howe. Their 1997 best seller The Fourth Turning examined history, mainly Anglo American history, back to the middle ages. What they found was a cyclical history, not the linear history (of Western Civilization) as usually taught by mainstream education.

Each historical cycle or saeculum lasts for about 80 years, a typical long human lifetime. Each saeculum is divided into four ‘seasons’, rather like a year is divided into spring, summer, fall, and winter. Each season is one generation long, about 20 years. Strauss and Howe named the four seasons or ‘turnings’ the High, the Awakening, the Unraveling, and the Crisis. Examples of past crises are the Great Depression / WWII, the American Civil War, The American Revolution… and so on back to the Wars of the Roses at the end of the middle ages.

Following WWII, the last Crisis, came the American High in 1946… Then the Awakening in the sixties, the Unraveling in the nineties… and the Crisis we are in, the ‘Millennial Crisis’. The spark that started this Crisis was the 2008 financial meltdown. As each turning lasts about 20 years, we are almost half way through (and not yet at the peak) at least according to the examples of previous historical cycles.

History affects human generations, and humans create history. Clearly a traumatic crisis like WWII will affect the participants and their children (in very different ways); less so their grandchildren, who never experienced the direct effects of the crisis. By the coming of age of the great grandchildren, the crisis is hardly more than a page of (ancient) history. Those who participated in WWII are now almost all gone… certainly retired from power… and society is again vulnerable.

The Fourth Turning is not a book of prophecies or predictions; it does not pretend to anticipate what spark sets off the NEXT Crisis… although the debt problem was apparent even back in 1997. Even less so does it try to predict the path of the Crisis; it simply shows how society will respond to a spark, based on historical, generational lessons.

Each previous Crisis brought about major destruction… of the old social structure… and the creation of a new, different, renewed order. The exact outcomes are not predictable, but the total effect is clear; winter is here, and winter brings death. Spring will renew life, but winter must come before spring.

SO, it seems that Trump, the Gray Champion of the Millennial Crisis, may play the role that Washington played (Revolutionary Crisis), Lincoln played (Civil War Crisis) and F.D. R. played (WWII Crisis). Now ‘Gray Champion’ does not necessarily mean a nice person; rather, it means a leader with the single minded focus, dedication, and power (of ego?) to ride out the Crisis.

Will this play out? Will Trump truly be the millennial Gray Champion? Who knows… but all the indications written about by Strauss and Howe are coming into play. I suggest you read the book… and draw your own conclusions. There are several web sites, some by Neil Howe, that bring the predictions of the book up to date;

http://www.theburningplatform.com/?s=fourth+turning

http://www.fourthturning.com/

http://www.lifecourse.com/about/method/insight-overview.html

The bottom line is, Trump or not, Gray Champion or not, the Crisis is in play and will play out. We may have Total War, a la WWII but with plenty of nukes, the USA may have another Civil War; the current political and social setup will change radically. End of Empire is at hand.

This is the truth behind winter, behind the fourth turning; without crisis, no real change is possible, the embedded PTB would simply continue with business as usual. Crisis knocks over the existing order, giving room for something new and hopefully better to emerge.

What can we do, if Crisis is inevitable, and ongoing? Simply this; just like we prepare for the winter season, we must prepare for Crisis. We prepare by learning as much about it as we can, and by acting on our knowledge. We encourage others to do the same; to retain sanity and balance even when the winds of destruction howl about us.

We prepare the storm cellar, with ample supplies and good neighbors to help each other in times of need. As always, especially as the initiating spark is financial… or rather, monetary… we must have a supply of real money on hand; Gold and Silver. Other preparations depend on our specific circumstances.

Even a squirrel has enough brains to know when winter is coming, and to hoard an ample supply of nuts, hidden away, to help it survive until spring arrives. As Homo Sapiens Sapiens, do we have as much brains as a squirrel?

Rudy J. Fritsch

The pundits are writing about the US election till the cows come home; right wing, left wing, neocon, neoliberal, alt-right, ad absurdum. Is The Donald a bigot, a misogynist, a white supremacist? Is he part of the 0.1%; is he anti-establishment, what in tarnation is he?

The bottom line is that US voters have bitten the bullet; better the devil we don’t know than the one we do know. Kilary and her $upporter$ were and still are clearly on a path towards confrontation, regime change, war… probably WWIII. With The Trumpster as president, chances are that war will be delayed if not avoided.

In any case, the answer to ‘making America great again’ is at the fundamental level very simple; the choice comes down to America Great, or Great American Empire. No way to afford both… kind of like LBJ’s ‘Great Society’; guns AND butter, rather than guns OR butter. If the new president actually starts to peacefully dismantle the empire, starts to close the ~1,000 US military bases worldwide, stops insane and expensive regime change wars, then Dollars thus saved could be put to good use rebuilding US infrastructure.

With Dollars saved by abandoning empire, the US military may even be able to afford to buy ammunition (cannon shells) for the latest ‘invincible’ US navy destroyer, the Zumwalt… although at $800,000 per shell (!) the price of keeping this marvel (that has broken down again and this time had to be towed out of the Panama canal) armed is insane. Trump will have to truly ‘drain the swamp’… including the totally corrupt US military acquisition swamp… to ‘make America great again’. Good luck to him.

But while this entire Trump business is clearly important, there has been very little attention paid to India; India, the second most populous country in the world, India the world’s largest democracy. Mobster Modi has decided to demonetize the 500 and 1,000 Rupee notes; about 85% of circulating currency in India. The purchasing power of these notes WAS about $7.25 and $14.50 US. The results are devastating to the majority of Indians.

People are robbed of their means of survival, people are dying waiting in line at totally unprepared banks to exchange their ‘money’ -that is no longer money- for new ‘money’… but there is hardly any ‘new money’ to be had, except through the mafia, at a 20% haircut. The underclass is dying, while the criminal class is growing fatter by the moment.

How desperate can a G’man get to do this? Clearly Modi must understand the devastating consequences of his actions, but is so desperate for funds to keep the game going that he has ignored devastating losses. Indeed, he will likely lose the next election… but by then India will have suffered a great setback. The Indian economy was on a path to grow at ~8% yearly, ahead even of China… but this debacle reduces GDP growth by at least 2.5%… if not more.

In the meantime, the mainstream media is reproaching the Indian G’man… for doing a lousy job, for being unprepared, for incompetence… all of which is true, but misses the main point; the MSM is actually in favor of this ‘demonetization’, of forcing Indian people to go begging to the banks, of spreading the lies that demonetization is an effort to ‘overcome money laundering’ and is the proper thing to do… to ‘help the poor’.

In other words, robbing the people of their hard earned cash is fine, as long as the theft is done ‘efficiently’ and with ‘competence’. Oh, my aching back!

But beyond the insanity and desperation, there is another interesting aspect to all this, an aspect that is NEVER discussed, not even whispered about. Why, demonetization is also ‘devaluization’ if I may coin a phrase. By decree, the Indian G’man has not only destroyed ‘money’ but has turned ‘valuable’ paper totally worthless by the stroke of a pen. The flip side of this, of course, is MONETIZATION… that is, turning totally worthless paper into ‘valuable money’ by the stroke of the same pen. How enlightening!

If you take a peek into history, you will see that Silver was ‘demonetized’ by the US G’man in the nineteenth century. By the stroke of the pen, Silver was no longer money (no longer legal tender)… and yet, somehow, Silver was not devaluized. Indeed, a Silver dollar (one Dollar face value coin) made of 90% Silver today buys over 20 US Dollars. Demonetization of Silver money is not equal to devaluization, quite the contrary.

Gold was demonetized in stages, first by FD Roosevelt in 1933, who confiscated (stole) the American people’s Gold and gave them paper in return… at the rate of $20.67 /oz… Then in a few months he marked up the value of the Gold (that is, devalued the paper given to the people) to $35.00 / oz.; a loss of more than 50% of value in a few months.

The demonetization of Gold was completed by Nixon in 1971, when he ‘closed the Gold window’… that is, reneged on the US commitment to redeem every thirty five US Dollars for one oz. of Gold, as per the Bretton Woods agreement. Gold was demonetized fraudulently; the honest approach would have been to devalue the Dollar, to balance all newly printed Dollars against physical Gold reserves.

Again, demonetization is not devaluization; today, the very same OZ of Gold that bought 35 US Dollars in 1971 buys over 1,200 US Dollars in 2016. Demonetization of Gold money is not equal to devaluization, quite the contrary. It is pretty clear that true value resides in Silver and Gold, while the value of paper ‘money’ is an illusion, an illusion that dissolves at the stroke of G’man’s pen. Fiat demonetization is indeed fiat devaluization.

I suggest that inflation is but a form of slow demonetization; the loss of value of Fiat currency such as US Dollars, Euros, Zimbabwe dollars… or Rupees… spread over years. Demonetization is inflation compressed into a few days or weeks. Funny how when North Korea demonetized their currency, robbing North Korean citizens, the world yawned. Now that the country with the second largest population on planet Earth has demonetized its currency, we need to stop yawning and wake up before we all pay the Indian price and are demonetized into the poor house.

Desperation of all G’men is growing rapidly. The theft of a few percent a year… the nominal ongoing inflation of all Fiat currency… is no longer sufficient for the profligate G’men; now it takes confiscation of all wealth to keep the game going for a while longer.

Already the EU has ‘demonetized’ the 500 Euro bill, and Citibank in the US has stopped accepting cash (Dollars; legal tender for all debt, public or private). I usually end my articles by suggesting that you keep cash at home; well, I believe this is still good advice, but I suggest small bills. The $100 Dollar bill is under imminent threat. Of course, the best answer is to hold money that has real, not just imaginary value.

Rudy J. Fritsch – November 2016

 

I have written many articles about Gold, about the Unadulterated Gold Standard, about the components of a Gold based economy. Perhaps it’s time for a bit of a ‘reality check’. Is the very idea of Gold money, the very idea of honest money in an honest society Utopian? Especially in this day and age, an age of the big lie, of tyrannical governments, of crony capitalism, of loss of human vitality…

 

After all, families run and have always run without money, except as needed to deal with the outside world. Same with the extended family; work is done, responsibilities shared, but money never changes hands. Why does this kind of very human interaction have to be limited to families, or at best to small tribes; why can’t the whole world run this way? Why not a world without money, with only the best interest of all as the driver? Why a ‘profit driven’, money based economy?

 

Many attempts have been made in just such efforts; efforts to replace the money based economy with an economy based on altruism, on human understanding, on shared responsibilities… the classical Marxist cry ‘from all according to their ability, to all according to their need’. Indeed, communal living has been tried on many scales, many times, from small ‘hippie’ communes to the great socialist experiments of Soviet Russia, of Communist China. The very same socialist experiment is now being tried in the formerly capitalist USA.

 

All these attempts have failed dismally; more than dismally, have failed tragically and with lethal consequences for hundreds of millions of innocent human beings; in Stalin’s five year plans, Mao’s Cultural Revolution… and perhaps soon in the USA’s ObamaCare as well. Why do these social experiments fail… and why does Humanity keep trying them, in spite of repeated tragic failures?

 

Why these Utopian experiments fail is easy to see, if we but choose to look and see the truth; the idea that what works in a family or small tribe can be scaled up without limit is Utopian. It is a false belief, and a lethal belief. Sociologists have researched this very topic; money-free societies can exist, do exist, direct democracy can exist, does exist, in communities of up to about 250 people. Once this number is exceeded, the family based, altruism based system starts to break down.

 

No rocket science or brain surgery is needed to see why; in a small group, every one knows every one else; knows who to trust, knows who is a good leader, knows who is a dead-beat… and the family connection brings forgiveness to relationships. As the group grows, it becomes harder to know whom to trust, whom to vote for… and much less forgiveness is given to strangers than to ‘Aunt Mindy’ or ‘Uncle Joe’.

 

The effort to scale up small scale communities to thousands, indeed millions, is doomed to fail. The hard reality is that a different system must be used to enable society at large to survive; if we don’t know who is making a promise, if we don’t know whether the promise maker can be trusted or not, the system itself must generate trust. Without trust, society breaks down and civilizations collapse.

 

Fiat currency is always and everywhere a promise; we don’t know, indeed cannot know if the promise maker is to be trusted. After all, Ben Bernanke is not our intimately known ‘Uncle Joe’… and Janet Yellen is not our ‘Aunt Mindy’. We cannot trust them, as we do not know them… we only know stories that are spread about them… stories that are mainly ‘spin’… i.e. mainly lies.

 

We do not have an intimate knowledge of their personality, their mindset, their belief systems; we don’t have a long term history of direct interaction with them. If we do trust them, we are being naïve; and naivety generally leads to trouble… just as Utopian social experiments lead to trouble.

 

No system based on trust can work, unless there are solid grounds for giving trust; either intimate knowledge of the players based on living in close proximity, as in an extended family, or a strong case of common interest. The interests of Central Bankers bear very little commonality with the interests of the average wage earner; and I suggest very few people on this planet have lived as part of Bernanke’s or Yellen’s family… extended or otherwise.

 

So we come to it; the Fiat system cannot be trusted, as the purveyors of the system cannot be trusted. The very idea of trusting a Fiat system is Utopian, and therefore lethal. Only a system that is inherently trustworthy, and is not dependent on the promises of either Bernanke or Yellen or of any other power seeker can possibly work. Only a system that is not under the control of and cannot be controlled by any ‘special interest’ can be trusted.

 

Of course, there is such a trustworthy system, a system not controlled by any special interest; it’s called the Unadulterated Gold Standard. Gold is not a promise, but a present good, a ‘bird in the hand’ vs. a promise of ‘two birds in the bush’. Gold is the touchstone, the acid test of any promise ever made. Gold is the ultimate extinguisher of debt; that is Gold fulfills any economic promise made.

 

A bond is a promise; and if redeemed in Gold, a promise that proves itself to be true. A Real Bill is a promise; and if redeemed in Gold, a promise that proves itself to be true. A bank note is a promise; and if redeemed in Gold, a promise that proves itself to be true. A promise that is ‘redeemed’ in another promise is proven to be what? Proven to be nothing but a lie.

 

Fiat currency is a lie, Fiat bank notes are lies, Fiat denominated bonds are lies… an economy based on Fiat is an economy based on lies. That is where we are today, living under a system based on lies… and the results are starting to show. Just as the lies of the Utopian socialist experiments in the USSR and China showed up… in the form of war, famine, death… so the results of living under a Fiat system of lies are starting to show up.

 

Is war far away? Is famine far away? I suggest both are already upon us. Thousands are dying in wars at this very moment… hundreds of thousands have died in the last few years… and the death of millions is in sight. The push of a button by a power mad psychopath would ignite the conflagration.

 

One third of the world population is already hungry; and not just in the so called ‘underdeveloped nations’. In the UK thousands of retirees are facing a choice; freeze or starve. These poor innocents cannot afford both food and fuel. In the meantime, the power mad psychopath running the US government is busy shutting down power plants, pushing energy costs to the sky. How many American retirees already face the same choice; freeze or starve?

 

Why Humanity keeps trying Utopian experiments is a conundrum; the special interests, the power seekers, the parasites spread reams of propaganda promoting their Fiat system; the very heart of the ‘big lie’… but why do people swallow the lie? Is it as simple as Santayana’s famous ‘those who fail to learn the lessons of history are doomed to repeat them’… or is it more than that? Why do we fail to see the truth? Do we fear to see the truth?

 

The truth will set you free. Do right and fear not.

 

Rudy J. Fritsch

 

Editor in Chief

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In my recent article ‘Entrepreneurial Magic’, I discuss the topic of trust based credit… or how to make money without money. I discuss how trust based credit reduces the cost of doing business… any business. In today’s G’man dominated world, only fringe businesses can benefit from using trust based credit. These benefits should be available worldwide to all business. Indeed these benefits were available under the Classical Gold Standard; as observed by Natural Philosopher Adam Smith.

Adam Smith saw that the ‘heavy lifting’ in world trade was accomplished not by the circulation of money (Gold and Silver coin) but mainly by the circulation of Bills of Exchange. Indeed, some people call this observation ‘The Real Bills Doctrine of Adam Smith’… as if Adam Smith had invented this ‘doctrine’.

 

Like any true natural philosopher, Adam Smith observed reality, saw what was happening with clear, unbiased vision… and then proceeded to write up the observations and hypotheses based on his observations. Quite unlike today’s mainstream ‘science’; where observations are selected to support current dogmas.

 

In any case, Adam Smith saw the almost magical qualities of Real Bills… aka Bills of Exchange. If you missed the last couple of articles, Real Bills are commercial bills drawn against urgently needed consumer goods delivered to retailers, with terms… that is, the bills have an extended due date… unlike retail bills that need to be paid cash on the spot.

 

Until their due date when they must be paid in full, Real Bills carry the value of the merchandise they were drawn against, and will circulate as a means of payment… increasing the efficiency of Gold and Silver money virtually without bounds. They are called Bills of Exchange because they change hands in clearing payments.

 

They are also called Real Bills because they are drawn against real goods already delivered. These goods are in urgent demand by consumers… consumers who will pay for the merchandise in Gold coin, thus allowing the bill to be paid in time by the retailer… indeed, perhaps paid before due date if consumption is brisk; prepaid at a consideration. This ‘consideration’ for pre-payment is the origin of the discount rate. Unlike interest that originates as the cost of (borrowed) money, the discount originates as the consideration offered for early payment of Real Bills.

 

As discussed in my last article ‘Trust Your Neighbor-Tie Your Camel’, the cost of doing business by borrowing to pay for inventory is very high… around 50% of net realized profits go to pay the cost of funds…!  To see how detrimental this is to employment, consider the idea of the Marginal Productivity of Labor…oops, bit of economic jargon slipped in here… but the idea is simple once you look at it more closely.

 

Margin is the line dividing two things… like the border of two countries for example. The productivity of labor is simply how much value an hour of work creates… whether the labor is shoveling coal, doing brain surgery, or cutting the patron’s hair. All work is called ‘labor’. Margin is the line between labor that is profitable… and labor that is not profitable. This is the Marginal Productivity of Labor; the line dividing profitable from non-profitable (loss making) economic activity.

 

Suppose the work of digging up 100 Lbs. of potatoes creates value of $20.00. That is, from a hundred pounds of potatoes in the ground to one hundred pounds of potatoes in a sack ready to ship creates (adds) value of $20.00.  Now suppose an expert can dig 100 Lb. in one hour… ($20 worth) while a less experienced or less motivated picker digs 75 Lb. per hour ($15 worth), and a rooky, wimpy picker bags 50 Lb. ($10 worth).

 

Our expert creates value of $20.00 per hour, the journeyman creates value of $15.00, and the rooky creates $10.00. Assume the overhead cost of the potato digging business is $10.00 per hour, and the minimum wage is $5.00… Overhead is an indirect cost, wages are a direct cost. Overhead is the ‘cost of doing business’. It includes costs of capital, compliance costs, taxes, etc… Direct cost is the payment made to the worker; paid directly for the work of potato digging.

 

If we take $10.00 (overhead) and add $5.00 (wages) we can see that the net value created by the expert is $5.00 ($20.00 -$15.00 = $5.00). This net value pays profits… or bonuses, or expansion of the farm, or whatever. On the other hand, the journeyman digger creates net value of $15.00 – $15.00 = $0.00… Break even!

 

There is no room for profit, or bonuses, or growth of the farm… this is the margin… the ‘marginal productivity of labor’ in the potato digging business is $15.00 per hour. Finally, the rooky who produces $10 of value per hour, will not create any NET value; indeed, $10 – $15 = -$5.00 … a five dollar per hour loss. The farmer cannot afford to hire the rooky; he is ‘sub marginal’.

 

So what can we do to improve the situation? Clearly the liberal stance of ‘increasing the minimum wage’ will put more workers out of work… as an increase in the cost of doing business raises the marginal productivity of labor; more workers will become sub-marginal. If the minimum wage is pushed to $10.00, the expert will become marginal. This wage increase will put the expert out of a job, and force the farmer out of business… or cause an uptick in the cost of potatoes to compensate for the increase in costs.

 

On the other hand, the conservative stance of ‘getting rid of minimum wages’ may put more workers to work… but at starvation wages. Neither liberal nor conservative views are complete; the real answer is to reduce the cost of doing business… or, the same thing, to lower the marginal productivity of labor; make it profitable to hire less productive workers.

 

Suppose overhead costs are reduced from $10.00 to $5.00… by reducing the cost of capital (through the use of trust based credit instead of bank borrowing) and by reducing compliance costs and taxes; now the journeyman worker indeed produces a net positive value. $15 – $10.00 = $5.00 of net value. The expert picker would also produce more net value; $20.00- $10.00 = $10.00. Why, the expert may even get a raise.

 

And our rooky? He produces $10.00 value per hour; overhead costs are $5.00… so he may sneak in at wages of $5.00 per hour… The rooky is now the marginal labor, instead of the journeyman. A new, lower margin (break even) at $10.00 per hour has been established. If the minimum wage is reduced to $4.50, we can be pretty sure the rooky will be in a position to be hired… and be in a position to learn, to upgrade his skills, soon to become a journeyman who easily picks 75Lb per hour.

 

Now play this very same scenario out over ALL business, all jobs, and ALL workers worldwide… and it becomes very clear why there was no structural unemployment under Gold. Borrowing costs were replaced by Real Bill profits. Under a fully developed Bill market, there is no need for the retailer to pre-pay his bill to get a discount; he simply buys other merchant’s bills as his till fills with the consumer’s Gold coin… and earns profits on these Bills as they appreciate.

 

If you think this can be compared to the retailer using a savings deposit or a CD to earn income on surplus cash, you miss the point; the money the retailer gets for his CD or deposit is more than offset in the economy at large by other borrowers, who pay the banks a much higher interest rate. The money the retailer earns by buying Bills is never borrowed, does not reduce any other merchant’s profits… rather flows strictly from the propensity of consumers to spend.

 

Remember, both the retailer and wholesaler, that is both the acceptor and initiator of a Real Bill benefit; the retailer gets merchandise on consignment (at no cost) and the wholesaler gets to sell more merchandise. Both parties benefit… else they would not make the deal. Neither borrowing nor lending is involved.

 

The structural unemployment we suffer from will not go away on it’s own. Dole payments are no substitute for wages and profits honestly earned. The World economy will never turn around as a result of more borrowing, more spending… but it will indeed turn on a Dime… if the Dime is real Silver, and if Real Bills that mature into Silver and Gold circulate freely once again.

 

Rudy J. Fritsch

 

Editor in Chief