July 19, 2012

By Kevin Michael Grace

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Gold was up (at press time) $9.70 (+0.6%) for the week to $1,580.90, and silver was up $0.08 (+0.3%) to $27.13. GoldCore reported July 19, “Gold has gained this morning after two straight days of Bernanke-testimony-related slight losses, and gold is testing resistance at the 50-day moving average at $1,586 per ounce.”

Bernancus Magnus admitted that the Fed has revised downward its already droopy growth projections, and “Given that growth is projected to be not much above the rate needed to absorb new entrants to the labour force, the reduction in the unemployment rate seems likely to be frustratingly slow.” For the time being, however, the Great One’s motto remains, “We will unleash no quantitative easing before its time.”

Four days before the Fed Chairman spoke in Washington, Barack Obama gave an extraordinary speech in Roanoke, Virginia, where he declared, “If you’ve got a business—you didn’t build that.” The Obama campaign has already accused Mitt Romney of taking this statement “out of context.” The full context, taken from WhiteHouse.gov, follows.

Chicken: "The hard part is knowing when to flinch."

“Look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something—there are a whole bunch of hardworking people out there.

“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative but also because we do things together.”

If nothing else, this speech should put paid to the notion that Obama is a great mind or even “so smart.” Yes, no man is an island. But that doesn’t make all men equal. And yes, there are a whole bunch of hardworking people out there, but few are capable of analytical insights, let alone those that can be transmuted into commerce.

Sometimes one wonders whether Obama is entirely ignorant of the history of his country or the history of anything. Henry Ford and Thomas Edison were almost entirely self-taught. Bill Gates and Steve Jobs were college dropouts. Jobs and Steve Wozniak transformed the personal computer from a toy to a tool. Gates and Paul Allen created the personal computer software industry ex nihilo. And Obama doesn’t know the difference between the Internet and the World Wide Web, devised by Tim Berners-Lee. These five men—if you seek their monument, look around you.

A mere generation after the collapse of Soviet communism, Obama has pronounced the death of capitalism and announced the triumph of collectivism. It is painful to admit that he is correct. If we understand “capitalism” to mean people lending their money at interest to banks, which then loan these funds at a higher interest rate to those seeking to establish or expand companies, that system collapsed after the dotcom bust, when Alan Greenspan determined that, business cycle be damned, there wasn’t going to be a recession on his watch. And so began the forced march to perpetual ZIRP.

Whatever checks and balances that existed in Capitalism Classic have been removed, and as a result, the world economy is now effectively a multitrillion-dollar game of chicken played by governments and bankers, with the rest of us reduced to rubberneckers.

Paul Craig Roberts invites us to imagine Congress demanding that Fed answer for the market-rigging and outright fraud that characterizes New Capitalism. “The Federal Reserve will reply: “So, you want us to let interest rates go up? Are you prepared to come up with the money to bail out the FDIC-insured depositors of JPMorganChase, Bank of America, Citibank, Wells Fargo, etc? Are you prepared for US Treasury prices to collapse, wiping out bond funds and the remaining wealth in the US and driving up interest rates, making the interest rate on new federal debt necessary to finance the huge budget deficits impossible to pay and finishing off what is left of the real estate market? Are you prepared to take responsibility, you who deregulated the financial system, for this economic Armageddon?’”

The answer, no surprise, would be: not on our watch. “But the question remains: How long can the regime of negative interest rates continue while debt explodes upward?” Roberts foresees a worldwide rebellion against the US dollar as reserve currency (it has already began with the BRICS), which means an end to it as “safe haven.”

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