Wiping the Smile Off the News Media’s Face


(Fearful of spooking readers and angering advertisers, mainstream news sources have been reluctant to tell it like it is when reporting on the economy. Because they remain steadfastly in denial four years into the Great Recession, touting a recovery that has touched relatively few American lives, it could be a long time before we hit bottom, says Gregg White, a regular contributor to the Rick’s Picks forum who goes by the handle “3 Lions”.  In the essay below, Gregg says the news media will have its hands full trying to put a happy face on things when America’s economic troubles deepen and spill out onto the street, as has already occurred in Europe. RA)

The mainstream press and TV business news channels are “paid to be happy” by advertisers and politicians. In some respects they are no different from the official ratings agencies like Fitch, which are also paid to “rate happy.” Having been proven to be worthless over the last several years, the ratings agencies are just beginning to get a bit more realistic – a glimmer of realism, no more. They now know that if they are seriously caught with their pants down again their whole raison d’être will be called into question. The appointment of Ron Paul as the official “hammer” of the FED is another glimmer of hope. At the moment, it is just a small snowball rolling down a mountain, but it is gathering more snow as it rolls. The ratings agencies must have noticed that complacency and deceit are gradually becoming unacceptable.

How long will new anchors be able to avoid hard truths?

As for the mainstream press, which by and large is bankrupt, a publication’s survival is less likely than a ratings agency’s. Pick up any regional or local newspaper, scan all of the positive editorials over the first three pages, and then turn to the readers’ letters page and you find the reality of people losing their jobs, homes, etc. Editors cannot continue to report “happy” in their newspapers whilst their readers are factually demonstrating the complete opposite. Hence we have the schizophrenic transitional stage in the mainstream press from “happy” to “dire.”

From an economic point of view, this double-standard, transitional stage in the press is still only in its very early stages in spite of the economic slump’s starting almost four years ago. This sluggishness towards the realization of the truth portends a very long depression that will last way beyond the forecasts of even the most ardent bears. Keep in mind that, four years into this economic slump, there has been no increase in interest rates, no stock market crash/slump, no significant city or state defaults and no street violence in the U.S. of the kind already appearing in Europe. All of these things will afflict the U.S., so it will be a serious challenge to editors to try reporting “happy” with all that going on.

The Younger Generation

It also reflects the evolution of the Internet in the sense that perhaps as recently as five years ago a commentator reporting economic truth in a blog (or whatever they were called in the good-old days) was regarded as a crank, and the mainstream press was regarded as the only place to find the truth. Hardly anybody nowadays would dispute that if you want the economic truth, you can only find it at blogs, etc. online, and that the mainstream press is not to be trusted.

The younger generation that is growing up with this online truth — do you know any young people who read newspapers? — and seeing the heartache caused to their parents and grandparents by the mismanagement of the economy over the last few decades, will be the ones to pull us out of this quagmire, but it ain’t gonna happen any time soon! After all, since the political generation responsible for causing the problems is currently charged with resolving those problems, it does not bode well for the short or medium term.

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

  • kkken530 January 5, 2011, 2:41 am

    Roger Ericson has the first sensible post in this thread..

  • roger erickson January 4, 2011, 7:05 pm

    “Our ever expanding national debt will hit the wall and ruin us eventually.”

    We’ve been through this multiple times in our history, going all the way back to Alexander Hamilton, then Tom Jefferson & later Andrew Jackson. The issue is not the amount of currency, but rather ONLY productive use of capital as separable from currency. And with all apologies to Adam Smith, Darwin & Walter Shewhart had a more accurate view: the survival of a nation comes from the return on coordination, not from tangible production. [Snails count on tangible production, army ants count on tangible coordination. Which would you rather be?] For any organization that issues its own currency, that currency is bookkeeping, not capital. We’ve come close to expounding this publicly, only to see the bank lobby come back stronger each time.

    It’s our lack of public thinking that will cause a crisis, and hopefully a rational discovery.

    see: 1939 Senate testimony by Sen. Marvel Mills Logan, Kentucky (shortly before his death)
    Quoting Abe Lincoln:  “Money possesses no value to the State other than given to it by circulation. Capital has its proper place and is entitled to every protection. The wages of men should be recognized in the structure of government and in the social order as more important than the wages of money. …
      Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers.  … 
      The taxpayers will be saved immense sums in interest, discounts, and exchanges.  The financing of all public enterprise, the maintenance of stable government and ordered process, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own Government.”

  • mario cavolo January 4, 2011, 8:59 am

    Another much appreciated article presented to us all, thank you.

    Regarding rmsinc’s comment in response “We now find ourselves a full decade into the twenty-first century encumbered by more debt than the rest of the world combined.”. In my idealism, it is easy to challenge the flaws behind the statement implying that U.S. debt is somehow a “separate” U.S. problem. Technically yes, yet idealistically and realistically not.

    What would you say if you were China’s Jin Tao or Germany’s Merkel when Obama came to you and said “We’re all in too deep because of this debt issue and tomorrow at noon we the United States are going to in fact announce the radical step of crispy new bills at 3 to 1 unless we can sit here and play nice together by midnight tonight and come up with a better plan moving forward for our global economies.”

    I’m not precise on my facts, but I mean to say that smaller countries such as an Argentina can play such games but with the position of the United States as the leading economic power AND with the USD as the world’s reserve currency, the United States leaders can’t and wouldn’t make such a move. The rest of world’s nations enjoyed growing lockstep with the rise of the United States and the rising debt was an integral part of how that happened. It is treated too much as a “separate” subject. U.S. debt is a world economic problem in an increasingly unthinkable, unknowable global new reality; I will suggest again that the increasing level and complexity of global connectedness could itself act as the buffer and protection needed to avoid a number of possible black swan scenarios that may rear up. Economic doomsday scenarios are off the table.

    And more on point regarding media, they will at some point play a big part in hopefully helping to manage crisis, to prevent blood on the streets, they will continue in their role, in their biases as an integral cog in the wheel of changing dynamics.

    Cheers, Mario

  • Dan January 4, 2011, 5:11 am

    I really enjoy the debate here, but the bottom line is the new realities of the market make it almost impossible to invest. I will not go long now, because the market is over extended. I won’t go long if the market begins to correct because there are too many things wrong. The banks control the flow and they need a strong reversal to make trading profits, which is also scary. What happens if they panic? Or worse yet use their puppets to create panic in order to help cover loses from the past few years. For now all I can do is to begin thinking about scaling into a short position, but every time I have done this I get burned – sooner or later shorting will work, but really the whole circumstance is surreal. The media is simply an instrument of influence in a large game run by the banks. It will end badly with many losers and very few winners – of course the winners are always those “to big to fail”.

  • redwilldanaher January 4, 2011, 5:07 am

    I respectfully disagree with this author. I understand why he’s making that argument and were it 60 years ago I would be inclined to agree, but this generation doesn’t seem to be deploying its tech savvy towards virtuous ends. But rather the oppositve, have a look at what online coordination seems to have produced in Wisconsin today: http://www.wisn.com/r/26347040/detail.html Really doesn’t inspire confidence but only time will tell for certain. I see close to the opposite and believe that it’s being steered that way by TPTB, intentional sabotaging of real edu. and a corrosive popular culture. But again, only time will tell.

  • Alex Bond January 4, 2011, 12:04 am

    Rick –

    I think it is pure folly to expect the media outlets to ever stop reporting “happy” stories; it is simply their nature. No matter how dire the situation, the media will report on only three things: things are bad because of (insert latest enemy of the media here), things are getting better because of (insert latest media favorite politician), and (random celebrity) did (insert some vulgar action) to (some other random celebrity).

    The younger generation will not ever blame the older generation for the problems in the economy. For starters, they are simply too dim-witted and uneducated to even begin to understand what is going on. Combine this general lack of awareness with extensive apathy, and they’ll be more than willing to “blame” whomever the hip, youth-oriented media of the moment tells them to.

    Blogs have been touted as the “next great thing” for quite a while now. In reality, all they’ve really accomplished is to increase the noise level in the information world and to flood us with the rantings of millions and millions of uneducated, unknowing, egotistical, journalist wanna-be narcissists. Assuming you can even find a blog with generally reputable content (such as yours – a comment I do not make lightly), it is difficult to convince *others* that it is indeed reputable. The major media has no such problems, as many people will believe them simply for being on TV, or appearing in newsprint.

    • Robert January 4, 2011, 1:29 am

      Blogs have been touted as the “next great thing” for quite a while now. In reality, all they’ve really accomplished is to increase the noise level in the information world and to flood us with the rantings of millions and millions of uneducated, unknowing, egotistical, journalist wanna-be narcissists”

      – As a (very) part time blogger myself, I’m not sure if I should be offended by this or not…? 🙂

      Seriously though, one point I do agree with Alex on is that many blogs (I somtimes sit and hit blog links at random just to see what others are writing about) are written from a very self-centered, almost narcissistic point of view. It has encouraged me to re-evaluate my own writing style recently.

      Ranting is a mechanism for people who simply do not feel that their voices are being heard through the established channels of the corrupt system- IE: if you do not own or run a Fortune500 company, then do not expect to get any face time with your district representative.

      The volume of people feeling that they need to rant is the information that needs to be processed. What they are ranting about might yield results to commonality analysis, but the far more telling data is in the fact that so many people are ranting at all…

      Get it?

    • Alex Bond January 4, 2011, 3:50 am

      Robert –

      I submit that the volume of people ranting online in their blogs is irrelevant, and I’d venture to say that *what* they’re ranting about is irrelevant as well. Having 10,000 bloggers all complain about the same thing doesn’t really mean that they’re talking about an important or “hot” topic — rather, bloggers tend to be lemmings and want to put their own spin or perspective on the topic-of-the-day.

      The people that rant on blogs are the same types that bore their coworkers to death with the endless whining and moaning that was previously limited to the company water cooler. Now, instead of spreading their “unique point of view” to their 10 or 15 unfortunate office mates, they inflict their views on anyone hapless enough to click on the wrong link.

      There are a few blogs where talented individuals can offer their analysis to the world — and those few people are generally good enough to be able to sell their content, using the free material on the blog as a loss-leader or simply advertisement. But I believe the vast majority of those who are just venting or ranting are simply wasting their time and cluttering up the internet.

  • dan January 3, 2011, 9:42 pm

    generation x should be in the streets and shutting down the criminal capitol DC. but they are busy with xbox and facebook so that this once proud REPUBLIC will rot and decay while we vote yet again to throw the bums out. As we will see shortly after a heated debate ,the debt ceiling will pass the CONgress with even the tea party elected voting for it…As rick has pointed out in past essays, the carnage to come will crush all those ready and even harder those that are not.

    • Robert January 4, 2011, 1:17 am


      I stringently disagree. GenX, being smaller in population than the Boomers (and GenY) by orders of magnitude, is simply outnumbered at the polls.

      Most Gen X’ers (myself included) came to the realization long ago that we should not plan our lives around the expectations of the same entitlements that our Boomer parents expected, because the freebies would simply not be there. Thus, our generation has focused on our own personal improvement rather than the improvement of a fatally wounded system of corruption.

      We aren’t in the streets rioting simply because most Gen X’ers don’t care about GDP or the national debt. We are aware of it, but we do not fixate on it- We care far more about our own interests and looking after our families. Your comment about the Republic rotting and decaying doesn’t faze many Gen X’ers- corrupted systems should be allowed to rot from the inside out- why should we waste any energy trying to perform CPR on a terminal patient?

      We never expected to receive Social Security, and yet we’ve silently sat by and let the government deduct FICA from our paychecks ever since we reached working age in the mid 80’s- all without protests.

      The tradeoff to this level of ambivalence will be equally strong indifference when Social Security finally collapses- which will occur long before any Gen X’er reaches retirement age. Our attitude is simply “We paid our FICA without any expectation or return, so don’t come to us to bail you out yet again after you’ve squandered all of it”

      If you buy Neil Howe’s “Generations” hypothesis, then today’s GenX’ers are analogous to the “Nomad” generation that comprised the 30-50 somethings who served as tactical mid-tier officers in WWII (The Captains, Majors, and Colonels)- These are the ones who made the real-time, do or die battlefield decisions that ultimately won the war. The “greatest generation” were the young foot soldiers who simply excelled at following orders.

      Here’s an interesting read:


    • Benjamin January 5, 2011, 12:07 am

      Robert said…

      “Most Gen X’ers (myself included) came to the realization long ago that we should not plan our lives around the expectations of the same entitlements that our Boomer parents expected, because the freebies would simply not be there. Thus, our generation has focused on our own personal improvement rather than the improvement of a fatally wounded system of corruption. ”

      High five, Robert! As I said, I’m a gen-xer myself. And you just aren’t wistling generational dixie, of that I can assure the doubters. Heck, even my ‘boomer family members don’t believe and expect, even though they probably will receive some of their benefits.

      But I will contest your generality that ours is so focused on self improvement. Some do, some never grew up. Pretty much like any generation, I’d wager. But, that’s no worse than lookin at only the immature and concluding the future is not, as SOME people who ought to know better, being intelligent and presumably of sound mind, are doing.

      Now, I’ve never travelled the world, but I’ve gotten around quite a bit, and truly,

    • Benjamin January 5, 2011, 12:44 am

      Sorry, accidentally hit the send button. New keyboard, with a key designed for that, I guess! Anyway…

      I’ve gotten around quite a bit and met numerous people in my 34 years. I’ve spent so much time looking into myself, as well. And people are truly unique, not defined by generations, nationalities… unless they chose to be, that is. It’s akin to racism (real racism, not mere name-calling or even criticism of a person, mind you), for someone to consider themselves superior simply because of a perceived general attribute.

      That said, our so-called “highly focused on self-improvement” generation is not, in my estimation, a reflection of reality. I’ve known both types, those who do and those who never grew up. I know that my own parents knew both of each in their lives, as well as my grandparents.

      But the big question is, who will save the world? Those who think and keep their head. Who are they? Everyone or anyone, but certainly not no one. Other than that, it’s all yet to be seen and experienced.

      Now, there’s so many reason why I think it will happen that I can hardly do it justice to list those reasons. Suffice to say, we’re not more corrupt and stupid than ever. It’s just that the system of force and fraud has reached beyond its capacity to do enough for enough people to keep going. Most sane people, in one way, shape or form, is aware of that, and aren’t especially enthusiastic about more of the same. Sure, they voted for “change”, but look how quickly that turned sour. And I’m pretty sure this new republican Congress will likewise turn sour fast. Give it _some_ time, and doubters will have no choice but to acknowledge that, while many are at a loss as to what to do next, aren’t brainless morons either.

      Other than that, the only thing I can say that writing people off as a lost cause isn’t going to help. If one knows something, share it. MAKE them listen. And if they find it unaccetable, might I suggest that you’re suggesting the wrong things as solutions?

      The nature of the conscious human being is that of self-empowerment, not punishing and belittling them and telling them they’re telling them they’re screwed no matter what. All this debt and the reasons we think it exists, while real in some regards, is a lot of smoke and mirrors, desinged to make the self in each and ever one of us lose faith in our human minds and bodies and souls.

      I’m really not kidding when I say that since the dawn of individual awareness that man has done everything in his power to deny the importance of it’s existence, and even it’s very existence. He’s not trusted himself to create a civilization of law and order, so he employed force and fraud against himself. Others, taking advantage of this fear and mistrust, seized their positions and enscounced themselves as a ruling elite. And time again, they have risen and collapsed, because they ultimately rule according to unreality.

      All everyone must do is acknowledge and act in accordance with their conscious, self-aware nature. It’s nothing to kick and scream about, folks.

  • Rich January 3, 2011, 9:26 pm

    Aloha All
    Nice article 3L.
    Having sold my gold too soon,
    want to say my biggest mistakes were getting bearish too soon.
    Prosperous 2011 all as we climb the proverbial wall of worry…
    Mahalo Regards*Rich

  • Pat S January 3, 2011, 7:53 pm

    I’m not one of the “younger generation”, but I, like them, no longer read or believe in the major news media outlets. I find the best information is provided on the websites dedicated to specific topics and run by reputable managers. I don’t always agree with their conclusions, but they provide links and sources to enable a person to critically think through an issue and draw an educated conclusion.

  • ricecake January 3, 2011, 7:22 pm

    “The younger generation that is growing up with this online truth — do you know any young people who read newspapers?”

    Mr. Rick,

    Not only the younger generation. Increasing number of older ones like us are going the website for the news too! Fewer people are watching TV these days.

    However the problems with the younger generation are:

    1) they are spoiled
    2) they are fat and lazy
    3) they don’t know what’s hard physical labor means because almost everything now can be done on their finger tip.
    4) they grow up with the games cartoons designed by the big corporate sales forces.
    5) they grown up in the world of virtual reality so many of them can’t see the line that separates reality and illusion/fantasy.
    6) they are two extremes: street gangs or woozies sitting on their fat butt playing computer games while eating chips all day.
    7) they are grow up in the culture of immediate gratification

    Sadness about human beings is that they won’t learn until disaster hit them. And even when disaster strike them they still doing the same thing over and over again. Wall Street is the example. The situation of the U.S.A today is not one man’s making. It has been generations and many people’s making.

    • Rick Ackerman January 3, 2011, 8:51 pm

      Here’s an excerpt from an interesting article from one Dr. Mark Goulston. It was published at Huffington Post: “How We Can Fix Our Kids”

      An initial step that might be helpful is to reach a consensus between parents and their children as to what terms related to personal responsibility mean. Here are ten terms that come to mind for me:
      1. Commitment: the level of dedicated action(s) you continue to take after your enthusiasm for an enterprise stops.
      2. Accountability: taking full responsibility for your actions by owning up to the negative or failed results, taking action to make up for it to the person(s) you let down, and learning what you did wrong so that it doesn’t occur again.
      3. Maturity: how well you are able to resist an irresistible impulse and instead have and exercise judgment and do the reasonable thing. In the brain we refer to this as exercising one’s executive function.
      4. Honesty: this is simply telling the truth according to the facts as you understand them. You know honesty best, when you tell a lie. Pathological liars lie whenever they are trying to get their way and take advantage of a situation. Compulsive liars lie both when the are trying to get their way and when they are trying to get out of facing the consequences of their actions.
      5. Forthrightness: this is coming forward and telling the truth and revealing untruths that you become aware of. It’s believing and following Justice Louis Brandeis words: “Sunlight is the greatest disinfectant.”
      6. Character: what you do when you are frustrated, angry, annoyed, afraid and/or bored and nobody is watching and your chance of getting caught is close to nil.
      7. Sacrifice: what you do unto others who will not (immediately) be able to pay you back by doing unto you.
      8. Compassion: what you feel unto others who will not be able to do more than say, “Thank you.”
      9. Thinking ahead and planning: overcoming the aversion to anything that causes you to forego immediate gratification.
      10. Listening: and then pausing to consider what you’ve heard before rejecting it, tuning out or competing with it (a skill every generation needs to learn).

  • Aussie Mick January 3, 2011, 6:44 pm

    Rick hits the nail..right on the head..the media are prostituting themselves to their masters…the goverments of the world…who in turn prostitute themselves to their masters…the bankers. The only strategy that the individual can rely on is…”feather thy own nest”. Does this sound selfish? OK…who else will look after you and your family…will it be the bankers…the govt….wall street…maybe..the tooth fairy.. Here is the reality…the tooth fairy is the only one who is not focused on destroying the world economies as a step towards a new world govt….controlling it will be the same criminals that control the Federal Reserve, the BIG banks, the Bilderberg group (google them)…While you are at it..check out ‘eugenics’…this is the most immoral concept on planet earth. Look after you and yours…spend less..get debt free…buy silver or gold..get prepared for the future…if you want one…Mick A.

  • C.C. January 3, 2011, 6:26 pm

    “How long will news anchors be able to avoid hard truths”?

    Until it can no longer be ‘avoided’ (remedial translation: Covered over)

    ‘Covered over’ could as easily be interpreted as: Government/Fed-induced liquidity. Which in turn, could as easily be interpreted as: Phony.


    If you have been on the ‘right side’ of this Phony trade since the summer (PM’s at least), you’ve done fairly well I reckon – at least I hope you all have.

    So… Raise a toast to ‘Phoniness’ and just make sure that before the buzz wears off, you pick up some physical before it goes bye-bye some time around late summer.

  • brutlstrudl January 3, 2011, 6:03 pm

    Greetings from Luigi’s

    Unlike the Greatest Generation, modern America will have no doubt whose fault this is.

  • Vito January 3, 2011, 5:44 pm

    The source of the problem is not simply with the Fed, but the complacency of the people in their complete and reckless abandonment of sound principals and comprehension of money as reflected in the continuation of the fractal banking system.

  • Wesley January 3, 2011, 4:20 pm

    Its nothing new that the media screen/filter information and spoon feed us news that favors government policy; consider the tyrant FDR and Pearl Harbor in this revealing book that HAS the evidence

    Its why foundations support so many hagiographic works!

  • John Jay January 3, 2011, 3:43 pm

    Dan Rather said it best about the state of todays TV news shows: “Dumb it down, tart it up.”
    Our whole society has gone down that path over the last few decades.
    All we have left in our post industrial wasteland is Ponzi finance, a drug culture, and the cult of the celebrity, which of course includes professional sports.
    The bulk of our population is mentally and emotionally about twelve years old.
    The rest of us can always see the truth by reading between the lines and using common sense.
    We did not know how high house prices would go, but we all knew those mortgages were never going to be paid back.
    The almost one trillion dollars of outstanding student loans will mostly never be repaid.
    Our ever expanding national debt will hit the wall and ruin us eventually.

    • Robert January 4, 2011, 12:39 am

      “Our ever expanding national debt will hit the wall and ruin us eventually.”

      Agreed. The accelerating rate and frequency with which the debt ceiling needs to be raised tells me we are already on a runaway train heading for a very deep ravine (with no bridge).

      -Better we should hammer Congress to stop raising the debt ceiling now and get the ugliness over with sooner, as opposed to kicking the can further down the road, yes?

      As a parent, I would much rather bear the unpleasantness for my children as opposed to burdening them with even greater future unpleasantness…

      I can’t fathom the point of view of anyone who would rather pass the mess on to those fresh little faces playing in playgrounds around the country, rather than simply cleaning the mess up now, and getting it over with.

  • gorfu January 3, 2011, 3:36 pm

    I always enjoy reading the posts presented here and generally do agree with most arguments posited. It is a great avenue in which to vent the frustration felt by the majority of us with the current state of financial affairs now present in our once great country.
    Many worthwhile thoughts and solutions are presented here and it is somewhat discouraging to realize that those who may have real answers to our common problems are not in positions to effect those solutions, nor are they inclined to pursue those positions that could have an impact.
    The solutions are obvious to most of us. The motivation to sacrifice ourselves and our security to mobilize those solutions is lacking. It will take much, much longer – years I fear – before a much lower bottom is felt by a much greater number of the population and we simply “won’t take it anymore”! Or, a “Black Swan” will shorten our wait!
    Thank you all for caring. There are not enough of us, yet!

  • rmsimc January 3, 2011, 2:15 pm

    Rick…I thought your readers may find the following essay I penned over the holidays an interesting read.

    Make It…Mine It…Grow It.

    This pithy yet poignant conception summarizes an underlying theme put forth by the eighteenth century Scottish Economist Adam Smith in his groundbreaking treatment of macro-economics titled “…the Wealth of Nations” (published in 1776). Adam Smith’s thoughtful treatise became the foundation that led to Western Capitalism. Simply put, Smith believed that true wealth can only be created, and a healthy economy sustained, through the production of tangible goods. It is considered that sovereign liberty (read individual freedom) is the optimal breeding ground for mankind’s pursuit of wealth through creative production.

    Our forefathers clearly subscribed to Smith’s concept that the free individual, left to pragmatic pursuits, will produce an economic society that benefits the collective. Smith further submits that the role of any government should be minimalist in scope; only pursuing those functions that are not more efficiently undertaken by the free market. This concept was also completely embraced by the framers of our Constitution as exemplified by the “Limiting Powers Act.” Dr. Smith went on to warn of the hazards introduced by government fiat and regulation that inevitably leads to the disruption of the natural risk-reward balance required for sustained equilibrium. In simple terms, the “invisible hand” of the free market tends to keep greed in check by the very real and unpleasant personal consequences of loss. (An individual that undertook undue risk resulting in the loss of his partners’ money would end up penniless…or worse).

    It was these ideas first unveiled by Adam Smith, and as applied by our forefathers, that formed the engine of our nation’s economic success. The powerful coupling of individual freedom with mankind’s pursuit of wealth led to the specialization (division) of labor. This resulted in improved productivity affording our society the luxury to produce more than consumed; leading to an ever-increasing export surplus. The inflow of wealth that followed was reinvested to further increase existing production and to develop new resources, technologies and products. The inevitable outcome was the emergence of a middle class with the highest standard of living and enjoying the largest distribution of wealth the world has ever witnessed.

    In addition to economics, a term not yet coined at the time, our founders also necessarily had a keen understanding of human behavior within historic context. It was this understanding of human psychology (another word not yet invented) that led Thomas Jefferson to rail against the concept of centralized banking. Jefferson went so far as to bluntly state that liberty will last only until such time as the people realize that they can raid the treasury. This is an obvious recognition of the imperfect and corruptible nature of man.
    Try as they might to set up an incorruptible system, the inevitable slippery slope of ruling-class manipulation took hold in the twentieth century. Centralized banking, social engineering, central planning and a steady increase in government regulation and fiat has led us to where we are today: a consumption-based debt-driven economy. The reasons for such an outcome are beyond the scope of this essay but are easily uncovered by those with such interests.

    We now find ourselves a full decade into the twenty-first century encumbered by more debt than the rest of the world combined. We have exported our manufacturing base, shrunk our productive sector, minimized land ownership, institutionalized big government and introduced moral-hazard into our business system. Whether or not our great nation is in decline will again be left to the initiated to ponder. But it certainly is without argument that we are currently in the process of transferring our national treasure to the emerging economies.

    Much has been written recently in the financial press concerning the emergent economies of the BRIC nation-states (Brazil, Russia, India and China). The BRIC nations in total constitute nearly half of the world population. Many of their citizens have left the mountains and rural farmlands and have recently sampled western lifestyle; and they like it and want it. The intent of this discussion is not to describe in detail the macro-economic, political and demographic causes for the ascension of BRIC. Rather, to point out that the imminent emergence of these economies will be accelerated in historic terms. This is simply a result of already having a proven roadmap to follow; namely, our own history of wealth creation. This brings us back to a central point of economic sustainability: efficiently producing more than is consumed.

    It is easy to see that large nations undergoing economic development within the framework of Adam Smith’s concepts will consume raw materials to create value. We also know that excess productive stock is exported to generate the capital to further invest in development. Again, simply our history repeated. This time, however, the resource demand is accelerated, larger in scope and against a backdrop of paper money not pinned to anything tangible. These new factors have the potential to produce extreme pricing pressure on the raw materials and commodities needed for both economic growth and population subsistence. Such pressures can have a devastating effect on the living standards within declining economies burdened with debt.

    As a prudent investor, it is incumbent to leverage this macro trend to serve as a means of both wealth preservation and capital appreciation. To be clear, this macro trend is toward increasing demand for tangible, productive assets and commodities: Agriculture, energy, mining, and manufacturing. Further, it is important to note that the debt-laden economies of the west circulate money that lacks any form of physical backing; allowing for the unencumbered issuance of further debt (think TARP, QE, EU Rescue, etc.). Quite frankly, this is inherently unstable and cannot last forever. The prudent investor is further burdened with the challenge of overcoming this ongoing dilution of purchasing power. If history is once again to be our guide, all past similar situations have ended with the resumption of gold/silver as the primary medium of exchange. The curious may wish to research the history of fiat money.

    Hopefully at this point the strategic thesis is clear. Specifically, the burgeoning development of the emerging economies employing their version of Adam Smith’s capitalism will continue to impart an upward bias on prices for raw materials, food and energy. Likewise, the indebted western economies will continue to wrestle with deflationary pressures in all debt-denominated instruments including real estate. Further, the exclusive use of fiat money worldwide will exacerbate both conditions and should provide additional long-term benefit to those involved in precious metals.

    A tactical approach to this discussion could be made elegantly simple by allocating long-term risk capital in quartiles. This straight-forward approach would allocate equal parts to the following four investment areas: Gold and silver bullion; metals, mining and manufacturing; energy and supply; and agriculture. Obviously, there are other productive sectors that may warrant inclusion (hardware, software, telecom, healthcare, etc.). Most notably absent from this list is the financial services industry. Although profit potential may exist, most savvy long-term investors will be best served finding opportunities outside of direct exposure to the debt system.

    The importance of hedging risk cannot be overstated. These tangible goods and commodity sectors may suffer considerable corrections while still within the secular bull cycle that should last another decade. As this is being written (Dec-10), these sectors have had expansive price performance. Nothing goes straight up forever and also understand that risk is not always found where expected. The fundamental reasons for price appreciation of commodities, as presented above, are certainly in place but the US Debt market is the largest financial market in world with a commensurate amount of power. If it is decided that the prices for food, energy, gold, etc. have gone too high, the central bankers may find it necessary to defend the fiat money based system by assaulting the commodity complex through methods too varied to mention. In the short-term, market manipulation can suppress prices, sometimes substantially and for extended periods; but the immutable free market forces cannot be over-ridden indefinitely. Such draw-downs should be expected, and considered as opportunities for additional wealth accumulation by the prudent investor. A more simple approach, however, would be to simply dollar-cost average into these investments over time so as to smooth-out the inherent volatility; the equivalent process utilized within employee retirement plans.

  • FranSix January 3, 2011, 1:30 pm

    It would be ironic if the news were presented in the most stoic and ashen style, it would still be propaganda without a cause. Just like in North Korea.

    Better the gel in the hair and the push-up bras for the cougs, its an obvious signal nobody believes what they’re saying.

    If anyone has great difficulty with understanding the nature of the bear, you simply refer to the following charts:


    As for alternative viewpoints available on the web, the histrionic Henry Blodget jumps to mind, who was only last month hammering away at: “The Bears Were Wrong.”

    So they got rid of the word ‘pollution’ from media, which the Macondo spill corrected for us. Now, the word that seems to be in short supply is ‘adjusting for inflation.’

  • Keith January 3, 2011, 9:08 am

    I’m not so sure it’s the younger generation that will pull us out of this mess but rather accelerate it. I’m among the firstborn of generation Y and all my cohorts are completely clueless of what’s lurking on the horizon. They refuse to listen to the other side because it wasn’t taught to them in universities and after all, to them society has transformed to a new level of enlightenment. Adam Smith? Who’s he? If and when the financial system goes up in smoke I think they’ll be like helpless deer staring into the headlights.

    The only movement of any value we’ve seen thus far has been the tea baggers (older generation). Is it not true that the younger crowd in the elections over the last 4 years have voted for “tax, spend and give me”? What is truly frightening is they hold so much power. Light a fire under them or back them in a corner and watch the greatest protests and movements this country has ever seen unfold.

    It truly is the younger generation that will shape the future of this country. I just don’t believe they’re going in the right direction by voting for cookies and candy. I don’t think that trend is going to change but hopefully I’m dead wrong.

    • Benjamin January 3, 2011, 12:47 pm

      “Is it not true that the younger crowd in the elections over the last 4 years have voted for “tax, spend and give me”?”

      I really don’t know. Keith, but I’ve a sneaking suspicion that it’s another happy meal cooked up by our (PC) friendly MSN. I can list dozens of reasons why I think so, but the sure-fire way to know is that the younger generations aren’t bigger than the older ones. Fewer kids per household, and all that. So how it could it have been them that voted in Mr. Jackass of the Century, seeing as how most ‘boomers haven’t died yet?

      But that’s neither here nor there. The big question is whether or not they can do anything.

      I think so because, growing up (generation X, here), I always wondered why people put up with all this crap. And how did the adults, even the apolitical or even anti-political answer that question? Like this… “Yeah, but what can you do?”

      Ah-ha! In fact, that probably explains why things got all eff’ed up in the first place!

      But truth can’t be hidden forever. Someone is going to have to find it, because it IS there to be found, and, when all is said and done, the answers are not hard at all. And as said in the article, kids are living this recession just as much as thier out of work and indebted parents are. The beginning of the end is here.

      “I don’t think that trend is going to change but hopefully I’m dead wrong.”

      Hope? You don’t have to hope because you _are_ dead wrong! 🙂

    • VegasBob January 3, 2011, 9:52 pm

      I think you are absolutely correct. Today’s young people are not going to lead us out of this economic morass. They were never taught about any of the tools they would need to use to begin to fix the problems, the first of which is to see reality as it is.

    • Dave January 4, 2011, 4:30 am

      Teach your grandchildren. Your kids don’t know squat.

  • Terry S January 3, 2011, 8:31 am

    Most certainly, Jill. It’s called “groupthink.”

  • Jill January 3, 2011, 7:40 am

    “since the political generation responsible for causing the problems is currently charged with resolving those problems, it does not bode well for the short or medium term.”

    It is not simply a matter of generation differences. The exact same individuals responsible for causing the financial crisis– folks from the TBTF banks– are trusted with government & Fed positions & expected to know how to solve the problems they caused. There are plenty of folks of the same generation as Geithner, e.g., who have a lot more sense than he does. If we all got together & decided to elect totally different sorts of people into Congress, it would be a totally different place than it is now. E. g. we could decide to elect folks of different ages, far fewer lawyers, more accountants (We need some people who can do math) & small business people, no one at all who accepts campaign contributions from Special Interest Groups, more people who have been found to be trustworthy by their local communities & who have a record of doing genuine public service in them.

    Lawyers would be OK to have as one of many groups of people in Congress. But almost everyone in there now is a lawyer. Having all one personality type leads to a Congress that is not very representative of the American people as a whole. We need more different types of people with different personalities & skills. Too much of any one type in a large group inevitably makes the group smart in certain areas and totally stupid in other areas.

    • Dave January 4, 2011, 3:57 am

      The larger the group the higher number of agendas. What we have here is human nature running it’s course. We have problems in America other countries have their problems. All are due to many different agendas. Mother Earth doesn’t care. She will be here long after we’ve destroyed ourselves and anything caught up in the collateral damage. If the planet has to start over with algae and volcanos then so be it. Politicians will never fix anything. Go back in history as far as you like. Nothing has changed.

  • Erin January 3, 2011, 7:28 am

    Day after day, week after week, month after month and year after year the same garbage comes from the same people who continue to drive this country into the ground…
    Once again the debt ceiling must be raised…
    Austan Goolsbee, the chairman of the White House Council of Economic Advisers, said that refusing to raise the debt ceiling would essentially push the country into defaulting on its financial obligations for the first time in its history. “The impact on the economy would be catastrophic,” Goolsbee told “This Week” on ABC. “That would be a worse financial economic crisis than anything we saw in 2008.” Goolsbee added: “I don’t see why anybody’s talking about playing chicken with the debt ceiling.”
    Fear mongering is always a good play in America because as a society we have no clue what the hell is going on anymore nor does anyone care. It is just too “scary” to think about. The best ideas that anyone can come up with is….Let’s just keep buying more stuff and we can make these scary things go away!!!
    We have lost complete control of our political parties and only those who have been smart enough to see this coming are prospering and will continue to prosper from the collapse of our failed monetary experiments. The bright side is the central bankers will finally be exposed for the counterfeiters that they are because no matter what you think of congress and the other elected officials in this country… the source of our problems is and always will be the fed. How much evidence does anyone need? We can go back almost 100 years and see the destruction all along the way. No elected official from any party can raise a debt ceiling or bail anyone out without a printing press!

    • Jill January 3, 2011, 7:44 am

      Excellent point there, Erin. I would add to my post below that we also ought to elect lots of Congress folks who are in favor of ending the Fed or at least its power to flood the entire universe with dollars.

    • BDTR January 3, 2011, 8:17 pm

      The key word is garbage, as it generally applies to data processing, Erin. What’s that reap what we sow thing? It’s beginning to smell a lot like landfill.

      A composite of the dominant, power-vested institutional interests perpetuate ever re-hashed, fundamental rationalizations in a self-delusional, multi-millennial witches brew model of beliefs in mythical gods, malleable morality and material monsters. It’s premised, of course, in something for nothing at the expense of some insignificant poor, disabled, old/young, ignorant or benign somebody else and our dearly declining mother, Earth.

      Not good physics for sustainability, but an excellent example of socio-economic Darwinism licking the proverbial plate of social philosophy. It’s not only a completely predictable result but a glaringly repetitive one. (The wonders of media pig-pen cosmetics these days. Maybe it’s high definition that really matters. A possible restorative 3D trinity incarnation of Bernake, Obama and the Pope! Pick your own order of need.)

      The stakes are only nominally higher due to rampant inflation in the numbers of humans …and the fiat that sadly represents the common measure in the worth of their very existence. This, sad to say, too, portends the unfortunate rightness of Rick’s anticipation to a more physics aligned end to reality stretching, fiat supply, and population. Not to mention, …well, never-mind.

      No shock and awe allowed with the plethora of garbage in what the crop will yield for us on this abused third rock. Hedge well, play hard, hope-less, …and good luck with that retirement thing.

  • Daman Prakash January 3, 2011, 6:25 am

    Author could have explained better. Did not understand.

    Economy is faltering is well known. Media needs to survive with ad revenue and it is understandable they weave disinformation at the instance of their customers.

    Signs of recovery need to be explained better. The orchestrated catastrophe by pessimistic is also equally bad like mainstream media’s extreme optimism.

    • Rick Ackerman January 3, 2011, 7:34 am

      Try re-reading the essay, Daman, since I’m having a hard time understanding what it is that you didn’t understand. Concerning the pessimists, four years and trillions of dollars of bailouts into the Great Recession, the burden of proof no longer rests with them.

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