Jim Rogers: We're Wiping Out The Savings Class Globally, To Terrible Consequence

Jim Rogers decries the growing uncertainty and recklessness of global central planners as the world enters unchartered financial markets:

For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it?s going to work out, I don't know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. It?s a peculiar time in world history.

I own the dollar, not because I have any confidence in the dollar and not because it?s sound ? it?s a terribly flawed currency ? but I expect more currency turmoil, more financial turmoil. During periods like that, people, for whatever reason, flee to the U.S. dollar as a safe haven. It is not a safe haven, but it is perceived that way by some people. That?s why the dollar is going up. That?s why I own it. Will I own it in five years, ten years? I don't know.

It makes it extremely difficult for the investor looking for acceptable risk/reward, or the saver looking to protect their purchasing power; as in Rogers' view, all options have their problems:

I own gold and silver and precious metals. I own all commodities, which is a better way to play as they debase currencies. I own more agriculture than just about anything else in real assets because of the reasons we discussed before. We were talking before about the risk-free or worry-free investment. Even gold: the Indian politicians are talking about coming down hard on gold, and India is the largest buyer of gold in the world. If Indian politicians do something ? whether it?s foolish or not is irrelevant ? if they do something, gold could go down a lot. So I own it. I?m not selling it. But everything has problems.

To Rogers, the bigger danger that concerns him is the hollowing out of the 'saving class' resulting from this situation. Central planners' policies are punishing the prudent in favor of rescuing the irresponsible. This has happened before in world history, and the aftermath has always had grievous economic, social ? and often human ? costs:

Throughout our history ? any country?s history ? the people who save their money and invest for their future are the ones that you build an economy, a society, and a nation on.

In America, many people saved their money, put it aside, and didn?t buy four or five houses with no job and no money down. They did what most people would consider the right thing, and what historically has been the right thing. But now, unfortunately, those people are being wiped out, because they are getting 0% return, or virtually no return, on their savings and their investments. We?re wiping them out at the expense of people who went deeply into debt, people who did what most people would consider the wrong thing at the expense of people who did the right thing. This, long-term, has terrible consequences for any nation, any society, any economy.

If you go back in history, you'll see what happed to the Germans when they wiped out their savings class in the 1920s. It didn?t lead to good things down the road for Germany. It didn?t lead to good things for Italy, which did the same thing. There were plenty of countries where it wiped out the people who saved and invested for their future. It?s usually a serious, political reaction, desperation in some cases, and looking for a savior and easy answers is usually what happens when you destroy the people who save and invest for the future.

Click the play button below to listen to Chris' interview with Jim Rogers (18m:59s):

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Should We Worry about the Class Divide?

by Jeffrey Tucker

Charles Murray's new book Coming Apart has generated an incredible amount of handwringing on all sides. For those who are skilled at ignoring such debates -- good impulse, I say! -- his thesis is that the ebb and flow of wealth and status between classes that once characterized American culture has ended.

He marshals vast evidence that we now have two separate worlds, one for the lowers and one for the uppers, and a huge chasm separates them. He demonstrates this with vast amounts of data that label the lower third of all races as essentially falling apart in every way. Increasingly, the lowers are characterized by divorce, unemployment, social alienation, and economic stagnation, while the uppers are stable in all the opposite ways.

There might be something to his worry. He quotes Alexis de Tocqueville (who somehow continues to set the standard for how we should be as a nation): In America, "the more opulent citizens take great care not to stand aloof from the people; on the contrary, they constantly keep on easy terms with the lower classes: they listen to them, they speak to them every day."

Is that really true anymore? Murray says no.

But why is it not true, what does it all mean and what are we to do about it? This is what the debate is about. To the Left, the answer about what to do is completely obvious. We need massive government programs to boost the lowers, and we need new taxes and punishments to whack the uppers good and hard. Never mind that the programs for the lowers don't work and the punishments on the rich end up only bolstering a new government elite that lords it over everyone.

The Right has a different solution. Well, not everyone on the right, but those neoconservatives who take it as a given that every coherent nation needs a unified national culture. To quote David Brooks:

We need a program that would force members of the upper tribe and the lower tribe to live together, if only for a few years. We need a program in which people from both tribes work together to spread out the values, practices and institutions that lead to achievement. If we could jam the tribes together, we'd have a better elite and a better mass.

No thanks on this Stalinist plan. The Right is just like the Left in this sense: if there is a national problem, it needs a solution imposed by force. The Left favors looting people, whereas the Right favors tasing people. Either way, it is all about increasing the police powers of the state. On the extremes, the Left wants total expropriation to make everyone equally poor, whereas the Right wants total war to unify us all in a grand project of killing and being killed.

This is what worries me most about the Murray thesis. No matter where you look for answers, the solutions actually seem worse than the problem itself.

More fundamentally, we have to ask: What is the problem we are actually trying to solve? It is hardly a new problem that the elite has separated itself from the lowers. I seriously doubt that this is more intense now than it was in the Gilded Age -- gated communities were a sign of wealth then, too -- or even in the Founding period, when a tiny group of elite landowners decided to wreck a perfectly decent system under the Articles of Confederation to ram through a Constitution that put them in charge of the entire country.

So long as the elite are an economic elite and not a political elite, they are benefactors to everyone, providing the capital, the great ideas, the norms and codes, the educational institutions and the cultural infrastructure to protect the country from the rapacious state. This is what Hans-Hermann Hoppe calls the "natural elite," and every society needs them. Resentment against this elite is purely destructive.

Bryan Caplan adds an interesting insight here. One of Murray's interesting insights is that the elite are largely intact from a cultural and social point of view. This observation contradicts the rhetoric of populism that blames all problems on the elite. Caplan says that traditionalists need to "embrace the elite and boost its self-confidence. Then traditionalists and elites can join hands and preach the Good News of bourgeois virtue."

Nor is the gap between rich and poor really a problem. The truth is that the poor are living better than the rich did only decades ago. The average working-class guy with a cellphone holds more computing power in his hand than was available to presidents and CEOs a decade ago. That the pace of advancement disportionately affects one group more than another is actually irrelevant at the individual level.

That leaves the fundamental question: Why has this actually happened? From what I've read, Murray seems to overlook the political reasons for why the lower third has begun to eschew the bourgeois virtues. It all comes down to economic opportunity and deep integration into the division of labor, for it is through commerce that individuals acquire value in the eyes of themselves and others.

The regulatory and tax states have made the lower classes into pariahs from the point of view of the commercial world. They are expensive to hire and hard to fire, which makes them even more expensive to hire. The minimum wage is bad enough, but that is only the beginning. A giant machinery governs how, where, when, and under what terms they can work and enjoy fulfilling lives. Business creation is harder than ever for anyone but the highly educated elite.

When they do get jobs, the whole system is allied against their social advancement. Cash business is criminalized. Everything requires a permit. The bureaucracy rules, instead of the entrepreneur. The laws, taxes, mandates, programs -- and everything else the state has done -- work like a giant bed of sharp rocks in the middle of a river that punishes those who tried to get to the other side.

Inflation and the Fed's interest-rate policy have punished the accumulation of wealth and shortened the time horizon of the lower third of the population classes. The rise of the police state and the criminalization of their lifestyle have driven them into a culturally, socially, and legally marginal existence, so that they are always one step away from entanglement with police, courts, and jail.

As government grows -- and the regulatory and tax states expand -- and as the prohibitions on behaviors, services, and goods grow and grow, society becomes ever less economically mobile and dynamic. The class system that is part of every society becomes a caste system of entrenched position. It becomes a society of the put-upons versus the privileged.

From my reading so far, I don't see that Murray is tuned into this reality, which is probably expected, since so much of the cost of statism is invisible to us and not discernible at this time. It consists of the opportunities missed, the jobs not created, the social advancement that does not take place, the wealth creation that does not happen. Conjectural futures evade the statisticians.

To end on note of hope: Murray is looking backward at what the state has already done; the proliferation of technology could end this trend here as it has around the world.
__
Jeffrey Tucker, publisher and executive editor of Laissez-Faire Books, is author of Bourbon for Breakfast: Living Outside the Statist Quo and It's a Jetsons World. You can write him directly here.

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In Latest Bout Of Class Warfare, Multi-Millionaire Harry Reid Seeks To Replace Buffett Tax Proposal With 5% Millionaire Surtax

by Tyler Durden

Confirming that one has to be a billionaire or at least a multi-millionaire to be an applicant for the Tax Czar position under the Teleprompted Wealth Readjuster, is the latest sheer class warfare idiocy out of tax expert du jour Harry Reid, who has proposed an overhaul of the Obama tax bill with one in which millionaires end up paying a 5% surtax.

National Journal reports: ?Senate Democrats will replace tax increases proposed by President Obama to pay for his $445 billion jobs bill with a more politically popular tax increase on millionaires, Senate Majority Leader Harry Reid, D-Nev., said on Wednesday.

"When Democrats bring this common-sense jobs legislation to the floor, we'll ask Americans who make more than a million dollars a year to contribute a little more," Reid said in a morning floor speech. He said he hopes to set up a vote on the revamped jobs bill ?within the next few days.? That means he will seek action after the Senate passes a China currency bill and before Senate action on three free trade bills. Reid and Democratic aides have said they planned to alter the pay-fors proposed by Obama to win support of Democrats wary of the tax increases.

Reid and other Democrats noted that raising taxes on millionaires polls well, even among GOP voters.? Why yes, Harry, please go ahead and create some more class hatred. You should even bring your agenda down to Wall Street and threaten to occupy Wall Street if your demands are not met. But before you do, please make sure you create a poster which highlights not only how much money you have raised from corporate interests during your career, but specifically how much has come from the ?Securities and Interest? industry. We are sure you will fit right in with your sincere populist demands.

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SF students without vaccinations barred from class

Jill Tucker, Chronicle Staff Writer

San Francisco -- Some 2,000 San Francisco students who still lacked proof of a whooping cough vaccination one month into the school year were barred from class Thursday and told not to return until they got the shot.

A new state law requires all children in grades seven through 12 to have the vaccine by the first day of school this year, but districts struggling to get families to comply asked for and received a 30-day extension. [...]

Many children receive whooping cough, or pertussis, vaccine as infants. Then after age 7, they typically get a Tdap booster shot, which also includes immunization for tetanus and diphtheria.

[InfoLib Note: Here is where, at the end of the article, the big lie is revealed: There are exemptions for these vaccines, you just need to know how to ask for them.]

For all required immunizations, state law includes an opt-out provision based on medical reasons or personal beliefs. Parents must fill out an exemption form at their children's schools.

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Show Love to the Merchant Class

by Jeffrey A. Tucker

People can be downright nasty to store clerks and stores. It's their right: a feature of the market is that you don't have to trade with anyone in particular. And yet, it still troubles me when people are so dismissive of attempts at entrepreneurship. Why not refrain from buying and walk away? Why hurl invective or behave in a rude way?

In the sports store the other day, I heard customers muttering that this glove is too expensive, this tennis racket is too tightly strung, this shoe is too gaudy, this exercise equipment is not all it says, and that the store should carry this brand of ball, not that one. Most people are happy, else the place could not be in business, but other people (again, rightly) just assume that it is their right to dislike, refuse, cut down, put down, and generally dismiss any merchant with a wave of their hand.

Compare to the scene at airport security. This same class of citizen marches in lockstep, permits himself or herself to be subjected to invasive searches, holds the tongue even when subjected to barking orders from the TSA, and even allows property to be confiscated from personal bags. No one dares utter a word of protest or even complaint for fear of landing in the slammer. The goal is just to get to the other side of the government barrier, where the mini utopia of airport commerce awaits to serve us in a real way ? and that hamburger and beer had better be served up immediately, else we will demand our rights!

We are masters of the universe as customers and as compliant as lambs when acting as citizens. And perhaps that's easy to understand. The government has a gun pointing at our heads. The merchant is trying to persuade us to part with our money in exchange for goods and services. One won't take no for an answer; the other sees no as just part of daily life.

Still, we should be more conscious of the difference, and appreciate what it means. The class of people who have chosen the path of persuasion over coercion are deserving of our gratitude even when we don't buy from them. The merchant class is that which makes everything possible in our lives: our homes, our food, our medical care, our clothing, our air conditioning, our computers, our music listening ? absolutely everything that makes daily life tolerable and joyful.

We are too often tempted to think that the gas station, the drug store, the restaurant, the fast-food franchise, and the mommy-owned cupcake bakery are just a given part of the structure of our world. They are not. The decision to open a business is absolutely wrenching because the risk of failure is so high. The future is unknown in either a macroeconomic sense (will the economy collapse with falling incomes?) or a microeconomic sense (maybe no one really wants to buy my stuff). Often it involves cashing out retirement savings or being in hock to the banks. No matter what the business plan, it is scary.

And it's not only about money. You end up buying lots of capital equipment that is not easily converted to other uses or sold at anywhere near the price you bought it at. Custom chairs, tables, signs, and other decorations are all a pure waste if the business doesn't work. Then there is the issue of people. You have to hire employees and they must get paid long before the point of profitability arrives ? if it ever does. You are suddenly responsible for them.

You call yourself "boss," but you know the truth. You are responsible but not really the boss. The bosses are the consumers whose fickle ways can make or break your new livelihood. You are completely at their mercy.

Then there is the issue of marketing. You believe in your product, but you can't do it all yourself. You have to hire others to push, market, and sell. It is necessarily true that these people you hire are not as strong in their belief in your good or service as you are. They must be a "salesperson" of fame ? someone hired to be excited and interested in the craft but who is most often more interested in other things.

Never underestimate the problem of inventory, which requires daily entrepreneurial judgments. If you are selling plywood, for example, and your first month's sales are far beyond your expectations, your battles have just begun. You must make a judgment about next month's inventory. Buy too much and you squander all your profits. Buy too little and you lose customers who never come back. Your guesses must be close to correct all the time. But you have no crystal ball. And this problem never goes away: whether you succeed or fail, you never know whether more success or failure is around the corner.

Then there's the competition. Anyone is free to copy and replicate your successes. The more you succeed, the more you inspire imitators who are pleased to do exactly what you do but somehow manage to do it at a lower price. This means that you must constantly stay on your toes and innovate. At the same time, you have to constantly watch your back. A bad day of sales could mean nothing or it could mean everything. It could be a bump on the road to glory or the foreshadowing of disaster. There's no way to know for sure.

The forces of competition in a dynamic market are constantly working to take away your future successes. For the currently successful business, the market system amounts to a giant conspiracy to reduce your profits to zero. The only way to fight back is to serve others with ever more attention to excellence.

And yet, no matter how much your plans work out, there is nothing you can really count on for the future. Any day, any hour, it could all dry up. The consumers could go away. The fashions could change. The tastes of the spending class could shift. You are utterly and completely dependent on the subjective whims of everyone else. No matter how much determination you have, in the end you just can't control what others think or do. This is as true of the lemonade stand as it is of Amazon.com. No matter how big you get, no amount of money can buy a reliable fortune-teller.

Why does anyone do it? Why does anyone become a merchant and an entrepreneur? The usual rap is that people are in it for the money. But there is no bucket of money to grab. The money may or may not be there. And when it is there, it usually ends up being poured back into the business itself in order to stay on top. So why do people do it? It has to do with the dream of success, the hope of making a difference, the living out of a vocation, the fulfillment of an ambition to serve and make a difference. This is what drives the entrepreneur.

And how do we repay them? We snarl and sneer, refuse to buy, criticize at the slightest misstep, and otherwise refuse to give them credit for anything at all. We call them greedy and dismiss their pleas to buy as craven marketing. The state hectors these people with regulations, taxes, mandates, and impositions far greater than the rest of us experience, and yet people call for ever more.

Clearly, the merchant class is treated now as it was in the ancient world: as lowly and unfit. And yet here's the truth: the merchant class is the class that brings us all the things we love the most. We depend on them, and they depend on us.

People living in the age of the Leviathan state often feel powerless to do anything about the state of the world. I would suggest that one way to fight against the takeover of society by the state and its minions is to show a greater appreciation of their opposite. We should show love to the merchant class. We should begin by intellectually appreciating what they do for us. We should go further to actually say to the merchants how highly we regard their vocation.

Managing our affections is one way to fight back. Show love to the things and the people who are doing what is best for society and are providing a model for others to follow. The model and ideal of the kind of peaceful and prosperous society we want to live in might be as close as the convenience store right down the street.
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Jeffrey Tucker is the editor of Mises.org and author of It's a Jetsons World: Private Miracles and Public Crimes and Bourbon for Breakfast: Living Outside the Statist Quo. Send him mail. See Jeffrey A. Tucker's article archives.

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