On January 24, Mr Michel Pento penned a quite amazing article entitled Gross Analysis for 321Gold.com. Here is the most amazing item in that article.
On January 6 on Fox business, a PhD economist stated that the US would be better off if it manufactured NOTHING and imported 100 percent of its (economic) goods from abroad. As things presently stand, manufactured goods account for less than 14 percent of US GDP, with consumer SPENDING accounting for 70-75 percent of the US "economy". The good Doctor would prefer that the US produces no economic goods at all. Why bother, just "buy" them from foreigners.
Totally ignored in this harebrained scheme (it takes a PhD in the humanities to come up with REALLY harebrained schemes), is a very simple question: "Buy them from foreigners, you say?" "WHAT WITH?"
Undoubtedly, our esteemed economist's answer would be - "MONEY, you dolt. US Dollars".
Welcome to the twenty-first century. Why bother producing economic goods when you can produce "money", in any quantity, out of the thinnest of air? Why bother any more with the old wives tale that money is a "medium of exchange", an economic mechanism which makes the trading of GOODS for GOODS much easier. Why bother with economic GOODS at all, just add "money" and stir. Presto, instant economic "growth". If it was not so tragic, it would be screamingly funny.
What if we were to conduct an experiment? Let us, for the sake of whimsy, bring back one of our cave man ancestors and sit him in front of us. Then let us produce, for his interest and edification, four identically sized pieces of paper. One has a recipe for chocolate cake written on it. One is a picture of the New York skyline. One is blank. And the fourth is a US 100 Dollar bill.
Our cave man friend would instantly discern that the pieces of paper were all the same size. He would also discern that each one was different in appearance. He would have no idea what the differences represented, nor would any explanations we could give him make much difference to him. He would not retain much interest in any of the pieces of paper for long.
But let us go further. Let us, by means of some very crafty sign language, convey to him the suggestion that he should offer us each piece of paper in turn to find out what happens. He offers us the recipe for chocolate cake - and gets a sharp elbow in the ribs. He offers us the picture of New York, and we leave the room. He offers us the blank piece of paper, and we burst out into gales of hysterical laughter. Finally, he offers us the $US 100 bill. We instantly sieze it out of his hand and offer him in return a two pound steak perfectly cooked.
If he is merely hungry, our cave man will instantly grab the steak and devour it. If he is a bit less hungry and a bit more intelligent, he will still grab the steak, but he will do something else. He will try with all his might to ask us a simple question. Waving the $100 bill around in front of us, he will want to know: "Where can I get some more of THESE?"
Our cave man friend has no inkling that this particular piece of paper is what we call "money". He does know about "exchange", but he has certainly never encountered a situation where something which he can see no practical or "economic" value in can be so effortlessly exchanged for something he wants. He reckons that we must be pretty crazy to want the piece of paper, but he isn't going to argue, he's just going to enjoy his meal.
Move that scenario forward to January 2007 and pin a PhD on the caveman and you have the mentality of those who think that the production of economic goods is wasteful and unnecessary when all that is required to gain anything one wants or needs is to wave what you call "money" in front of the nose of those who DO produce REAL economic goods.
Ignorance of what money is, of how it was discovered and incorporated into economic life, and of what is required in order for it to function to maintain and improve economic life is RAMPANT today. It covers all "strata" of society, but finds its most virulent peaks in the halls of academe and in the boardrooms of organisations whose sole function is to manipulate money.
This level of ignorance, and its attendant contempt for money, is a product of the "fiat money" era. Since that era began in mid 1971, two generations of Central Bankers, "economists", politicians, bankers, and market analysts and players of all descriptions have grown up. All of them, whether they are consciously aware of it or not, have the attitude that the only thing required to acquire economic goods of any and all varieties and magnitudes is to wave that $100 bill in front of the noses of those who are producing the economic goods.
Americans (and most others in the "developed" world) have good reason to have gained that attitude. Two generations of their professors, teachers, poltical representatives, bankers, brokers, and advisors have explicitly or implicitly assured them that it is true. And most people today, up to and including the "baby boomers" who are now on the verge of retirement, have based their entire adult lives on this assumed fact. None of them can see any difference between "money" and wealth. And Americans in particular have never suffered any repercussions from the fact that their nation has all but ceased to produce GOODS and now produces almost nothing but "money".
The danger that almost nobody foresees is that the day will come when waving those $100 bills around will no longer get you that two pound steak. All it will get you is the gales of laughter that our cave man friend in the experiment experienced when proffering the blank piece of paper. And that day will come when all the hot air exhumed by all the PhDs in all the banks (Central or otherwise) in all the world will no longer be enough to disguise a simple fact. The US is no longer producing ANYTHING the rest of the world wants. That being the case, of what VALUE are these pieces of paper they persist in calling "money"?
Such a bizarre twisting of economic truth could and would never take place in a nation which uses Gold as money. Amongst many reasons for this is the simplest one of all. Unlike pieces of paper or entries on computer hard disks, Gold cannot be created out of thin air. It is in itself a TANGIBLE economic good. It's special distinction over all other economic goods is that it is the most "tradeable" good. As such it has become the good that people want to hold in order to exchange for other goods. THAT IS WHAT MONEY IS. It is a medium of exchange. And in order to become a medium of exchange, an economic good must first be an ECONOMIC GOOD.
When one sees "arguments" like the one presented by our PhD economist being presented and taken SERIOUSLY, one may know that the fate of what is presently used as "money" is sealed. No cave man, or civilised man for that matter, would ever consider the possibility that one could produce nothing and simply "import" one's goods from those who do. It takes a politician, a banker, or an "economist" to harbour such notions.
Gold became a "barbarous relic" in our "modern times" more than three decades ago. Now, the ideas which Gold underpinned in its role as money - freedom and liberty, political and economic - are well on the way to suffering the same fate. Ignorance breeds contempt of a lot of things. The more profound the ignorance, the more contemptible the result.