|
Co-brand
Partnerships
| |
|
|
|
|
| |
|
Contributed by Bill
Bonner
Publisher of: The
Fleet Street Letter |
|
BALTIMORE, MARYLAND
WEDNESDAY, 4 JULY 2001 |
|
|
Today:
The
Fed's Methadone Strategy
|
*** Markets closed... all major indexes end the "first
half" in the red...
*** An informal salute to the Nation's most mild-
mannered revolutionary...
*** Baby Boomers' gift to the 21st century... and more!
|
* * * * * * * * Advertisement * * * * * * * * * *
Double Your Money Thanks To Wall Street's Short
Attention Span
With the energy crisis no longer front-page news, many
investors think the problems have been solved. Not even
close...
In fact, they're getting worse. Demand keeps rising as
supplies keep falling. Thanks to government missteps and
OPEC misrepresentations, the age of cheap energy is over
forever - but Wall Street doesn't realize it yet.
Shrewd investors stand to make a fortune over the next
12 to 18 months. You could be one of them. Let an
industry insider tell you all you need to know in our
special report:
http://www.agora-inc.com/reports/RASS/HolidayReading
* * * * * * * * * * * * * * * * * * * * * * * * *
In a shortened trading session yesterday, all the major
indexes fell - but not by much. The Dow fell 22 to
10,571... the S$P 500 lost a couple to close at 1234...
and the Nasdaq shed 7, closing doors at 2140.
Going into the Independence holiday, and what is
effectively the end of the "first half," the net result
of 6 fed rate cuts is 'nul' - as they say here in the
French office. The Dow has lost 2% of its value, the S&P
is down 6.5% for the year and the Nasdaq follows up the
rear... down 13% YTD.
The markets are, of course, closed today...Bill and Eric
have taken what Eric called "an uninterrupted day to
celebrate our nation's independence from the tyranny of
the British." So, since the celebration of liberte in
France won't begin for another 10 days, I offer you a
single holiday salute.
"God, who hath given the world to men in common," said
John Locke, Jefferson's philosopher, and spiritual
leader behind the Declaration of Independence, "hath
also given them reason to make use of it to the best
advantage of life and convenience."
Reason, it is believed by many, empowers man to remake
the world to his advantage. At the Daily Reckoning, we
often take a more skeptical view. In fact, on this 4th of
July, 2001, it might be worth a look at what reason hath
also wrought: The Creature From Jeckyll Island.
In a book of the same title, Edward Griffin, notes the
basic plan for today's Federal Reserve was drafted at a
secret meeting held in November of 1910 at the private
resort of J.P. Morgan on Jeckyll Island off the coast of
Georgia. It was the brainchild of Paul Warburg, a
partner in Kuhn, Loeb & Company, representing the
Rothschilds and Warburgs in their European holdings.
The purpose? According to Griffin, "a primary objective
[of the meeting] was to involve the federal government
as an agent for shifting the inevitable losses from the
owners of those banks [being represented] to the
taxpayers."
Griffin quotes Paul Warburg: "Picture a party of the
nation's greatest bankers stealing out of New York on a
private railroad car under the cover of darkness,
stealthily hieing hundreds of miles South, embarking on
a mysterious launch and sneaking on to an island
deserted by all but a few servants, living there for a
full week under such rigid secrecy that the names of not
one of them was once mentioned lest the servants learn
the identity and disclose to the world this strangest,
most secret expedition in the history of American
finance."
"I am not romancing," Warburg claimed in 1930. "I am
giving the world, for the first time, the real story of
how the famous Aldrich report, the foundation of our new
currency system, was written."
"The composition of the Jekyll Island meeting was a
classic example of a cartel structure," says Griffin. "A
cartel is a group of independent businesses which join
together to coordinate the production, pricing, or
marketing of their members. The purpose of the cartel is
to reduce competition and thereby increase
profitability. This is accomplished through a shared
monopoly over the industry which forces the public to
pay higher prices for their goods or services than would
otherwise be required under free-enterprise
competition."
At the risk of appearing too simplistic, I submit, the
cartel achieved as much - and more. In 1913, the Federal
Reserve act became law. At that time you could have
purchased a simple pair of men's shoes for $5.50. By
1938, when Hitler was just beginning the Anschluss of
Austria and Czechloslovakia, the same pair of shoes
would have cost you $7.38; in 1969, when Armstrong was
taking large leaps for mankind in his own moonboots,
they would have cost you $20.39... and today, on July
4th, 2001, while George W. exhorts us in his Presidential
Statement On Independence Day to "remember the
achievements of our great statesmen, social reformers,
inventors and artists," that $5.50 pair of shoes will
set you back $100.
In 1910, "Wall Street was still the biggest kid on the
block," writes historian and former assistant managing
editor of The Washington Post, William Greider, of the
founding of the Fed. "This trend was a crucial fact of
history, a misunderstood reality that completely alters
the political meaning of the reform legislation that
created the Fed. At the time, the conventional wisdom in
Congress, widely shared and sincerely espoused
Progressive reformers, was that a government institution
would finally harness the 'money trust,' disarm its
powers and establish broad democratic control over money
and credit... the results were nearly the opposite."
Unbeknownst to the "reformers" of the time, the world's
most wily capitalists had harnessed the machinations of
government and the popular will to serve their own ends.
"Paul Warburg," wrote his biographer Harold Kellock, "is
probably the mildest-mannered man that ever conducted a
revolution. It was a bloodless revolution: he did not
attempt to rouse the populace to arms. He stepped forth
armed with a simple idea. And he conquered. That's the
amazing thing. A shy, sensitive man, he imposed his idea
on a nation of a hundred million people."
And yet, today, as a nation, we celebrate the spirit of
Independence from tyranny of the few over the many.
"...Men enter into society," wrote Locke, for "the
preservation of their property; and the end, while they
choose and authorize a legislative, is that there may be
laws made and rules set as guards the properties of all
society, to limit the power...of every part and member
of that society.
"Whensoever...the legislative shall transgress this
fundamental rule of society, and either by ambition,
fear, folly, or corruption, endeavor to grasp
themselves, or put in the hands of any other, an
absolute power over the lives, liberties, and estates of
others by this breach of trust, they forfeit the power
of the people...and it devolves the people, who have a
right to resume their original liberty, and by the
establishment of a new legislative, provide for their
own safety and security..." Who in America feels as
strongly today?
Today, as you "celebrate with pomp and parade...guns,
bells and bonfires," the revolutionaries who've long
since past, don't forget the unsung among them, who have
also given us our nation... and our currency.
Happy 4th,
Addison Wiggin
Paris, France
* * * * * * * * ADVERTISEMENT * * * * * * * * * *
Discover Vitamin Cures that work in as little as 30
seconds!
Now you can learn about them directly from the doctor
who developed them, and:
* Drop cholesterol up to 134 points
* Make years of arthritis pain and swelling vanish
* Restore lost vision
* Reverse "incurable" memory loss
* Cure and prevent deadly sex organ cancer
This maverick doctor even took on the FDA just to bring
these cures to his patients. Learn first-hand about his
breakthroughs for prostate disease, asthma, migraines
and more...
http://www.agora-inc.com/reports/JWNH/DR0704
* * * * * * * * * * * * * * * * * * * * * * * * *
A 4th of July Daily Reckoning Guest Essay
THE FED'S METHADONE STRATEGY
By Gary North
Think of the Federal Reserve System as a senior producer
in an international fiat money drug cartel. Think of
Alan Greenspan as its godfather. He uses commercial
banks as his pushers.
When users build up tolerance to the existing supply of
fiat money, the FED has to increase the dosage in order
to maintain the economic boom. In this system, the
economy is never allowed to "get clean." The addiction
to fiat money is forever.
But Greenspan is a kindly godfather. He means to produce
no serious harm. He doesn't want to see America as
a nation of helpless addicts to the really hard stuff.
He wants the whole world to move from the heroin of fiat
money to methadone. If we will just keep coming down to
the banks for our regular supply of the drug, we will be
able to postpone the horrors of going cold turkey.
Economic "cold turkey" is a recession that is not
overcome by a wave of fiat money. The Great Depression
was cold turkey.
The whole world today is addicted to fiat money and
long-term debt. Long-term debt makes sense when the
money supply is constantly being expanded. You can pay
off your debts with depreciated money. But the debt
system keeps the addicts coming back for more. The
longer the addiction process continues, the more
dependent every section of the economy becomes on a
continuing supply of fiat money.
Today's users are counting on the easy availability of
the central bank-supplied methadone. The universal
assumption of the cartel's directors is this: methadone
does not produce the fearful effects of long-term
resistance to the drug's stimulating effects. Addiction
is a permanent condition, but it can be handled
emotionally by the addicts.
The problem is this: the addict has no incentive to get
well by breaking his addiction. The central bank
continually adds to the money supply, generation after
generation. This makes the level of accumulated debt
ever greater. The addicts keep building up their IOU's.
The biggest addict today is the U.S. government. It has
made promises to voters regarding Social Security and
Medicare. These promises involve unfunded debts so huge
that they cannot be paid off in terms of money with
anything like today's purchasing power. To put it
bluntly, the U.S. government is on methadone today, just
like everyone else, but this methadone dependence must
lead, statistically speaking, to the heroin habit.
For the United States, the day of demographic reckoning
may be as far away as 2017, but 2011 should see
preliminary signs of crisis in the Social
Security/Medicare systems. The first Baby Boomers were
born in 1946. They will reach age 65 in 2011. For Japan,
the crisis will begin soon: In 2003. For Italy, 2005.
The other major industrial nations will follow in short
order. The United States is at the end of the row of
dominoes.
We can see it coming. But methadone-addicted users in
Washington see nothing coming further out than the next
Congressional election.
I realize that my analogy may sound a bit nutty, but it
is closer to the truth than most people think. I wrote
the initial version of this essay in 1964, which was
published as a booklet, "Inflation: The Economics of
Addiction." Since that time, the dollar is down in its
purchasing power by about 75%.
There is an addiction effect with fiat money. The world
found out in the 1930's what happens when the flow of
fiat money ceases. Politicians are determined never to
allow this to happen again.
So far, the voting public agrees. The central banks of
the world continue to keep the funds flowing. A national
economy has its ups and downs, but it never falls into
the disaster-level mode of 1932. This seems positive.
But the relentless pressure of debt never decreases. The
public, along with their governments, continue to make
assumptions about the future that cannot possibly come
true with today's money supply and price level.
So, the central banks continue to increase the money
supply, general prices never fall, and aging populations
remain unconcerned with the statistical brick wall that
faces all of us, in every industrial nation.
Addicts ignore unpleasant reality.
Gary North,
For The Daily Reckoning
At age 25, Dr. Gary North was the youngest elected
member of the Economists' National Committee on Monetary
Policy. He served as a senior staff member of the
Foundation for Economic Education and as a research
assistant to U.S. Congressman Ron Paul. To receive
Gary's free e-letter, Reality Check, send an e-mail
request to: reality@agora-inc.com
|
|
|
| About
The Daily Reckoning: |
|
Daily Reckoning
author Bill Bonner
Bill Bonner is,
in spite of himself, a natural born contrarian. Early each morning, Bill
writes The Daily
Reckoning—his take on the financial markets and what’s going
on in the world—and sends it off by e-mail before most Americans’
alarm clocks have buzzed. Many readers say it's the first thing they want
to read when they get up—not only because it's informative and thought
provoking, but also it's inspiring, in its own quirky and provocative way.
Of course, there's
much more to Bill than his daily market commentary. He's also the founder
and president of Agora Publishing, one of the world's most successful
consumer newsletter publishing companies. Bill's passion for international
travel and big ideas are reflected in the company he's successfully built.
In 1979, he began publishing International Living and Hulbert's
Financial Digest . Since then, the company has grown to include
dozens of newsletters focusing on health, travel, and finance. Bill has
vigorously expanded from Agora's home base in Baltimore, Maryland since
the early ’90s—opening offices in Florida, London, Paris, Ireland, and
Germany.
Agora's publication
subsidiaries include Pickering
& Chatto, a prestigious academic press in London and Les
Belles Lettres in Paris, best known as a publisher of classical
literature in bilingual editions.
|
|
|
|
