One of the most morally courageous of all the Russian Dissenters of the 1960s-1970s was Vladimir Bukovsky. In his book To Build A Castle - My Life As A Dissenter (WELL worth reading, by the way), Mr Bukovsky describes the reaction of a typical "Soviet man" while reading the newspaper pinned up on a stand:
"An intelligent-looking little old man wanders down the Arbat and into the Prague to do some shopping, a quiet, subdued little man bothering nobody. 'Aha', he says to himself, 'the sun's shining, the bloody sun's grinning its head off again. They'll be calling that a socialist achievement next.' He hates the sight of the sky, that Soviet sky. Even the green leaves look as if they've come from off a Mayday poster. There's a fresh newspaper pinned to the wall - what claptrap are they blathering now? He knows its claptrap and it sickens him to read it, but still he stops and scans it, if only to feed his rage. "Aha, the harvest! Unprecedented, as usual, in record time, as usual. So we'll be importing grain from Canada again.'"
By the mid 1960s, everybody from the "top" to the "bottom" in the Soviet Union knew that the government and the press told the truth only when it served a purpose or when it was of no political import. If a Soviet athlete won an Olympic medal it was immediately broadcast as being useful to the rulers. If Mr Kruschev was asked if the sun rose in the east he would answer in the affirmative. All other matters came under the heading of propaganda, defined by Websters unabridged dictionary as: "Information that is spread for the purpose of promoting some cause."
That's a pretty innocuous definition. In the Soviet Union (and in Nazi Germany to give another example), propaganda was simply the art of distorting any fact or group of facts into a form which would further the aims of the rulers. Russians living in the Soviet Union of the 1960s, 70s, and 80s, and their East Bloc counterparts, were masters of unravelling the "information" they were fed. This skill was vital, since only by mastering it could the "average" citizen of these nations form a fairly close estimation of what was REALLY going on. Many of them were astonishingly good at it - Mr Bukovsky himself being a stellar example.
It is a sobering fact that most people living in the "West" of today have not developed that skill. It is a still more sobering fact that most of them see no need to develop it. The "propaganda" coming out of most of the government departments, especially in the form of economic statistics, is not yet as blatant as that which Mr Bukovsky was subjected to, but it's getting there.
Do you read Richard Daughty - the Mogambo Guru - at 321 Gold?. Check out his latest. In it, Mogambo has a very telling quote from Mr Doug Lee, the president of Economics from Washington: "The inflation risk for investors is not so much that core measures of inflation will move higher but that these measures are losing credibility with financial markets".
Now what exactly does this mean? It is of course an obvious fact that the official measures of "inflation" (PRICE inflation, that is) put out by the US government are and have been for years claptrap - as the little old man on the Arbat above would describe them. True, they have become even more blatant in recent years. How blatant? Well, the US PPI for February has just made its much delayed appearance. According to the official statisticians, price inflation affecting producer goods in February rose by - wait for it - 0.1%. Even the late and unlamented Herr Goebbels would pause for thought before coming out with a porky as big as that one.
On the other hand, it is true that as far as their actions on the markets are concerned, the evidence is that the majority of investors in the US (and in most other places) are still successfully telling themselves that the numbers coming out of the various government bureaus are "true". On April 2, it was announced that there were 308,000 "new jobs" created in the US in March, and the US unemployment rate went UP by 0.1% to 5.7%. What was the reaction? The Dollar soared, the stock markets went up by a useful degree, Gold plummeted off multi-year highs (in $US terms) to fall $US 6.20 on the day. And the US bond market took its biggest dive since July 2003.
If Mr Lee sees the main danger to the US investment markets as a loss of this self-induced credulity, he is certainly right. No regime which relied on blatant propaganda for its perpetration has ever survived a loss of credulity by its "subjects". No matter the number of its sycophants, when the general public sees through the charade, the game is up. It's just a matter of time.
To understand this phenomenon, consider the mass media (with some honourable exceptions) in the US - the big chains of newspapers, magazines, TV and radio stations etc - in relation to their reporting on the "war on terror" in general and the war on Iraq in particular. Americans in rapidly increasing numbers are turning away from these perveyors of the "news" in dismay and disgust. They are exposed as mere sounding boards for the Bush Administration, nothing more or less than vehicles of propaganda.
And if the US mass media has been exposed, how much longer will it be until the big banks, brokerage houses and investment analysts (again with some honourable exceptions) of Wall Street face the same exposure? They have used the statistics (blatant absurdities masquerading as "facts" about the state of the US economy) poured out in dizzy streams by the government departments to paint a completely mendacious and deceiving picture of the state of the US economy and the "health" of US financial markets.
The latest example was, of course, the knee-jerk reaction to the March employment statistics released on April 2. Like a herd of lemmings, the big investment houses bought Dollars (or got rid of their Dollar shorts), bought stocks, sold Gold (but not Silver), and dumped Treasury paper out the window. In regard to foreign policy, the press "moguls" of the US have been the government sycophants. In regard to the US economy, US investment markets, and the Treasury and Fed, the big Wall Street firms have been the government sycophants.
A lot of Americans - and Britishers and Spaniards and Italians and Australians and Poles etc - are mentally kicking themselves for being so "gullible" as to fall for the party line about terrorism and Iraq. How long before similar numbers of people start kicking themselves about being so gullible as to fall for the claim that producer prices in the US were rising at a rate of 0.1% in March or that the US can create more than 300,000 jobs and see its unemployment rate go UP?
Actually, that's not quite accurate. In many or most of these individual cases, it was not a matter of gullibility. It was a matter of refusing to think about the issues or of not making an effort to think about the issues. It is easy to forgive oneself for a mistake made out of ignorance or misplaced confidence placed in the words of another. It is much harder to forgive oneself for shutting off one's own mind in the face of claims that one strongly suspects are false. It's a case of saying to oneself: "I knew better, I just didn't want to admit it to myself and act accordingly". That one is grim.
Please re-read a portion of the quote from Mr Bukovsky's book given above: "He knows its claptrap and it sickens him to read it, but still he stops and scans it, of only to feed his rage."
That is what happens to people when they finally make the leap to stop lying to themselves and face what is REALLY going on around them. They get very angry very quickly. There wasn't much the elderly gentleman in the Arbat could do about it - very few men have the moral courage to go through what Mr Bukovsky went through before he won his personal war with the Soviet Union. But in western financial markets, one doesn't face the prospect of long stays in gulags or insane asylums as the result of one's actions. The people who get mad will want to get even and to get even they will sell the items that the propaganda was designed to get them to buy. They will also buy the things that the propaganda was designed to get them NOT to buy.
Gold has corrected at its first attempt to decisively break above its January 2004 highs. It has retreated in the face of another dose of statistical claptrap loosely referred to as an "employment figure". The financial sycophants have acted once more. But the propagandists are losing their battle in the financial arena just as they have already lost it in the foreign policy arena. It has always been true that one cannot live a lie, but the process of ridding oneself of one, when expanded to fill a nation or even a world, is an explosive one. Hang onto your hats, the situation is coming to a head.