Of all
the stories woven around the subject of gold, possibly the story of King
Midas is the best known, whilst also being the least understood. Circa 700 BC, Midas was the King of Pessinus, the capital of Phrygia. Phrygia was a small but wealthy
country within the eastern part of what is now known as Turkey.
The
mythology starts with Silenus, the drunken satyr,
falling asleep in the prized rose garden
of King Midas. He was hauled before the court of
Midas who, instead of punishing him, listened enthralled as Silenus regaled the court with amazing stories. As a half man/half goat drunkard,
intent upon a life of pleasure seeking, he probably had some rather
interesting tales to tell.
Silenus was the surrogate Father of
Dionysus, god of the life force. When
Dionysus found out what had transpired he was well pleased and offered to
grant Midas one wish in return for his kindness. Midas asked that whatever he might
touch would be turned to gold. Dionysus
warned him of the dangers of such a wish, but Midas was blinded by his
enthusiasm. Dionysus granted the
wish.
From
then on everything that Midas touched turned to gold including his beloved
roses, and even the food and drink that he wished to consume. It was only when he inadvertently
touched his daughter and killed her by turning her into gold that he finally
repented his foolishness.
Full of
remorse Midas approached Dionysus and asked that the wish be cancelled. Dionysus told him to bath in the water
of the Pactolus
River. This Midas did and the
‘gift’ was washed away.
Incidental to this story is that the gold ‘from Midas’ was
washed down-river to Lydia
(in western Turkey),
which around 660 BC was the site of the earliest gold coinage.
Modern
renditions of the story of King Midas erroneously place all
the story’s emphasis on the folly of man’s obsession with
gold. That was most certainly not
the intent of the fable. That
sensible people valued gold highly was taken for granted. The intent of the fable was a theme
common to Greek mythology… the inability of many people to think beyond
the immediate and obvious.
The
wonderful writer and economist Henry Hazlitt* follows the same theme when he
points out that the problem with Keynesian economics is that it consistently
fails to successfully predict, or even foresee, secondary consequences. Much like the child who insists upon
eating large amounts of sugar lollies because they taste nice, and who fails
to appreciate, until too late, that they have the secondary consequence of
causing a very upset tummy.
Which
point brings us up to the current economic situation. Our governing elites have utterly
failed to manage the economy in a wise manner. The not only predictable, but
blindingly obvious consequences of their own actions have left them
open-mouthed and bewildered. It
goes without saying that the moment that the economy is ‘managed’
then distortions and mal-investments will occur. But it is possible to manage an
economy with a competence borne of an understanding of economics that at
least minimises that damage. This
has not been the case.
The
economic mistakes that have destroyed America were borne of a
pig-headed, Congressional arrogance that they, the wise and wonderful
politicians, were right and that the classical economists and Founding
Fathers were wrong. Gold and
silver, the only real money, were replaced by pieces of printed paper backed
by nothing other than the full faith and credit of politicians. How much more worthless can something
get?
Once
these pieces of paper were forced to be accepted in lieu of real money, then
the process of inflating away the value of the new ‘money’
began. Three generations of
Americans have had their wealth confiscated and reallocated to a governing elite via this process. These people worked their whole lives
for a modern mythology known as the American Dream. What little they still have to show
for a lifetime of toil is about to be lost. The ideas of Keynes are the anti-Midas
in that whatever they touch turn to shit.
Differences of opinion are not unusual in this world, nor is that necessarily bad… sane people let results be the
judge. For over 70 years the
results of
going off the gold standard, coupled with the fallacious
doctrine of Keynesian economics, have caused massive destruction of capital
and great hardships to the non-elites… not to mention the innumerable
wars with hundreds of millions of deaths that blighted the 20th
Century. Read Ferdinand Lips if
that strains your credulity.
(http://www.fame.org/PDF/Why%20Gold-Backed%20Currencies%20Help%20Prevent%20Wars.pdf)
Keynesian
economics was an unsophisticated dogma that failed to pay heed to the real
world. It’s
adherents were not interested in whether or not it worked over the long term,
they were only interested in whether it suited their own perceived short term
interests. Its only virtue was in the immediate, and that was always enough
for Congress. As long as the
immediate would take them through to the next election, then all was
fine. As long as it felt good and
sounded good then the flimflam of Keynesian populism would suffice; never
mind that nonsense about responsible economic management and heeding a dusty
old document called the Constitution.
Our
modern satyrs, Bernanke and Paulson have defended their actions by regaling
Americans with wild stories about how it was all the fault of the free
market. Under the auspices of a
compliant Congress they have rammed through the sort of giddy
‘solutions’ that one would expect from those whose genes are half
goat. Alan Greenspan, whatever
his motives, succeeded in destroying the Federal Reserve in its current
form. As there could be no more
destructive form the man deserves credit for that.
I came across a quote by Benjamin Franklin recently:
"Only a virtuous people are
capable of freedom. As nations become corrupt and vicious, they have more
need of masters."
I would
strongly suggest that, to the contrary, people are generally virtuous until
governed by ignorant ‘masters’. Bad government will firstly degrade
the currency and the laws and then (secondary consequences!), moral
standards. It is not that people
lack virtue and thus need masters, though it is convenient for the elite that
people believe this to be so. It
is masters who destroy virtue by idiotic edict that encourages and rewards
criminal behaviour at all points of the legislative process. The morals of society succumb to rule
by the idiocracy.
As our
half men/half goat drunken elite perform their media rituals, the question
needs to be asked whether “we the people” deserve any
better. An observable rule is
that in all aspects of their lives people do not get what they
‘deserve’, they get precisely what it is that they are prepared
to put up with. That is a truth
that applies down at the level of personal relationships right the way up to
the type of government that we allow.
Government is the problem, not the solution. Until we can see and
understand that one simple truth, and make the decision that we will no
longer put up with that situation, then humanity will continue to suffer the
cyclical existence that ranges from impoverished serfdom to intermittent
prosperity and back to poverty again.
The real
theme of the old Greek fable about King Midas from 2700 years ago is still
most applicable to not only our governing elite, but to the American
people. Yes, the immediate
bailout legislation, forced down the throat of Americans, will hopefully lead
to a continuation of the current comfortable lives that we have become
accustomed to for a few months longer, but what are the secondary
effects? The answer to that is as
obvious and as unattractive as a drunken half man/half goat sleeping in a
crushed rose garden. Will anyone
haul these modern satyrs before a court?
Are
modern Americans so complacent, or so intimidated that, unlike their
forebears, they are prepared to put up with this? If the anger reaches the level of the
street, will the military and police choose to support a Congress and
presidency corrupted beyond anything that Jefferson
could have imagined in his worst nightmare, or will they choose to support
the Constitution? Will Americans
believe the desperate, verging on pathetic excuse that it was somehow the
non-existent free market itself that was to blame… that the crime was
committed by laissez-faire capitalism?
How gullible are Americans?
The
answer to those questions will determine whether America
goes the way of Phrygia and Lydia,
where writers of the future will have to explain where it used to be on the
map.
“Serf City,
here we come…” (apologies to Brian Wilson and Jan Berry)
Sam Mathid
October 14, 2008
I look forward to seeing some of you in Canberra, Australia
next week at Professor Antal Fekete’s
fifth and last session of Gold Standard University Live.
feketeaustralia@yahoo.com
* Henry Hazlitt’s ‘Economics in One
Lesson’ is a wonderful and easy to read primer for anyone wishing to
understand why it is that government attempts to help the economy inevitably
have such disastrous consequences.
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