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Rethinking the State

Mises Daily Friday: The Truth About Politics

FEBRUARY 5, 2016

The very first votes of the 2016 presidential election season were cast this week in the Iowa caucuses. This is supposed to fill us with happy thoughts about self-government, civic virtue, rational deliberation, and about politics as the way the people’s will is put into effect.

But to the contrary, we should spurn what the establishment would have us celebrate. Politics operates according to principles that would horrify us if we observed them in our private lives, and that would get us arrested if we tried to live by them. The state can steal and call it taxation, kidnap and call it conscription, kill and call it war.

And yet we are taught to fear capitalism, of all things.

But what, after all, are capitalism and the free market? They are nothing more than the sum total of voluntary exchanges in society.

When we engage in a voluntary exchange — when I buy apples for $5, or when you hire someone for $25 per hour — both sides are better off than they would have been in the absence of the exchange.

We can’t say the same for our interactions with the state, since we pay the state under threat of violence. The state sure winds up better off, though. That’s for sure.

Business firms that increase their profits thanks to some new innovation cannot rest on their laurels. Other firms will adopt the innovation themselves, and those abnormally high profits will dissipate. The original firm must continue to press forward, striving to devise still newer ways to please their fellow men.

The state operates under no such conditions. It can remain as backward as it likes. Other firms are typically prohibited from competing with it.

The state’s priorities arbitrarily override your own. Ethanol “is important for the farmers,” one candidate says. So because the state has decided some interest group’s foolish and economically nonsensical pet project is “important,” what you yourself would have preferred to do with your money is simply set aside and ignored, and you are forced to subsidize what the state seeks to privilege.

Our schools and media portray corporations as sinister, and government as benign. But who wouldn’t rather take a sales call from Norwegian Cruise Line than an audit demand from the Internal Revenue Service?

Or imagine if a corporation fabricated a web of untruths, used them as a pretext to launch a violent attack on a people that had never caused Americans any harm, and brought about as many as a million deaths and millions more internal and external refugees. That corporation would be broken up and never heard from again. It would be denounced ceaselessly until the end of time.

Now all those things did happen, but they were carried out by the state. And as we all know, there have been no repercussions for anyone. No one has been punished. In fact, the perpetrators earn six-figure speaking fees. The whole thing is shrugged off as at worst an honest mistake. Some people are still outraged about it, but even they seem to take for granted that there’s really nothing that can be done about behavior like this on the part of the American regime.

Imagine there were a corporation that was somehow so entrenched that despite being responsible for a staggering death toll, it evaded all responsibility and simply carried on as before. The outrage would be deafening and overwhelming.

But so relentless has been the propaganda, ever since all of us were children, about the state’s benign nature that many people simply cannot bring themselves to think as badly about the state as they have been taught to think about corporations — even though the crimes of the state put to shame all the misdeeds of all existing corporations put together. Meanwhile, opponents of the state are routinely portrayed as incorrigible misanthropes, when in fact, in light of the state’s true nature, we are mankind’s greatest advocates.

The market brings people together. People of divergent and sometimes antagonistic racial, religious, and philosophical backgrounds are happy to trade with one another. Beyond that, the international division of labor as it exists today is the greatest and most extraordinary example of human cooperation in the history of the world. Countless firms produce countless intermediate goods that eventually combine to become finished consumer products. And the entire structure of production, in all its complexity, is aimed at satisfying consumer preferences as effectively as possible.

The state, on the other hand, pits us against each other. If one of us wins a state favor, it comes at the expense of everyone else. For one group to be benefited, another must first be expropriated. At one time or another the state has pitted the old against the young, blacks against whites, the poor against the rich, the industrialists against agriculture, women against men.

Meanwhile, all the anti-social effort devoted to extracting favors from the state is effort that is not available to produce goods and services and increase the general prosperity.

The market is about anticipating the needs of our fellow men and exerting ourselves to meet those needs in the most cost-effective manner — in other words, by wasting the fewest possible resources, and making what we offer as affordable as we can for those we serve.

Ah, but we need the state, virtually everyone tells us. Whether it’s “monopoly,” or drugs, the bad guys overseas, or the scores of other bogeymen the state uses to justify itself, we’re constantly being reminded of why the state is supposed to be indispensable. To be sure, these and other rationales for the state sound plausible enough, which is why the state and its apologists use them. But the first halting steps toward intellectual liberation come when someone considers the possibility that the truth about these things might be different from what he hears on TV, or learned in school.

The small minority of people who administer the state with funds expropriated by the productive private sector need to justify this situation, lest the public become restless or entertain subversive ideas about the real relationship between the state and themselves. And this is where the state’s various platitudes about the people governing themselves, or taxation being voluntary, or government employees being the servants of the people, enter the picture.

Think for a moment just about this last claim: that government employees are our servants. These people staff an institution that decides how much of our income and wealth to expropriate in order to fund itself. They will imprison us if we do not pay. And we are to believe that these people are our servants?

For those not gullible enough to fall for such a transparent canard, the rationales become mildly more sophisticated. All right, all right, the state may say, it’s not quite right to say that the people govern themselves. But, they hasten to add, we can offer the next best thing: the people will be represented by individuals chosen from among them.

As Gerard Casey has argued, though, the idea of political representation is not meaningful. When an agent represents a business owner in a negotiation, he ensures that the owner’s interests are pursued. If the owner’s interests are defended only weakly, ignored, or downright defied, the owner chooses different representation.

None of this bears any resemblance to political representation. Here, a so-called representative is chosen by some people but actively opposed by others. Yet he is said to “represent” all of them. But how can this be, when he can’t possibly know them all, and even if he did, he’d discover they have mutually exclusive views and priorities?

Even if we focus entirely on those people who did vote for the representative, is their vote supposed to imply consent to his every decision? Some of them may have voted for him not for his positions or merits, but simply because he was less bad than the alternative. Others may have chosen him for one or two of his stances, but may be indifferent or hostile on everything else. How can even these people — who actually voted for the representative — seriously be said to be “represented” by him?

But the idea of political representation, while meaningless, is not without its usefulness to the modern state. It helps to conceal the brute fact that, despite all the talk about “popular rule” and “governing ourselves,” even the “free societies” of the West amount to some people ruling, and others being ruled.

When the results are announced this primary season amid cheers and celebration, then, remember what it all represents: the triumph of compulsion over cooperation, coercion over freedom, and propaganda over truth. The civics textbooks may write with breathless awe about the American political system, but this is by far the worst thing about the US. Rather than celebrate the anti-social world of politics, let us raise a glass to the anti-politics of the free market, which has yielded more wealth and prosperity through peace and cooperation than the state and its politicians could with all the coercion in the world.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

From Mises.org, here.

Rabbi Grossman Critiques the Mishna Brurah

The Chofetz Chayim and the Vilna Gaon: Similar Halachoth, Dissimilar Approaches

March 20, 2016

This past semester we had the opportunity to review the topic of the time concerning the weekly onset of the Sabbath. Using the Mishna Berura (to Orah Hayim 261) as a base text, we saw how in the olden days, the prevailing view was that the halachic day starts at sundown, and therefore if one wished to add to the Sabbath by accepting it while it was still Friday, he would have to accept the Sabbath, i.e., desist from performing forbidden labors, sometime before sunset. We also how Rabbeinu Tam believed, based on his understanding of the relevant Talmudic passages, that the halachic “sunset,” the dividing line between the halachic days, is something that occurs everyday almost an hour after the setting of the sun that we are used to seeing. At the time, applying Rabbeinu Tam’s opinion was revolutionary. For centuries, the Jewish people greeted the Sabbath queen and saw her off at certain times of the day, and then slowly, they started doing so later. The weekly Sabbath shifted by about an hour, and that eventually became the prevailing custom among us, such that both the Shulhan Aruch and the Rema assume that the halacha follows Rabbeinu Tam. While there were notable holdouts who did not completely accept the new definition of the cut off line between days, like the Shach and Yemenite jewry, Rabbeinu Tam’s position held sway until the Vilna Gaon came around. The Vilna Goan completely rejected Rabbeinu Tam’s approach because it simply does not fit with reality. What celestial phenomenon actually happens about an hour after sunset? Most of the stars, whether, small, medium, or large, are already out by that time. It was better to revert to the classic understanding of sunset as explicated by the Geonim and Maimonides: sundown is sundown, and the Sabbath must start by then, and it departs only a matter of minutes afterward. The Chofetz Chayim, by mentioning the Vilna Gaon’s opinions concerning most halachoth, helped popularized the Gaon’s overall approach, and today the momentum has shifted. Most Jewish communities accept the Sabbath by sundown on Friday, and allow their constituents to begin forbidden labor well before even an hour has passed from the sundown the following day. Rabbeinu Tam would not be too satisfied with the status quo today; he ruled the way he did because he believed that the halacha should fit with the ancient cosmological models that the ancient Hebrews shared with others in the Near East, and felt that the sages later viewing the world and the orbits of the spheres as did the Alexandrian astronomers was improper, despite their stature.

Here’s where it got interesting. Rabbeinu Tam and the Shulhan Aruch and the rest specifically adopted one position and outright rejected the other, while Maimonides and the Vilna Gaon took the second opinion and rejected the first. All of the pos’qimtook sides on the issue, each one for his own reason(s), but the Chofetz Chayim does not present his readers with sufficient arguments for or against each position. Instead, he just presents the opinions as being at odds with each other and identifies who subscribes to each opinion, and then he rules that both opinions be ideally followed. We should take in the Sabbath according to the earlier definition of sunset, but end the Sabbath according to the later opinion. This overall approach of trying to satisfy all major opinions was popularized by the Chofetz Chayim, but is, in a historical sense, the most revolutionary. And this shows us the defining difference between the methods of the Vilna Gaon and the Chofetz Chayim, even though it was the Chofetz Chayim who made the Vilna Gaon’s views so well known: The Vilna Gaon ruled like the view that he felt fit the Talmudic sources and the reality, while the Chofetz Chayim did not weigh the merits of individual views, and instead sought to somehow satisfy all of them.

…

We then saw a number of the classic cases we discussed previously, where most notably, the Mishna Berura does not mention the actual opinion of the Vilna Gaon on the matter because, presumably, it stands at complete odds with the view the Chofetz Chayim was trying to advance.

In 31:8 the Chofetz Chayim is trying to advance the position that a blessing should not be recited when donning t’filln on Hol Hamoed, and the Vilna Gaon’s “lenient position” on the matter can be used as a “weight” to counter the position that a blessing should be recited on donning t’fillin. This would give the reader the impression that the Vilna Gaon ruled that t’fillin are worn without a blessing on Hol Hamoed, whereas in  reality the Vilna Gaon believed that there was no question about the blessing, because he held like the Shulhan Aruch, which ruled that t’fillin may not be worn on Hol Hamoed at all. Citing the Vilna Gaon accurately would have wrecked his entire thesis.

In 583:8, the Mishna Berura, in a discussion concerning the practice of Tashlich, neglects to mention the opinion of the Vilna Gaon: that tashlich should not be done on Rosh Hashana, nor by a body of water. Citing the Vilna Gaon would have eliminated the entire point of the discussion. The same can be said about the entirety of mark 605. The Mishna Berura has much to say about how to perform kapparois, even though both the Shulhan Aruch and the Vilna Gaon prohibited them.

In Orah Hayim 2 and 8 the Mishna Berura discusses the issues of ad hoc head coverings when reciting blessings, and the idea that Jews should always wear hats even when indoors. He does not mention that the Vilna Gaon wrote that “the rule of the matter is that there is never any prohibition of going about with an uncovered head,” and that it is only during the times of the prayer that one should cover his head out of respect. Once again, the Vilna Gaon’s opinion is not mentioned,  because it is in such stark contrast to the view the Mishna Berura favored.

The Vilna Gaon would often mention who subscribed to views that he rejected; I know of no instance where the Mishna Berura cites the Vilna Gaon and then rejects his opinion.

…

The entire issue of reading part or all of the last verse of Parashath Zachor multiple times has its basis in  a  practice of the Vilna Gaon as cited by the Mishna Berura. Ma’aseh Rav 133 and 134 mention that the Vilna Gaon himself would be the one to read Zachor in the synagogue, and that he read the word as zecher, with a segol, as opposed to the traditional vowelization, zeicher, with a tzeirei. In Diqduq Eliyahu, the Vilna Gaon seems to say that the difference between the two vowels is the yud-like sound that is a natural part of the tzeirei vowel, much like the long hiriq (ee as in “bee”) has a natural yud sound. This issue is surprising, because as we wrote earlier, there are many disputed vowelizations throughout the Torah, and many actually affect the meaning, but in this case, there is no known manuscript or classic text that has the word zeicher vowelized with a segol, and even if such a variant vowelization existed, it would not change the meaning of the word. The Vilna Gaon also felt that the word should also be zecher in Psalm 145:7 (“Ashrei”), even though, once again, we have no such version. Be all this as it may, the Vilna Gaon apparently favored one view over the other, but it was the Chofetz Chayim who popularized trying to somehow satisfy all opinions.

But why did the Vilna Gaon feel that the word zeicher should be re-vowelized? Granted he made similar recommendations with regards to the prayer liturgy, and spent his life trying to edit the exact texts of the Talmud and Midrashim, but those are not part of the received Biblical text, the masora, and he did not suggest any other re-vowelizations throughout the entire Bible, nor did he attempt to reconcile some other known vowelizations that are subject to dispute. Why did he seem to care about only one word in the entire Bible, and is it more than a coincidence that it happens to be in the one minimally parasha read every year by command of the Torah?

Here is how I see it. The Vilna Gaon likely did not really say that zeicher should be revowelized! Having a segolate noun of the tzeirei-segol form (e.g., sheivet, tribe, and neizer, diadem) is just as valid as the double segol form (e.g. kesef, silver, and qesher, knot). In the commentary  P’ulath Sachir to the printed versions of the Ma’aseh Rav, the author mentions that the Vilna Gaon’s students actually do not agree on how the Gaon said zecher/zeicher. Some dispute the Ma’aseh Rav, and claim he really said zeicher with a tzeirei. So what happened?

The Vilna Gaon was not always the regular Torah reader. That is why it was a novelty for him to be the reader for Zachor. He would normally only go up to the Torah for the sixth aliya. Further, he believed that the reading of Zachor was biblically ordained, and told his students that that was his opinion, so they naturally paid more attention to that reading, especially when their holy master was doing the reading. Next, the Vilna Gaon’s Hebrew definitely did not sound like that of  other Litvaks. It, like very other of his practices, was colored by his objective adoption of what he believed to be right, and therefore was unusual. (He also declined to speak Yiddish like the rest of the Jews, and strove to only speak Hebrew.) His vowels were the objective ones he describes in his other seifer (sefer?). While Ashkenazis allows for a segol that sounds like the e in “bet” and a tzeirei that sound like the ay in “way,” in truth the tzeirei should not have such a strong diphthong yud (y) sound, and in the Gaon’s opinion, the tzeireiwas actually somewhere between the two sounds, similar to the way both the segoland tzeirei are pronounced in Modern Hebrew. Next, in the entire Parashath Zachor, the vowel tzeirei only occurs once in a syllable that is both open and accented, i.e. most distinguished from a segol: in the word zeicher! Therefore, when the Vilna Gaon read that word properly, to some students of his students it sounded like what they knew was his version of a tzeirei, but to the less knowledgable students, it did not sound like a true, hard, Ashkenazic tzeirei, so it must have been a segol! This is similar to the fallacy that Ashkenazis is any pronunciation system that includes a weak sav and some sort of qamatz that is different from a patah, or that the forms of checkers or handball that are unusual are “Chinese.” The vowel was weaker than a tzeirei, so it must have been a segol. What about the tzeirei in eith and Amaleik? Wouldn’t they have noticed that those were weak? Not as much, because those syllables are closed and therefore less noticeable.

To sum up, the Ma’aseh Rav is not reporting that the Vilna Gaon felt the word should zeicher should be vowelized with a segol, but rather that the Vilna Gaon did not, when the time came to speak proper biblical Hebrew, pronounce a tzeirei exactly like the way the other Ashkenazim were doing, and this fits with the Vilna Gaon’s life-goal of escaping the misguided “poilisher minhagim” that dominated in Europe.

Much like eating an inordinate amount of matza in a short period of time has come to overshadow the commandment to remember facets of the Exodus, the over pronunciation of the words of Zachor has now overshadowed the message of the parasha, and this is due in part to the Mishna Berura’s over simplification of this issue, turning it into just another mahloqeth that needs to have both sides satisfied.

From Avraham Ben Yehuda, here.

Take Your Money Out of the Bank!

Two BIG Reasons NOT to Keep Your Cash in the Bank

By

Nestman.com

March 16, 2016

It’s bad enough depositing your money into a bank account and earning essentially zero interest on it, or in some countries, having a negative interest rate.

It’s even worse knowing that once you deposit your money in a bank, it’s not really yours anymore. You have turned over your property to the bank in return for a debt claim. You become an unsecured creditor holding an IOU.

Worst of all, there’s the “bail-in,” which we all became familiar with during the 2013 banking collapse in Cyprus. Some uninsured depositors got half of their money back, although, at one bank, customers received nothing of their deposits over the “insured” amount.

In 2014, the leaders of the Group of Twenty (G20) – representing the world’s 20 largest economies – declared the Cyprus model should apply globally. They did so in a mind-numbing tome entitled Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution.

Deposits in banks that are “too big to fail” will be promptly recapitalized with their unsecured debt. And… guess what? The largest chunk of unsecured debt is your bank deposits. Insolvent banks will recapitalize themselves by converting your deposits into worthless bank stock. This avoids taxpayer-funded bailouts that proved politically unpopular during the last financial crisis.

Oh, and get this… the G20 has also declared that derivatives – the toxic contracts Warren Buffett calls “financial weapons of mass destruction” – are secured debts. Since your bank deposits are only unsecured debt, guess who gets your money if the bet goes the wrong way for the bank? Answer: It’s not you.

Heads, the bank wins. Tails, you lose.

It’s practically guaranteed, too, that in the next financial crisis, there’ll be a whole slew of bank failures. That’s despite the fact that the mainstream financial media assures us that central banks have imposed higher capital requirements, stress tests, etc., on banks to ensure that when the “big one” hits, your deposits will be safe.

Don’t believe a word of it. The amount of capital that banks hold compared to the money on deposit is frighteningly low. In the US, the five largest banks have a capital ratio as a percentage of assets of only 6% – although that’s double what it was in 2008. In effect, if every depositor in a bank demands their money back simultaneously – the classic “bank run” – the largest US banks could repay only six cents on the dollar before they ran out of money. And since most banks don’t keep a lot of cash on hand, it could even be less.

It’s worth remembering that historically, US banks were much better capitalized. For instance, in 1842, US banks had an average capital ratio of 60% – ten times that of the largest banks today. That was an era in which bank competition was based on safety because no deposit insurance was in effect.

This chart from Bloomberg News says it all:

Sure, in many countries your bank deposits are “insured.” In the US, the first $250,000 in your account qualifies for deposit insurance through the Federal Deposit Insurance Corporation (FDIC). But for every $100 on deposit, the FDIC has only $1.06 with which to back it. Doesn’t that make you feel warm and fuzzy about the safety of your bank deposits?

Continue reading…

From Lewrockwell.com, here.

Meir Ettinger On His Torturers

Meir Ettinger, In His Own Words: The Delicate Bridges

BY ON

The following article was Meir Ettinger’s most recent blog post. It was written just before he was arrested and it was posted on August 4th on Hakol Hayehudi in Hebrew, once he was already in jail. Some of Meir’s blog posts have been cited in the media as part of the evidence against him. Here we present one of Meir’s posts and allow the readers to judge for themselves whether it is grounds for administrative detention.

Did Moti Yogev burn the house in Duma?

This past week we’ve witnessed an all out attack by the media on Jewish terror. Representatives of the state of all stripes and sizes have condemned these recent attacks. Yet beyond condemning the attacks, they have really been assaulting Jewish values as a whole while hiding behind the guise of condemning violence or murder.

What they really mean can be heard in the words of those who were less successful in hiding their true motives. For example we can look at Yair Lapid, whose words we will quote below since they reveal what the self-proclaimed “knights of justice and equality” are really fighting.

Yair Lapid said (translated from the original Hebrew), “We’re at war. He who stabs young people at a Pride March, the terrorists who burned a baby in Kfar Duma- they are the enemy. Those who burned the Church next to the Kinneret- they are the enemy. A person who throw stones at security forces- he is the enemy, because stones kill. Members of Lehava- they are traitors who assist the enemy at times of war. He who threatens to attack the Supreme Court with a D-9 bulldozer- is a traitor helping the enemy at a time of war.”

What is the connection between Moti Yogev and the home in Duma? What is the connection between Lehava that opposes assimilation and the arson of a church? The answer is simple, Lapid is inciting a culture war. The media outrage and assault is not really about compassion for innocent victims or opposition to violence it’s about sticking it to those with Jewish pride.

Culture War

Yair Lapid, speaks for all of them. He knows how to explain himself clearly and he understands that the media assault is not about burning a house, or about innocent victims. It’s not about violence or murder. It’s not even about how we conduct our wars or about the boundaries of the law. Lapid’s war is a culture war.

But still, how can we be so sure that it’s not human life and murder that matter so much to those in the media? The answer is in the way they so casually relate to the lives of Jews. They silence murder committed by terrorists and they create rules of engagement with stone and firebomb throwers that put Jewish lives in danger. The media and the left blatantly support Arab terror against Jews and by extension, at the very least, are indifferent to Jewish life.

So if human life is of little concern to them, why the media assault? Once again one of their own, President Reuven Rivlin, said it best in his own words. “Sadly, until now we have dealt with Jewish terror lightly. Perhaps we did not internalize that against us stands a dangerous, determined, ideological group that has set for itself the goal ofdestroying the delicate bridges we have so carefully constructed. I believe that the more we recognize that we are standing against a real danger to the State of Israel, we will be more determined to fight them and uproot them entirely. “

So what are those delicate bridges so carefully constructed? The answer can be found in the concept that has been absent from Rivlin’s lips the past year. Rivlin has worked tirelessly to distort and render meaningless the entire concept of ‘Judaism.’ In Rivlin’s (and many others) opinion, a Jewish State can be both “binational” and “Jewish” at the same time. The national identity of the Jewish people is not related to its uniqueness in contrast to the nations of the world, and Jewish identity is certainly not related to fulfilling the Mitzvot. Everyone must respect one another’s view, even if it violates one’s own beliefs.

Rubi Rivlin has worked to blur the lines between a “Jewish State” and the policies those very words imply. He has tried to claim that distorted, liberal, modern culture encompasses Jewish heritage. He stands guard over all the imaginary and false bridges he has built between Judaism and leftist, liberal democracy.

The Shin Bet is not a security agency!

The Shin Bet has for many years been running to the media claiming that it is terrorism when Jews uproot a tree or commit other petty crimes in response to the Arab intifada, which, in contrast, the Shin bet has tried to silence.

The Shin Bet shouts in our ears, “Jewish terror, Jewish terror, Jewish terror,” while at the same time attempting to cover up and ‘contain’ the daily incidents of stone throwing and molotov cocktails committed by Arabs. The Shin bet has transformed acts of protest committed by teenagers who could no longer bear the daily attacks against them, into terrorism. In committing these actions the Shin Bet has led many Jews to the realization that the agency responsible for their security and safety, has the blood of dozens of Jews on its hands. Rather than protecting Jews’ safety, the Shin Bet has acted as a political tool.

This is the same Shin Bet that calls Arab terror, “popular protest.” They consider firebombs thrown at vehicles, “popular protest.” This is the same Shin Bet that thinks so little of Jewish life that they have closed checkpoints, and reopened security roads to Arab traffic. And why? All in order to guard the “holy, delicate bridges.”

The head of the Shin Bet (during the release of prisoners in the Shalit deal) took personal responsibility for the murder of Malachi Rosenfeld, Dani Gonen, and all the other Jews who would yet be murdered by the terrorists who were released. These are not the hands of an organization that cares about the safety of Jews, rather those of a group attempting to shape public opinion behind the scenes. It is for that reason that they redefine protest as terror and terror as protest. It is for that reason that they draw such silly cartoons and create imaginary hierarchies of ‘secret, underground,’ Jewish terror organizations. All for one reason- to guard the identity of the State of Israel as as that of leftism and assimilation.

So what can we do against this media assault? For one, we simply must not be alarmed. Against the delicate bridges of liberal culture being thrust upon us, we must rekindle the bonds that connect us to a love of G-d and our Jewish heritage.

“They” have delicate bridges, bridges of lies. It is said that the Hebrew word for ‘lies’ has no feet and thus that lies have no foundation. Therefore they are scared and stressed, but we will not fear their media assault. “I am a wall” says King Solomon- our connection is strong and it gives us the strength to stand up against all the imaginary walls and smokescreens to say without fear what is truly a Jewish State.

From Hakol Hayehudi, here.

Gold As Guard Against Government

The So-Called Relic (Finally) Roars Back

By

Nestman.com

February 24, 2016

Economist John Maynard Keynes is often quoted as calling it the “barbarous relic.”

Soviet revolutionary Vladimir Lenin said he would build toilets out of it, as the ultimate symbol of capitalist waste.

More recently, economists have claimed it was “irrelevant,” was “no longer a currency,” and it gave investors “a false sense of security.”

I’m referring, of course, to gold – element #79 on the periodic table (symbol: Au).

For at least 50 centuries, Homo sapiens have used gold as a medium of exchange. It’s easily divisible, transportable, and durable.

Gold is also scarce. If Goldfinger were to come to life and somehow seize all the world’s gold, it would fit into a cube with sides of less than 70 feet each.

Scarcity makes gold difficult for governments to debase. Many have tried, of course, primarily by alloying it with much less valuable metals. Royal dynasties in Rome, China, France, and England all followed this practice. Governments achieved the same goal by increasing the quantity of supposedly gold-backed currency in circulation, without increasing gold reserves. But this policy led to price inflation in the countries that practiced it and eventually forced the US – and effectively, the rest of the world – to gradually abandon the gold standard. Its last vestige was swept away in 1971.

Since 1971, global central banks have created hundreds of trillions of dollars, yen, euros, and other fiat currencies out of thin air – monetary units backed only by the “good faith” of the issuing government. Central banks pump these fiat currencies into their respective economies to maintain growth. Most of this new money has been created since 2008 when the world entered the worst economic downturn since the Great Depression of the 1930s.

This hasn’t led to economic growth, so in a sign of increasing desperation, central banks have also imposed negative interest rates. Negative rates mean lenders literally pay businesses and consumers to borrow money. They also penalize savers for hoarding it.

In theory, that policy should force consumers and businesses to spend their money, rather than save it. That hasn’t happened, so central banks keep pushing rates lower. In Switzerland and Denmark, for instance, the rate the central bank pays on deposits now stands at –1.25%.

In a world with a gold standard, gold prices would have skyrocketed with all the newly created fiat currency sloshing around in the financial system, not to mention negative interest rates. But while gold prices rose sixfold from 2001 to 2011, over the next four years, they fell more than 40%.

Gold’s price decline wasn’t matched by a decline in central bank money creation. Some experts account for this disconnect by observing that bullion banks – banks that lease bullion from central banks – made massive leveraged bets against gold in futures markets. One development that facilitated this strategy is the appearance of securities whose value is tied to the price of gold, such as SPDR Gold Trust (symbol: GLD).

GLD and similar securities give investors a convenient way to purchase gold without needing to store it securely. But these securities also give speculators the ability to bet on gold prices without taking physical possession. This led to a massive growth in “paper gold” transactions – metal that effectively exists only in cyberspace. In September 2015, the Chicago Mercantile Exchange (CME) revealed that the ratio of paper gold to gold that could actually be delivered had spiked to 200:1.

This strategy also served the interests of central banks and governments. With gold prices stagnating or worse, investors who might have wanted to purchase gold as a hedge against a currency collapse or negative interest rates would instead purchase government bonds, stocks, or other paper assets.

That strategy stopped working in 2016. In the US, the stock market is off to its worst start in its history. Markets in other countries aren’t doing much better: in Japan, stocks are down 15.35% for the year; in Germany, 10.63%.

The barbarous relic, though, has prospered. While investors haven’t been flocking to gold to build 24-karat toilets (although a few exist), gold prices have increased 13.88% since the beginning of the year, including a stunning one-day gain of nearly $50 per ounce (more than 4%).

One reason for this recovery in gold prices is that a growing number of investors are demanding physical delivery of gold. This makes it harder for central banks to slam down gold prices via massive shorting of paper gold. Leading the pack in this regard is the Bank of China, which in January alone added 580,000 ounces of gold to its reserves. That’s especially notable because China’s foreign currency reserves have fallen sharply in recent months, as it tries to prop up its domestic currency and collapsing the stock market.

But the most important reason gold is rebounding, I believe, is the financial alternatives to it have become increasingly less attractive. That’s the only plausible reason China, with its bleeding foreign exchange reserves, is buying so much of it.

Then there’s the “bail-in” issue. Following the 2013 model pioneered by Cyprus, governments worldwide have quietly adopted the bail-in model. For Americans, that means your accounts in domestic banks – possibly earning negative interest rates if former Fed Chairman Ben Bernanke has his way – could be vulnerable. Instead of getting your money back if the bank fails, your IOU (yes, that’s the legal status of a bank deposit) would be forcibly exchanged for worthless bank stock.

Sure, the first $250,000 in your account qualifies for deposit insurance through the Federal Deposit Insurance Corporation (FDIC). But that reassuring FDIC logo on your bank’s front door masks the fact that the FDIC Insurance Fund has a reserve ratio of 1.06%. For every $100 on deposit, the FDIC has only $1.06 with which to back it.

And when a banking crisis hits, it won’t occur in a vacuum. It will likely coincide with a collapse in stock prices, real estate, and other assets. It might take some time to retrieve funds from your insured bank account. That’s true even if the feds create more money out of thin air to honor the FDIC’s commitment.

Uninsured deposits, of course, would be bailed in. That prevents those inconvenient – and politically unpopular – bailouts of too-big-to-fail banks.

More and more people have decided to prepare themselves for the plundering of their wealth by getting a portion of their nest egg assets out of the financial system by buying gold. For me, that’s about 25% of my net worth.

Given the alternatives, can you think of any reason not to join us?

Reprinted with permission from Nestmann.com.

From Lewrockwell.com, here.