TMR - TRANSCRIPT
"THE GREATEST GAMBLE OF ALL"
Cambridge House Vancouver - June 7, 2010
Perhaps the most essential requirement implied in our title is the necessity of clearly understanding just what is meant by the term "gamble." According to the dictionary, it means, "...taking risky action in the hope of a positive result." With that in mind, we must then ask whether there is a concept which would justify the title of this presentation. I believe there is.
It exists, it is growing, and, most importantly, it is potentially VERY dangerous.
The nature of this gamble is a deliberate movement among the world's monetary authorities to unite the world under one monetary system based entirely on fiat currencies. (We define a fiat currency as one which has no intrinsic value and gains its utility solely from public acceptance.)
Why is this a risky enterprise? I believe the answer lies in the fact that currencies of value, namely gold and silver, were abandoned to allow governments to expand monetary creation in order to finance the proliferation of government intrusions into the entire working structures of societies. It is our opinion that it is the unlimited nature of such growth that constitutes the greatest danger.
In order to understand this relatively new phenomenon, it is necessary to discuss the changing nature of governments over the past three hundred years, at least in what we regard as the "Western World." We believe these transformations have occurred in two distinct waves.
The first such wave began in the Eighteenth Century and might be named, "From Slavery into Freedom." It was defined primarily by a reduction in the number of laws and regulations imposed by governments on society. This trend resulted in the enhancement of both individual liberty as well as commercial enterprise; a growth in both freedom and prosperity. This era also saw the utilization of currencies of gold and silver.
Unfortunately, this wave was followed by a second and still ongoing new one, a wave we might call "From Freedom into Slavery." Politicians began to seek the creation of good, not by the relaxation of restrictions alone, but as the result of direct, positive action by government. This resulted in a growing body of laws and regulations, a trend still mightily in force to this very day.
With this growth of government came a new difficulty, namely finding the funds to finance the growing list of government bureaucracies as well as generous handouts to various recipients. And so, not unexpectedly, taxes began to rise, government borrowings began to sharply increase and, concurrently, we started to see a rise in levels of government indebtedness.
The entire process of the gross enlargement of government was advanced by two personalities in particular; Karl Marx and Lord John Maynard Keynes. Marx provided the social justification by declaring, through his international Communist movement, that the entire struggle of civilization was the owners of society, the Bourgeoisie, versus the workers of society, the Proletariat. He believed government should use its power to correct ancient wrongs by coming down in support of the Proletariat.
Keynes provided much of the justification to finance such operations by declaring that it was the responsibility of government to correct economic difficulties by interventions in the financial marketplace and by adopting policies of government stimulation to combat any economic downturns. His legacy is clearly with us to this day, as witnessed by the astonishing size of governmental activities which, unfortunately, have led to an escalation of debt and deficits beyond the previous imaginings of mankind.
Regrettably, this style of interventionism has not been limited to just one nation, but has spread throughout the 'advanced' nations of the globe. However, we will turn our focus to America, simply because it is the largest economy on earth and the US Dollar is by far the most important international currency.
For the first 125 years of its existence, America was a fundamentally free society, particularly in economic terms. However, based on the writings of Marx and Keynes, incoming President Woodrow Wilson declared in his Inaugural Address of early 1913 that, "...Our duty is to cleanse, to reconsider, to restore, to correct..." He was as good as his word, and set about to advance the changes he desired, exemplified best by two new laws enacted during that fateful year of 1913, the income tax law and the creation of the Federal Reserve Board, America's first central bank. The changes Wilson instituted toward the growing interference by government were advanced markedly a few years later by the administrations of Franklin Delano Roosevelt.
Not surprisingly, this desire to have government solve all societal problems hit hard against the financial restrictions imposed by the existence of a gold standard which limited the creation of new currency or the acceptance of new debt. Therefore, the political forces for expansion declared gold to be their enemy. Keynes referred to it as a "barbaric relic" and Roosevelt outlawed the private holdings of gold in 1933, along with terminating the convertibility of currencies into gold by Americans.
Along with the transformation of government, another one of great importance took place among the America public. Thanks to relentless re-education from the public school teachers and administrators, along with encouragement from a compliant public media, the American public began to look for government as the guarantor of a good life, rather than to their own self-reliance. In addition, since the free economy supposedly failed during the Great Depression, relentless calls for the expansion of government control of economic activity became commonplace, calls resounding to this day. Programs such as controlling the licensing of trades and professions; expanding government influence on education; support for the arts, regulation of Fishing, Forestry, Agriculture and Mining; and control of transportation, roads and airways all became commonplace along with the most recent proliferation of environmental laws.
However one category stands out above all the rest when it comes to expansion of government, namely the proliferation of social welfare programs from outright welfare to unemployment benefits to senior services to services for the blind and disabled to medical services, legal services and a host of others. Government action has now become the norm for these 'services'.
Astonishingly, this trend is not only being maintained, but continues to expand, despite the obvious difficulties being encountered. During his 2008 Presidential campaign, Barak Obama promised his followers he would press for more government programs to create jobs; more government programs to advance medical care; more government programs to regulate banks and other financial institutions; more government programs to control pollution; more government financing of 'green projects'; more government programs to finance education and more government programs to rescue home owners who were defaulting on their mortgages. And the American people willingly bought into the entire concept by handing him and his party a resounding victory.
Obama was hardly alone. As an example, in her "Throne Speech" of November, 2009, Queen Elizabeth told the British people that 'her government' would - among other things - raise education standards, strengthen the national infrastructure, insure everyone had a fair chance in life, finance public education, fight youth gangs and a host of others too numerous to mention.
Almost a century has passed since Wilson began the transformation of the underlying theme of American political philosophies away from free markets and individualism toward increasing direct bureaucratic involvement along a host of fronts. What have been some of the visible results of this great change initiated in 1913?
Virtually all governments now spend more than they take in through taxation. Virtually all governments have gone deeply into debt. Several governments now must face the reality that without some outside help, they can no longer repay debt and principal on their outstanding loans. And, all solutions offered to such problems seem to involve only the further expansion of debt.
Figures don't lie. America now spends $4 trillion per year on government expenditures, up from 'only' $504 billion in 1979. The USA national debt has grown from barely $800 billion in 1979 to over $13 trillion today. Greece, Spain, Portugal, Ireland, Italy and even 'giants' such as Great Britain, France and Germany all now suffer under crushing levels of debt compared to national productivity. Many have turned to "Quantitative Easing" - meaning the outright creation of artificial currency via central banks - to maintain their government structures.
In all of this, nations are moving toward our "Greatest Gamble of All" threshold, one we believe could be leading to that worst economic scourge of all, Hyperinflation. Historic hyperinflationary examples from the past include Ancient Rome, eighteenth century France, and Twentieth Century Germany, Hungary and Zimbabwe. All such events have led to catastrophes of one sort or another. Sad to relate, much of what is happening in the world today is following virtually the same mistake-laden formula which resulted in these past calamities.
Rome debased its currency in order to maintain their "free bread and circuses" economy combined with the maintenance of military might, a combination which they could not afford. At the end, the famous golden dinarius was only .02% gold - and the rest artificial fillers.
France allowed for an expansion of their currency through the issuance of unbacked paper units known as "Assignats" in the late 18th century. This was done to 'stimulate' commerce and, while it appeared to work for a while, so many Assignats were issued that the currency ultimately disintegrated, leading to chaos.
During the Weimar Republic following World War I, Germany was unable to repay their war-time indebtedness, fund social welfare and take care of their economy, all at one and the same time. They resorted to the printing of currency and created the best-known hyperinflation of all time.
After the end of WW II, the eastern European economies were in a state of collapse and nations like Hungary resorted to the printing press in order to build a new economy. All they accomplished was to destroy their currency and open the doors for a Soviet takeover of the nation.
In our present era, no nation has exemplified hyperinflation like Zimbabwe. One disastrous economic policy after another was followed by the liberalization of currency restraints until the Zimbabwean Dollar became much more a unit of fiction than value. Businesses collapsed and the social order was placed into true jeopardy.
The consequences of hyperinflation have been dramatic indeed. The Roman collapse was followed by the Dark Ages. France's currency collapse led to the dictatorship of Napoleon Bonaparte. Germany's 1923 hyperinflation so weakened the social structure that a fertile ground was created for the advent of Adolph Hitler. Hungary fell to the Soviets and Zimbabwe disintegrated into social disorder.
In our present era, all restraints to monetary creation have been removed. Super agencies such as the International Monetary Fund (IMF), Bank for International Settlements (BIS) and the European Community (EC) steadily supplant the authority - and restraint - of individual nations. Central banks are now directly responsible for the financing of these super-agencies. And there are no limits on the monetary creation of central banks.
It appears to us that many signs point toward a "gathering Storm", one which could break upon us with frightening ferocity. The only thing holding the financial world together is the public belief that fiat currencies are the equal of gold and silver. We fear that is a fragile faith, vulnerable to shock and disillusion.
And one warning stands out above all other:
No fiat currency has ever survived the test of time. Not one!
At the same time, gold and silver have never failed to retain value!
Today, it appears we stand at the brink of a monumental calamity. Debt to GDP ratios are at horrendous levels in nation after nation. Economies are weak, even after massive doses of 'stimulation'. Governments may no longer be able to restrain themselves from further activities of that nature, but the public is growing truly restive as they finally learn about the perils already set before them.
Time is growing short. The threat of hyperinflation with its accompanying social unrest and political instability looms.
Keep informed by following developments in the "Melman Minute" section of our website, "The Melman Report".
Thank you.
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