A MESSAGE FROM THE QUEEN
Power Point Presentation at PDAC, March 7, 2010
It is a pleasure to be with you this afternoon at the world's largest annual mining convention.
First, despite the title of my presentation, I want to assure you that there is no anti-queen message implied in the information I will be putting forward. She has an impeccable reputation and, just like Prime Minister Tony Blair's character stated in the movie "The Queen", in almost 60 years, she has never failed to conduct herself according to the dignity of her high position.
There are truly several great endemic problems facing economically advanced governments around the world. First, there has been a staggering growth of debts during recent years and, next, there has been a concomitant growth in budgetary deficits in many nations. As government expenditures have grown steadily, there has also been a growing difficulty in raising sufficient funds to pay for all that government and, as a result, several nations in the world, most prominently America and the U.K., have resorted to the technique known as "Quantitative Easing", or the creation of money out of thin air, by several central banks in order to finance government operations.
How did this state of affairs develop? One explanation has been offered by the noted 19th Century British commentator, Herbert Spencer, in his book, "The Man Versus the State."
In short, a remarkable turn of events took place during the 17th and early 18th centuries when the focus of the political world turned away from the ever-growing power of kings, legislators, barons, earls and sheriffs; each with their own body of complex regulations. Instead, legislators began to focus on ridding the world of unnecessary and intrusive regulations. As each law was repealed, the citizenry felt freer, more at liberty and better able to participate in the renewed industrial and economic vigor of mankind.
However, a new breed of politicians next arose who convinced the populace that legislators should go further, that they should concentrate on positive action to create improvements in life. They began to enact laws directing government to intrude into education, transportation, industrial regulation, welfare and a growing list of other means of improving life on earth. The public began to see the benefits - particularly to individuals or groups who stood ready to enjoy particular government favors - and, in response, they began to demand a growing roster of such government actions.
Two men then assumed instrumental roles in advancing this renewed philosophy of government interventionism. KARL MARX arose during the second half of the nineteenth century and told the world that all of society represented a class war, with two dominant sides; the Bourgeoisie - or industrial/mercantile class - and the much larger but disadvantaged Proletariat - or working class. Marx managed to convince millions that the Bourgeoisie-dominated governments of the world had an obligation to improve the lot of the Proletariat.
As if in accompaniment, economist JOHN MAYNARD KEYNES provided believable arguments that governments must expand their fiscal and stimulative interventions into markets in order to provide economic growth during economically troubled times.
With both justifications for expansion of government becoming common and accepted knowledge, the stage was set for a third vital individual, FRANKLIN DELANO ROOSEVELT. He managed to build a case, which was believed by huge numbers of people, that the economic downturn of 1929 developed into the Great Depression due to a lack of action by government, and he would make no such mistakes. He initiated a multitude of new social action programs, raised the level of distrust against free market capitalism and advanced the concept that societal good could be mainly accomplished by government action.
As a result, the number of government programs expanded dramatically and government expenditures tripled (during a period of deflation!) between 1930 and 1940, as did the U.S. National Debt. At the same time, the public's acceptance of government programs rose sharply, a trend which only accelerated with the advent of WWII when the issuance of various government edicts became commonplace.
So, where are we today? Following more than a century of gradually increasing public acceptance of government programs, in nation after nation we now have libraries filled with government laws, regulations and directives, micro-managing and intruding into the daily lives of the citizenry in ways never before imagined. We have a staggering array of welfare and social programs, and the entire economic and industrial workings of many nations now comes under the close scrutiny of quite literally, armies of regulatory bureaucrats.
Among the other realms now under government control in country after country, we find national defense; a system of courts and justice; control of the economy; licensing of trades and profession; government control of education; support for the Arts; regulation of Agriculture, Forestry, Petroleum and Mining; regulation of transportation; and enormously complex environmental and pollution laws - as well as a multitude of others.
However, most important in its financial implications is a relentlessly growing array of social welfare agencies and expenditures involving social security and retirement programs; family services; senior services; unemployment relief; Medicare, Medicaid and similar medical service programs; housing assistance; etc. etc.
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Please now consider that on top of the mountainous areas of government expenditure and involvement already in existence, two important persons have recently been in the forefront of a growing movement to further expand government activities.
In America, PRESIDENT BARACK OBAMA has been a driving force behind the goal of enacting complex new laws to establish or expand mortgage control and relief programs; job creation programs; medical insurance programs; clean and "Green" energy programs; climate control programs; banking and financial programs and creation of a Financial Consumer Regulatory authority, all of them backed up by Acts containing one thousand or more pages of intricately detailed procedures.
And, in Great Britain, we have the subject of this presentation, QUEEN ELIZABETH II and her address of November 19, 2009 to open the new session of Parliament. In just eight short minutes, the Queen promised that "her" government would - among other things:
1 - sustain growth and deliver a fair and prosperous economy
2 - provide employment training programs
3 - strengthen the national infrastructure
4 - combat climate change
5 - enhance the governance of the financial sector
6 - reduce the budget deficit by half
7 - enable the wider provision of free personal care
8 - raise educational standards
9 - tackle youth gang crime
10 - support carbon capture and storage
11 - protect communities against flooding
12 - improve the management of water supplies
13 - ensure everyone has a fair chance in life
14 - narrow the gap between rich and poor
15 - tackle discrimination and enshrine into law a commitment to abolish child poverty by 2020.
Items 1-5 and 7-12 all involve direct expenditures, whether for the provisions of the programs themselves or for the establishment of government bureaucracies to accomplish the desired goals. Items 13-15 are social goals which have been, in many people's eyes, desirable for generations, but have yet to be fulfilled.
But in some unexplained manner, despite the array of new expenditure items, without any corresponding measures to increase revenues, the Queen has promised item 6, that is to cut the budget deficit in half! The government of Great Britain is presently drowning in debt, taxes are already at confiscatory levels and the financial markets have been saying that they are tired of "Quantitative Easing", but the question of how to pay for this amazing assortment of programs was never even addressed!
Also, in terms of accomplishing those to-date unsolvable social goals, not one concrete suggestion regarding a specific process to follow was suggested.
We are not implying in any way that the Queen be personally blamed for any of this. As we understand matters, her "Parliamentary Address" is prepared for her by the ruling party and is assumed to be a reflection of public opinion.
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Figures can give us an objective view of matters and those relating to spending, debt and deficits in America are beyond astonishing when evaluated in historic perspective. They also show that our perception that demands on government have been rapidly expanding is real and provable.
In just the past thirty years, U.S. government spending has grown from $504 billion in 1979 to $3,997 billion ($3.997 trillion) - or almost eight times over. Some of that growth is due to dollar devaluation and some to population growth. Most, however, is due to relentless growth in government spending.
At the same time, U.S. government debt has grown from $826 billion to $12.3 trillion - or about 15 times over! - and the U.S. budgetary deficit has expanded from $40 billion in 1979 to about $1.841 trillion - or about 45 times over - by the end of 2009.
Will the public consent to real government reduction in order to finally put an end to this seemingly relentless trend? We believe the indications are not good. Despite their state's horrendous financial situation, Californians, both civil service employees and recipients of government services, have continued to show that they are strongly opposed to any actual cuts in programs or employment. In Greece, where the state of affairs is hyper-critical, the civil service has demonstrated in the streets by the tens of thousands against any meaningful government cuts and in the American federal government, President Obama has cast in stone so many promises for additional programs and expenditures that any meaningful reductions appear most unlikely, to put things mildly.
What then comes next???
If the trend toward unending expansion of government expenditures and thereby an equal expansion of debt and deficits continues unabated, at some future time - and that approaching time may be VERY NEAR - the financial markets will be unable to function efficiently under mountainous financing demands and they are also likely to refuse to accept "zero" interest-rate financing via "Quantitative Easing." That evolving process could - and likely will - lead to rising interest rates which by themselves will carry the seeds of destructive expansion in government debt financing costs as well as ruination of what remains of the real estate markets.
We believe that all of these considerations combined will lead to a growing perception that the stability of the world of international currency transactions - particularly including the value and stability of the American Dollar, the world's reserve currency - is in danger. Also, lurking for the moment in the background, is the peril that if the value of unbacked, fiat currencies themselves come into serious question, there is the consideration that hyperinflation - the most ruinous of all economic tragedies - could become a growing possibility.
In our opinion, all of this presents a fertile field for a potential substantial metals bull market and we suggest that physical holdings and share investments in gold, silver and platinum should be considered for both monetary insurance and for profit potential.
And, in order to keep up with events, we suggest you follow developments at our "THE MELMAN REPORT" website, www.themelmanreport.com, paying particular attention to our frequent "Melman Minute" commentaries, accessed by clicking onto the clock on the home page.
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