Posts Tagged ‘Investing’

100 dollar bills.jpgWhen Harvard Economics professor and wannbe Fed Chairman Lawrence Summers speaks, it’s usually a good idea to pay him heed. Mind you, not because pearls of wisdom fall from his lips as manna from heaven, but because what he says carries weight. He is among the very elite of the intellectual and financial elite. A true master of the universe, if you will. And if Summers writes in the Washington Post that he wants to grab your cash, you’d best be paying attention. Because if he’s saying it in the mainstream media, you can take it to the bank (bad pun intended) that the rest of the elite is thinking along those same lines.

Of course, he wasn’t so crude as to suggest he was just going to take your money. People of his ilk never do. They’re far too genteel for such talk. No, what they do is make the case for some small, seemingly innocuous move. The sort of thing that, not only seems downright reasonable, but actually appears to be the very essence of patriotism and upright thinking. I’m speaking here of Summers’ recent call to “kill the $100 bill.”

Now why would this economics professor think that killing a perfectly good Federal Reserve Note is so important that he would take the time to write a newspaper column on the subject? The better to fight crime and terrorism, he tells us. Besides, he adds, we don’t need that silly old $100 bill anyway.

Citing Peter Sands, a senior fellow at Harvard’s Mossavar Rahmani Center for Business and Government, whose recent paper on the subject of banning large denomination bills was the inspiration for his article, Summers writes,

The fact that – as Sands points out – in certain circles the 500 euro note is known as the “Bin Laden” confirms the arguments against it.

Cash, you see, means terrorism. But it’s not just terrorism that we can stop by banning large bills. Crime of the more ordinary sort can be reduced as well. Summers continues,

I confess to not being surprised that resistance within the ECB [European Central Bank, the issuer of the euro] is coming out of Luxembourg, with its long and unsavory tradition of giving comfort to tax evaders, money launderers, and other proponents of bank secrecy…

So, banning the big bills helps us catch crooks too. And on top of that, “technology is obviating whatever need there may ever have been for high denomination notes in legal commerce.”

If we take Summers’ at his word, there simply is no legitimate reason for large denomination notes to even exist at all. And if you think otherwise, you must be a terrorist or tax evader. And you wouldn’t want people to think that about you, now would you?


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ZambiaGod have mercy on the currency,” read the headline. Curious, I followed the link to an article about the president of Zambia calling for a national day of prayer and fasting to address country’s currency crisis. It turns out that Zambia’s national currency, the Kwacha, has fallen by 45% against the US dollar in 2015, causing Zambians a host of economic difficulty. It is eminently Christian and sensible to call on the Lord in times of trouble The Bible is filled with promises that God will deliver his people if they call upon his name. Typical is Ps. 50:15 which reads, “Call upon Me in the day of trouble; I will deliver you, and you shall glorify Me. And because it is eminently Christian and sensible to call on the Lord in times of trouble, no Western president or prime minister would ever think of doing it. “We’ve got this,” they say, “no divine help needed.”

Such was not always the case. During the American Civil War, Abraham Lincoln called for a national day of prayer and fasting. But that sort of thing doesn’t fly anymore. In the aftermath of the greatest national disaster of my lifetime – I’m speaking here about the 9/11/2001 terrorist attacks on New York and Washington D.C. – George Bush encouraged Americans to go to Disney World. What’s worse, he participated in a blasphemous ecumenical prayer service at the National Cathedral in Washington which featured, among others, a female Episcopal bishop, a Rabbi, a Muslim cleric and a Cardinal of the Roman Catholic Church-State. Far from being an example of turning to God, this service was a double-minded affront to the Lord Christ Jesus. And because it was double-minded, those who participated had no reason to think they would receive God’s blessing or assistance. The failure of the Global War on Terror stands as a stark testimony to this principle.


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"You shall not crucify mankind upon a cross of gold." - William Jennings Bryan, 1896

“You shall not crucify mankind upon a cross of gold.”
– William Jennings Bryan, 1896

Talk of the US returning to a gold standard, at least according to the anointed wise men of our time, is the province of weirdoes, wackadoos and wingnuts and ought never to be mentioned in polite company by any serious presidential candidate. At least that’s the sense one gets when reading Matt O’Brien’s Washington Post article “Dear Jeb: Gold won’t make America great again.” O’Brien is upset that, when given the opportunity to squash any notion that he might support a gold standard, Jeb Bush waffled in his comments, implying that he may in fact be prepared to crucify mankind upon that dreadful cross of gold.  The horrors.  According to O’Brien, “The right answer would have been that the gold standard was a “barbarous relic” even 80 years ago, and might be the world’s worst idea today.”

O’Brien goes on to chide both Ben Carson and Bush, the former for his positive support of the gold standard, the latter for his failure to live up to his duty as “the candidate of serious policy,” which in O’Brien’s mind means taking a stance of uncompromising devotion to the central bank driven, fiat money status quo. The reason O’Brien gives for this is simple, “We tried it [the gold standard], and it failed.”

But did the gold standard fail as O’Brien thinks it did? O’Brien’s chief beef with the gold standard is that the price of gold is controlled by the Federal Reserve’s [the central bank of the United States] interest rate policy.

[T]he gold standard says that the dollar will always be worth a certain amount of gold. But that alone isn’t enough to make it true. The Federal Reserve has to do that. So, for example, think about what would happen when the price of gold “wanted” to go up. That is, when supply and demand would make its price go up if it were allowed to do so – which it wouldn’t be under the gold standard. In that case, the Fed would have to make the dollar go up instead to keep the relationship between the two the same. And making the dollar go up is just another way of saying that it makes interest rates go higher, since more people will want to hold a currency that pays more interest.

There are at least two fallacies with this argument. First, the gold standard does not require that the Federal Reserve (the Fed) do anything. In fact, the gold standard does not even require the existence of the Fed, as can be seen from the fact that the US was on the gold standard long before the it came into being in 1913. In truth, it was the Fed’s activism that caused both the stock market and real estate boom during the 1920’s and the subsequent 1929 bust that contributed to the depression of the 1930’s. It is the Fed, not gold, that failed during the depression. But as a good statist, O’Brien puts the blame exactly where it does not belong, on gold, while exonerating the Fed which did so much to create the mess. This is an example of calling good evil and evil good.

“Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly” – Karl Marx and Frederich Engels – The Communist Manifesto

Karl Marx

Karl Marx

Worth noting too, is that central banking of the sort practiced by the Fed, and so admired by O’Brien and his counterparts in the media, academia and government, was actually advanced by Marx and Engles as one of the planks in their Communist Manifesto. It is unsurprising that the communists, favoring as they did government ownership of the means of production, would also insist on government control the monetary system. What is worth noting, however, is that so many in the West seem to be of the opinion that a modern economy cannot function in the absence of a central bank. But far from being a necessity, the central banks of the world are a positive hindrance to economic development. In the 100 years of its existence, the Fed has managed to destroy 96 percent of the dollar’s value, robbed savers with artificially low interest rates to bail out its billionaire banker buddies, and created unprecedented economic distortions, the worst of which have yet to play out. It is the Fed and its unseemly support of Wall Street investment banks that is to blame for the record income inequality in the US. Not, as is commonly assumed, laissez faire capitalism. It is the Fed that helped to bring on the depression of the 1930’s and caused the tech bubble of the 90’s, the real estate bubble of the 00’s and the current stock and bond market bubbles, both of which are set to pop and threaten to send the US and world economies into an economic tailspin such that the Great Depression will seem like a golden age of prosperity by comparison. When it comes to central banks, the best thing to do is to bury them in the same pit as the rubble from the Berlin Wall.

A second problem with O’Brien’s analysis is that he assumes that a gold standard requires the government fix the price of gold at a certain level. According to the Bible, governments have only two legitimate functions: to punish evil doers and praise those who do what is right. Nothing more. Though many people assume that they should, governments have no right to manufacture money. This means that for a gold standard – or any monetary standard – to work properly, it should be the free market, and not the government, that determines what is, and what is not money as well as the market price of money, that is, the free market should set interest rates, not some monetary politburo at the Fed as is currently the case.


Although the Bible does not require a gold standard or a silver standard, it does require that money, in whatever form it takes, be honest. Historically, gold and silver have done the best job in this role. Our current system, in which central banks conjure up capital out of thin air, crediting billions of dollars to the accounts of favored financial institutions with the click of a mouse, is about as far from honest as it can get. In any other context, the normal activities of the Fed would be called counterfeiting. Or to put in another way, lying at the heart of our current financial system is a consistent violation of the Eighth Commandment, Thou shalt not steal.

Contrary to O’Brien, there is nothing serious about advocating the continuance of the current broken, immoral, central bank dominated, debt based, fiat monetary system. But statists look for every excuse under the sun to defend the central banks and their fiat money ponzi schemes, one example of which is O’Brien’s claim that a gold standard cannot be trusted to regulate interest rates. This is simply false. Since the interest rate is simply the price of money, it is regulated in the free market by the laws of supply and demand, just like any other good or service. A gold standard set by the free market is honest money enabling honest commerce conducted apart from the interference of government. It is Biblical. And it works. Seriously.

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The study of ethics, what we ought to do, is one of the principle fields of philosophic inquiry. And many are they who presume to speak with authority on this subject. But as with all statements of all men, the Christian ought to compare all ethical claims by the standard of Scripture.

And what is the basis of Christian ethics? The law of God. A thing is right, for no other reason that God says it is right. A thing is wring, for no other reason than God condemns it Peter summarized this idea when explaining to the Sanhedrin why he disobeyed their order not to speak in the name of Christ. He told them, “We ought to obey God rather than men” (Acts 5:9). Understanding this one principle greatly simplifies the Christian’s task of judging the ethical merits of any proposed course of action.

For example, during the 2008 financial crisis, the powers that be so frightened Congress and the American people with visions of financial Armageddon, that TARP, a taxpayer financed $700 billion bailout package aimed at saving the so-called too-big-to-fail banks on Wall Street, was passed. It was just obviously the right thing to do. So much so, that one of my business school professors said it was boring even to question the decision.

But was this decision to rescue failing financial firms with taxpayer money self-evidently ethical? Where, for instance, in the Constitution is Congress ever given the authority to bail out anyone? More to the point of this essay, where does the Bible ever grant the civil magistrate the power to take from one person to give to another? The law of God calls this theft, and we are commanded not to do it. In short, the Bible condemns TARP and all those who planned, advocated, voted for, and benefitted from it. Guilty too are those who continue to defend it.


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Those Wacky Gold Bugs

A gold standard is the creationism of economics. – Larry Summers

Former treasury secretary Larry Summers, it seems, is more right than he knows. The quote above, widely attributed to him on the internet, apparently was his reaction to a question about the viability of a monetary gold standard. Summers, as do nearly all academic economists, considers the gold standard to be the barbarous relic of a bygone era. “Let us mange the currency for you,” say the Keynesians, “we’re so much more reliable than that yellow metal.” In a way they’re right, of course. You can always count on the Keynesians to push monetary policies that result in the debasement of the dollar at your expense. When it comes to robbing people blind, they’re a reliable bunch indeed.

The funny this is, Summer’s statement is actually correct, just not in the way he means it.  By likening the gold standard to creationism, Summers is being sarcastic and intends us to understand he thinks it is worst sort of crack pottery. But just as creationism is God’s revealed truth about the origin of the world, so too does the gold standard reflect God’s revealed truth about money. Money, the Bible tells us, must be honest. That is to say money must be full-bodied. This is the point of the many verses in Scripture on honest weights and measures. When a currency such as the dollar is defined by a certain weight of gold and can be exchanged for it without discount, you have an honest, full-bodied currency. When governments can manufacture money without limit, without convertibility into a commodity such as gold or silver, you have the prescription for the worst sort of monetary abuse. This is the situation throughout the West today: governments robbing their people by debasing their currencies with the printing press.

Yes, Summers is right about the gold standard in a fashion similar to Caiaphas who stated that it was better for one man to die than for the whole nation to perish: he says more than he knows.  The moral blindness evidenced by Larry Summers in his attack on God’s revelation is further evidence of just how far the West has strayed from the Biblical blueprint for government that was established in the West as a result of the Reformation. The “wisdom” of man has supplanted the wisdom of God.  My financial advice to readers? Hold onto your wallets. Buy gold and silver.

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Financial Outlook 2012

Jim Rogers is one of my financial heroes. Not only is he one of the most successful investors in the world, he’s also that ever so rare highly placed individual who 1) knows what he is talking about, and 2) is honest and brave enough to publically speak the truth. I had heard of him years before the 2008 financial crisis, but only as the events of that fall unfolded did I really pay attention to him. What impressed me so much was that as the whole financial system was coming unglued, Jim Rogers was one of the few calm, sane voices on Wall Street. Unlike the entire financial and political establishment, he denounced at every opportunity and to anyone who would listen the morally indefensible bailouts of Wall Street, Fannie Mae, and Freddie Mac in clear language a normal person could understand. Imagine that! A financial guy who speaks clear English.

Another nice thing about Jim Rogers is that he does a lot of interviews. He is a regular guest on American and foreign financial television shows, and he recently did an interview for an Australian TV network in which he discussed his financial forecast for 2012. I don’t know whether Rogers is a Christian, but his views on monetary policy, taxes and government are certainly consistent with the Bible.

Consider what Rogers says to a question posed by interviewer Lelde Smits regarding his outlook for global economic growth in 2012 ,

“Well Lelde, I’m not too optimistic about what’s going to be happening in the world in the next two or three years, and maybe even longer. We have serious problems in the United States. you know, in 2002 we had an economic slowdown, 2008 was even worse because the debt was so much higher. The next time around the debt is going to be staggeringly higher. So, the problems are going to continue to get worse until somebody solves the basic underlying problem of too much spending and too much debt.”     

This is exactly right. The 2008 financial crisis was brought on as a result of too much spending and debt. To cure this debt and spending problem, our dysfunctional political leaders – with intellectual cover provided by quack academic economists – decided to send the nation further into debt by a combination of money printing and deficit spending. It was Keynesianism on steroids.

The book of 1 Kings records a confrontation between the prophets of Baal and Elijah. When Baal did not heed the cries of the false prophets to consume the sacrifice on the altar, the Baal worshippers doubled down on their foolish leaping, shouting and gashing themselves, somehow desperately believing that Baal would hear them if only they could shout loudly enough. In the end, they just looked ridiculous.

And as is was with the prophets of Baal, so it is with our contemporary high priests of Keynesianism. They demand ever more money printing, government boondoggle spending and debt, hoping against hope that somehow the absurd act of piling more debt on top of an economy already being crushed by too much debt will fix things. But in the end, just like the prophets of Baal, the Keynesian quacks in charge of our monetary and fiscal policies will just end up looking ridiculous. Of course, they may bring the whole economy crashing down around us too, a feat well beyond the power of any mere prophet of Baal.

To read more of Jim Rogers’ cogent economic and investing forecast for the coming year, please click here.

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The politicians keep on fueling an illusion that you can spend yourself out of the misery, and that by printing money you will improve the economy which is not the case. – Marc Faber

Whatever their nature, all debts must be paid. This is a basic feature of God’s creation and one that reflects his character. We see this in Romans where Paul described God as both just and the justifier of the one who has faith in Jesus. Sin put us in God’s debt, and his justice demands payment, a payment no sinful son of Adam can ever make. God doesn’t wink at our sins, he doesn’t let us file bankruptcy or default. Our sin debt must be paid, either by our eternal condemnation or by the blood of his Son Jesus Christ. This is a simple point, an elementary point, a point that a child can understand. And yet this simple point often causes us to stumble. We want to believe that there really is a free lunch.

This wishful thinking isn’t limited to our sin problem, but shows up in how we think about more mundane areas such as fiscal and monetary policy. The United States, and indeed the whole western world, has incurred an enormous monetary debt because people believe in free lunches, that is, they think that debts do not have to be paid.

One of the few prominent investors who gets the debt issue is Marc Faber. I don’t know whether he’s a Christian, but his understanding about debt is certainly consonant with Scripture. We cannot spend our way out of debt, that’s a Keynesian lie. Our debt, he tells us, must be paid. That’s not the line the folks from Washington, Wall Street or Main Street want to hear, but it is the truth. Check out this video interview with Faber.

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