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As the old
expression has it, there are:
“None
so blind as those who will not see.”
The world is about to get a sobering lesson over the next year or two as the
precious metals markets move explosively to the up side. As happens so
often in the affairs of men, reality is there in front of us just sitting and
being itself. Yet so few of the species homo sapiens can see it.
I
have presented an alternative explanation for the blind stupidity of the
Keynesian “economists” and their almost perfect record of being
wrong. On March 9, 1933, Congress gave the commercial bankers the
special privilege to create money out of nothing. Immediately the money
supply began to increase, and today the price level is 17 times what it was
on that day.
Since
the bankers could now make loans (receiving interest) without paying for
capital (as the old fashion savings bank or S&L did), they naturally had
a strong interest to do so. They immediately began to fund a group of
“economists” who emerged to defend the thesis that creating money
out of nothing was the “road to plenty” for a society.
Creating
money had been tried many times in many different countries, always with the
same result. Prices went to the moon, and the society got very
poor. The most recent example of this was Zimbabwe
where life expectancy dropped from 60 years to 40 years over a decade, a
figure which explains the photographs of human skeletons and the official
unemployment rate of 95%. By comparison, the two most successful
countries in world economic history are Britain
(including the Commonwealth) and the United
States. And these are countries which
maintained a strict hard money standard for over a century.
The
“economists” who apologized for paper money and served the
commercial bankers were a collection of phonies and frauds. Most
prominent here were two American economists named William Trufant Foster and
Waddill Catchings, who wrote a book in 1928 entitled, “The Road to
Plenty.” In the 1940s, the bankers realized that something had to
be done, and they embarked upon a campaign to buy titles for these crackpot
economists.
But
first a British pedophile (John Maynard Keynes) “improved” the
Foster and Catchings fraud by employing a technique I call the wolf in
sheep’s clothing. Here the wolf consists of a group of people in
politics or economics who wish to go back to the way things were in the
Middle Ages. The proper term for such people is reactionaries.
The sheep’s clothing is a disguise these people adopted to pretend to
be in favor of science, liberty and progress. When you see words like
“new” or “progressive,” then you are dealing with the
wolf in sheep’s clothing.
Keynes
plagiarized the Foster and Catching theory, called it “The New
Economics,” and presented it as the latest word in the modern science
of economics. The bankers then entered and literally bought fancy
titles for their favorite “economists” so that these could use
the prestige so gained to influence the country in favor of paper
money. The classic case here was when the Manhattan Bank (later Chase
Manhattan) bought a chair of economics for John Kenneth Galbraith at Harvard
to provide a platform from which he could present his paper money theories
and serve the interests of the bankers.
This
is a fantastic picture. The entire institution of higher learning in
America was bought out by the bankers. They took the bankers’
money and sold a pack of lies to the American people.
Actually,
I have written a book on the wolf-in-sheep’s-clothing tactic (The
Wolf in Sheep’s Clothing). It is scheduled for publication
soon by the Foundation for Economic Education and Harper Collins. It is
the story of a gigantic fraud which has deceived our entire society and come
close to overthrowing freedom in America. A group of reactionaries
(people who want to go back to the past) are pretending to be advocates of
progress and have pulled the wool over the eyes of all of the people.
Once
the banker “economists” infiltrated into our higher education
system, it ceased to be education, and the teaching of economics became a
joke. If you take an economics course in 99% of all American
institutions today, you will be taught a pack of lies, not just any lies but
precisely the lies designed to support the bankers’ privilege to create
money. You can hear a good many of these lies any time Bernanke opens
his mouth to speak.
Now
when economics was a science (prior to the 1930s), the basic thing that
economists did was to make predictions. Prediction is the basic tool of
science. If you have a true theory, then you use it to make a
prediction, and when the prediction proves correct, then this is supporting
evidence for the theory.
Naturally,
when the banker “economists” came in during the 1940s, they
established an unparalleled record of failed predictions. The year I
entered Harvard (1955) John Kenneth Galbraith went to Washington and
testified before Congress that the stock market (DJI 420) was in danger of
another 1929. He caused a panic as speculators in the market rushed to
sell their stocks, driving the DJI from 420 down to 400. It then turned
and rose for the next 11 years, hitting DJI 1,000 in 1966. There was no
repeat of 1929.
We
had a more modern example of this foolishness in late July. After a
decline in the gold market through late July, Alan Abelson of Barron’s
predicted (on July 26) that the price of gold was ready for a substantial
decline. Gold declined for exactly one day as Abelson’s readers
rushed to sell. You know what has happened since that time. Gold
turned on a dime. The breakout created on the 27th proved
false, and it is now at $1,275. Abelson’s readers are sitting
there with their mouths agape. They sold their gold at the exact bottom.
Now
certainly people can make mistakes. The progress of science is full of
them. But when a scientist makes a mistake, he observes it and admits
it. When a banker “economist” makes a mistake, he hopes the
public will not notice, puts a good front on it and uses his title to get
away with it. I have often referenced Henry Kaufman’s prediction
of higher interest rates and a depression in 1982. I happened to catch
Kaufman on a talking head TV show around the turn of the century. There
was the host obsequiously kissing up to him and not one mention of the fiasco
of 1982.
I
was screaming at the TV set. “What about the depression?
What about the high interest rates?” Kaufman got millions of
stock market traders to sell their stocks with the DJI under 800. It
was the bonehead play of the century. But the host continued smoothly
on. “Oh yes, Mr. Kaufman, what is your opinion of the coming
year?” To heck with the coming year. How does he explain
his prediction of 1982?
I
have detailed in these articles many other bonehead predictions such as the
Great Depression of 1990 and Dow 36,000 (by 2003-05). Why are all these
establishment “economists” making one wrong prediction after
another – throughout their entire lives?
The
answer is very simple. They don’t know anything about economics,
and they don’t care. They are hired agents of the bankers, and
their impressive titles are intended to get the sucker public to believe any
absurd thing they say. Their most common error is; to predict
“deflation” because they are trying to get the Fed to print
money. When the “deflation” does not happen, they shrug
their shoulders, hope you will quickly forget and go about their
business. They are confidence men, not economists, and as long as you
are stupid enough to believe them, they will continue to lie to you.
But
consider the tremendous position that puts us gold speculators in. The
last employment of the “deflation” lie occurred in 2008, and
virtually all of the media joined in. The fools who believed the lie
rushed to sell commodities in the last half of the year, and the CRB index fell
in half. But despite this artificial self-confirming effect we have
still not had one year in which the Consumer Price Index declined.
“Deflation,” where is thy sting?
And
even as all await the “deflation” with bated breath, commodities
are gathering strength for a second move up. Gold has broken out to new
highs. Silver has broken out from an ascending triangle. Wheat
and corn are on the move. Coffee is at new highs for the century.
The CRB is gathering strength for an attack on the July 2008 high. The
charts are not predicting “deflation.” The charts are
predicting “inflation.”
So
here are all the traders in the world taken in by a lie, the exact same lie
which has been used to take their money over and over and over. Here
are all these stupid people rushing to give their money to us, and all we
have to do is to reach out our hand.
And
what it all comes down to is that, if you want to be a good speculator (or a
good person), then you have to see reality as it is. This is easier
said than done. These five little words contain a crucially important
moral virtue. To actually follow them requires a lot of work. You
must draw your own conclusions in defiance of what the people around you
believe (and are trying to shove down your throat). This is the virtue
known as contrary opinion. You must put your emotions aside and believe
what is true, not what you want to believe. Emotions are great things,
but a strong emotion can cloud the mind. If you try to suppress the
emotion, it will just get stronger and come out in ways of which you are not
aware. What you must do is to tell your emotion to temporarily stand
aside.
I
often find it effective to simply talk to my emotions (as though they were a
little person inside of me). For example, I might say, “Avarice,
stand aside for a while. I need to think clearly if I am going to be
able to give you what you want. You are a beautiful woman and should be
given fine jewelry and pretty clothes. But if I am to accomplish this,
then I have to see reality as it is. When I have made my big score, I
will invite you back, and we will have great fun together.”
Ditto, ditto for the emotion of fear (which in the markets is very powerful).
Incidentally,
Keynes’ views on fear and greed, like everything else the man said, are
garbage. Markets are not made by cycles of fear and greed. An
easy way to see this is with the auto stocks (more so with the housing
group). They characteristically develop very low P:E ratios at stock
market tops (and high P:Es at market bottoms). Wait a minute. If
the market puts a low P:E on the auto group near a market top, is it
committing greed? No chance. If market tops are caused by an
irrational desire for money, then why are auto stocks (one of the big movers)
showing lower P:Es at the top? This is rational behavior, not
irrational.
What,
in fact, causes stock market tops is government intervention (via the
Fed). When the Fed eases (as in 1982 and 2008), stocks form a
bottom. When the Fed tightens (as in 1987 and 2006), stocks form a
top. I have known this for 41 years. It has enabled me to predict
90% of all bull and bear moves in the stock market. I have been writing
about economics for all of this time. Wouldn’t you think that
somewhere, someone would have caught on? How about when I predicted
Black Monday on October 19, 1987? On that day, the DJI fell 22%.
All these people lost a big bundle that day (as they will lose more bundles
in the future), but no one woke up to see reality as it was.
None
so blind as those who will not see.
I
would like to appeal to the rational speculator who tries to see reality as
it is. For this purpose, I publish a fortnightly newsletter, the One-handed
Economist. This is dated every other Friday and sent out (via
regular mail and also posted on the website, password protected) the next
day. The cost is $300. If you would like to subscribe, go to my
web site: www.thegoldspeculator.com and
press the Pay Pal button. Or you can subscribe via regular mail.
Send $290 ($10 cash discount) to The One-handed Economist, 614 Nashua St.
#122, Milford, N.H. 03055.
The
One-handed Economist is designed for people who have made the decision
to see reality as it is. To support this decision, I have taken my 45
years of market experience and formulated principles of correct speculation
(such as the application of Austrian theory economics to the markets,
charting theory and the commodity pendulum). With each issue, I make
judgements on what are the best goods to speculate in at the current time and
then make specific recommendations (right now including both stocks and
commodities). The most recent (Sept. 17) issue recommended a shift from
gold to silver. I have been keeping a running Model Conservative
Portfolio since the beginning of the century. It started with (a
theoretical) $100,000, and this week it hit $210,000. By contrast, the
average U.S. equity fund is about unchanged over the same period.
Thank
you for your interest.
Howard Katz
The Gold Speculator
Howard S. Katz is
the editor/publisher of the One-handed Economist, a financial letter which
combines fundamental and technical analysis. He was a bug on gold in the
1970s and became a bug on gold again in late 2002.
Subscribe to the Gold
Speculator (the One Handed Economist)
You can subscribe
to Howard Katz’s thoughts on commodities, stocks, bonds and real estate
are available in a letter entitled The One-handed Economist and published
every two weeks giving specific advice on trades in stocks and futures. This
letter is available (both electronic and paper copy) for $300/year with a
3-month trial for $100. Send to: The One-handed Economist, 614 Nashua St.
#122, Milford, N.H. 03055.(Include both electronic and mailing address.)
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