Stuck between apathy and dependence
The average life span of the world's greatest civilizations has been 200 years: bondage to spiritual faith to great courage to liberty to abundance to selfishness to complacency to apathy to dependence and back to bondage.
Those words, widely attributed to 18th century Scottish historian Alexander Fraser Tytler, are perhaps apocryphal, but they ring with authenticity. Those words should cause most of us to pause and reflect where this nation has been, and where it's going. Notable exceptions: the den of thieves in Washington, D.C., and Wall Street, as they are too busy confiscating and/or speculating with the wealth the rest of us produce.
The U.S. stands at a delicate crossroads, as we appear to be somewhere between apathy and dependence in the above formula. To wit, several formerly great U.S. corporate names are unable to survive without government help. The U.S. government for its part is dependent on a large and growing line of credit from our major trading partners.
Consider for a moment the bedrock institutions that have failed us in both duty and fiduciary responsibility in recent years. Categorically, the federal government commits a fraud each time it appropriates money it doesn't now have and never will. Consider the science of economics as its mainstream leaders in government and academia, who didn't see this crisis developing, offer only more destructive and self-serving remedies. Most troubling, however, for this observer, is the lack of justice in our system in dealing with the fraud thriving in the Wall Street/Washington corridor. Many cry out for even more regulation. However, the regulations in place are often adjusted to fit the needs of the well connected.
And so, we face economic/financial crises that will compound the damage already done in an ongoing struggle to clear bad debts and mal-investment. Essentially, the U.S. must devalue (inflate) its currency to redeem massive debt obligations with less valuable dollars. Or, stop the madness and default on its sovereign obligations. Clearly history suggests that no sitting government chooses default. The alternate tactic, inflation, has been under way for some time. The non-correlative asset class thus far has been the bond market. The U.S. Treasury market is likely the next bubble to burst -- mind you, an event not merely taken in stride.
Protecting one's nest egg in these times is paramount. The forces at work suggest highly volatile conditions. I have written in these pages over the past decade the appeal of gold. Insurance against stupid governments armed with a printing press. Gold remains an asset class that is not someone else's liability. This point cannot be stressed enough. Investors may also look for exposure to non-U.S. dollar investments with emphasis on safety and liquidity.
I happen to believe that the sanctity of our Constitution and the industriousness of a freedom-loving people will cause exception to the formula above. It appears to this observer that this begins at the state not the federal level. We are likely to hear the "secession" term more often. If I never hear the Republican vs. Democrat debate again, it will be too soon.
Andy Wahrenbrock of Bakersfield is an investment counselor.
