Sunday, December 9, 2012

Stephen Leeb at The Daily Bell

Forgive my lengthy post, but there was too much material here….

BM: An interesting interview; a lot of faith in the religion of “we.”

DB: From our point of view, he is taking fear-based Tavistock-elite promotions at face value and suggesting ways to ameliorate them.

BM: Yes, Dr. Leeb offers a kind of one-stop-shop for the elite-based promotions as relates to energy and centrally-planned “solutions.”

DSL: The only way to get anywhere is if you sit around and you have these intuitions about things.

BM: Intuition….

DSL: …eventually we are going to need renewable energy and we are going to need a lot of it because hydrocarbons and non-renewables are really peaking

BM: He speaks on and on about the upcoming shortage of energy, but not a single comment – either positive or negative – about the revolution in gas and oil going on in the upper Midwest of the US.  If it is real, how does this affect his “intuition”?  If it isn’t, say so and explain why not.

DSL: When you see record level prices with no growth, especially commodity prices, that's unheard of. The only explanation is major scarcity.

BM: There is one other explanation.  It isn’t so difficult to intuit.  Even Dr. Leeb sees this later in the interview, without stating it directly.

DSL: China right now is preparing to build out an infrastructure that will take them through the 21st century. They think long term. China does not think in nanoseconds. They think in 100-year-old intervals, if you will, 20- and 30-year intervals. This country is unfortunately complacent and it thinks very short term, quarter-to-quarter, election-to-election, etc.

BM: Let me translate: Central planning is our only hope, and since China has more of it than does the west, they will succeed while the west will fail.

DSL: I am not an expert in Chinese politics, far from it, but if you look at how they pick their current standing committee, those seven people who are running the country, they really centralize power in two people and I think that was done very deliberately. They know they have a lot of things to do. They have to clean up a lot of corruption and they've got to get this machine working so they can accomplish their goal.

BM: I will translate again: In order to combat corruption, one must centralize power and decision-making to the maximum extent possible.  Concentration of all power in one person is best, but one can’t condemn China for getting the number down to two.  There is no concern that this centralized power will lead to corruption.

DSL: I believe we are headed to a world in which we are going to have to make do with less, a world in which qualitative improvements are going to have to count for more than quantitative improvement. We've gone about as far as we can go with current economic analysis, whether it be Austrian, Keynesian, etc.

BM: It isn’t clear that he understands the first thing about Austrian economics.  How can someone lump Austrian with Keynesian when discussing “current economic analysis”?  What is the one (high-level) distinction about Austrian economics from every mainstream school of economics if it isn’t the distinction of “qualitative” vs. “quantitative”?

DSL: …but the kinds of recessions that we are getting or you've gotten since 1960 or maybe 1970 are probably not the kind you can apply business cycle analysis.

BM: Yes, he doesn’t understand Austrian economics.  These are precisely the types of recessions to which one can apply Austrian economics.  The period since 1971 is one where every major currency (and the associated credit) was fiat – tied to nothing.  This is at the root of Austrian Business Cycle Theory.

DSL: I think central bankers are doing what they can. They are between a rock and a hard place. Central bankers cannot print silver or copper or gold. They can just print money or take away money.

BM: Here Dr. Leeb, states the other possible cause of increasing commodity prices at a time of slow or no growth – they can print money, but not the stuff it can buy.  This would be called what, exactly?  Too bad he didn’t “intuit” this in his earlier reply.

DSL: Incidentally, I know you may be from the Austrian school and I'm very agnostic about this but as a sidebar, when you look at history very rarely do you see horrible things happening because of inflation, even in Germany during the 1920s.

BM: Does he have the slightest idea about the absolutely miserable life of the average German during this time?

DSL: It did not even bring down the government….

BM: I see.  As long as the government survives, there are no “horrible” consequences to hyperinflation.

DSL: You had massive dislocations, very painful dislocations, but the last half of the 1920s in Germany – or last two or three years of the '20s were fine.

BM: I will translate: if you ignore all of the horrific consequences of German hyperinflation, there were no horrific consequences.

DSL: So what really happened? What brought on the horror in Germany and a lot of other countries? It wasn't the inflation, per se. It was deflation; it was depression. That's what led to the rise of Hitler. Hitler never would have gotten anywhere if Germany hadn't fallen into this deep, dark depression.

BM: Too bad he doesn’t understand Austrian Business Cycle Theory.  He might then stop to think what it was that caused the depression.  Could it have had something to do with the inflation that preceded it?

DSL: [The Chinese] know if they have enough gold, anything that they don't have they'll be able to get…. I think the yuan itself will partially be backed by gold, and that's where the Chinese are headed, in my opinion, will certainly be the critical, most important currency.

BM: I have intuited this for some time:

From that post (so you don’t have to look if you don’t choose to): [The Chinese] are locking up resources around the world. These contracts are likely priced in dollars -- something the Chinese have plenty of and don't want to hold. At some point, China can declare the Yuan partially backed by gold -- even 15% - 25% would be sufficient. This strengthens the Yuan and makes it easier to buy those resources now priced in cheaper dollars.

DSL: At the end of the '70s you had this huge surge in commodity and the price of oil. A lot of that was political.

BM: To the extent central banking and money printing is political.  But Dr. Leeb never peeks under that curtain, even though this suggests he understands another possible cause for seeing record level prices with no growth.

DSL: So [one] of the things we are going to see in the next ten years are a harsh bear market in bonds….

BM:  Sooner or later, correct.

DSL: So, we've got to segue into something that's much different and we've got to do it in a hurry and we've probably got to do it as a world, not as a country.

BM: To translate, one last time: bring on global government.

1 comment:

  1. People just do not see what effects the redistribution of wealth via government programs have on society. DSL doesn't obviously understand that once we came off the gold standard in 1971, because of excessive government spending during Viet Nam, the dollar depreciated so much that the rest of the world wanted it devalued, hence the 7 month oil embargo in 73' and 74', during which the Nixon Administration was forced to renegotiate the dollar’s value against other currencies and the resultant inflation. They just refuse to concede, despite fact after fact, that central planning causes a quasi fascist oligarchy, that uses government and central banking to run roughshod over society, benefiting especially the upper end of the investment class to the detriment of the majority. Hence, 47.7 million on food stamps and a true unemployment rate between 20 and 22 percent. The Keynesian model is probably currently destroying 1/3 the world’s economy. Except for a few monetary holding tanks, do you see anywhere in the world that is really better off today, except those that are increasing the invisible hand of the free market.