Thursday, February 24, 2011

Revolution Fire Continues to Rage, What’s wrong with Anarchy?

2/24/2011 Portland, Oregon – Pop in your mints…
Today we can hardly believe our eyes.  What appeared to be a simple revolution in a remote land, Tunisia, has begun a chain of events that may touch every person on the planet before it is through.  We will call it the "Fire" of revolution, at it seems to be catching everywhere.  The grievances of a generation are beginning to be aired in public forums from Tripoli to Madison, Wisconsin.  As you are aware, we are of the opinion that the spark for this fire began it what may appear to be a very far away place.  Washington, D.C.  
While many conspiracy theorists have their own, well, theories, we believe that this is collateral damage from the Federal Reserve's misguided attempt to leave no debt unpaid by simply printing the money up to pay them.  It is simple enough to do in their ivory towers, but the consequences in the real world, in the form of trade and production imbalances, which are sometimes referred to as "Malinvestments," are absolutely and totally destructive to balance in society.
The consequences of printing money are generally felt in two forms.
The most obvious form is what is being seen in Greece and now Wisconsin.  In these cases the government made promises to workers, retirees, and other constituents that they cannot honor.  The governments appear to be doing the honest thing and are effectively defaulting on these promises.  However, they are attempting to default at exactly the wrong moment, as the increased money supply begins to pinch workers in the developed world.  In both cases, many public workers are simply being asked to give up privileges such as the ability to take a long holiday at the beach.  In both cases, we are seeing sometimes violent evidence of just how hard it is for the government to default on its promises.
The less obvious and more damaging form of consequences are what we are seeing in Tunisia, Egypt, Yemen, Algeria, Bahrain and Libya.  In these cases, the governments are not technically defaulting on promises, rather, they are seen as the scapegoats for rapidly rising food costs which threaten to drive many to the point of starvation.  These rising food costs are the indirect result of the governments in the developed world attempting to give their public employees holidays at the beach.  Naturally, with the stakes higher in the developing world, a sense of desperation has set in and the pace of and violence involved in the uprisings is markedly higher.

Monday, February 21, 2011

Raging Against the Machine in Madison, Inflation Only Beginning to Take its Toll

2/21/2011 Portland, Oregon – Pop in your mints…
The world is beginning to rage against the machine.  Egypt, Bahrain, Libya, and Madison Wisconsin?  Yes, it appears that the airing of grievances knows no borders.  It is difficult to be a leader today.  Whether you are a sheik in a desert kingdom or the governor of the cheese heads, the job has gotten increasingly more difficult.
Why?  Again, numerous reasons are being spouted off by numerous analysts.  The general explanation, if you can call it that, is that the Arab world suddenly wants "Democracy."  In the land of Cheese, Unions of public employees are protesting to defend their "right to collective bargaining."  In both cases, we suspect that these folks simply want money and expect the government to give it to them.
Take the case of Egypt.  After the dictator who ruled for over 30 years stepped down, promising a transition to democracy, you would think that the crowds would go home and patiently wait for their ballots to arrive in the mail.  Yet they continue to riot in the streets with more intensity. 
We offer Iraq as another example of democracy failing to satisfy the masses.  After nearly 8 years of war to ouster Saddam Hussein, the Iraqi people are openly expressing their anger at their democratically elected government.
In Wisconsin, which theoretically has had a democracy since it obtained statehood, protestors are camped out on the floor of the legislature and taking to the streets in great numbers in an attempt to prevent the government from reneging on their promises.  What a sight!

As we have stated before, there is but one reason for this sudden outpouring of grievances, inflation of the money supply.  Inflation is fun when asset prices are rising, it is not so fun when the cost of food and gasoline are rising.