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Economics

Sign up to see Atlas Shrugged part 1

It was brought to my attention that a film version of a book was about to be released on 15 April. The book is of course Ayn Rand’s classic Atlas Shrugged, a book that should be brought to the attention of every serious student of life. Sadly, I only came across the book 3 years ago but I found its insights on the way the world works today simply stunning. You can find my introduction to the book here.

A film of this classic deserves an airing and is most timely with current world events unfolding as they are. The film makers are appealing to everyone who wishes to see the film in the cinema to join their online petition. Could I encourage every reader to sign up for a local viewing?

One can imagine that a film of a book that exposes so many home truths about the way Western society and culture are headed will meet stiff opposition. It is time to stand firm and demand a hearing of all views, especially the ones that describe the mess we are in and give a pointer to the remedy.

I look forward to seeing this film and posting a review. The makers have a hard job to approach the standard of the original, but they should be encouraged and supported in their efforts.

You can find the film’s website here.

Economics

Atlas Shrugged: Is Hollywood about to destroy a classic?

A new film is to be released on the 15th of April: Atlas Shrugged Part 1:

The book Atlas Shrugged by Ayn Rand details the decay and collapse of a society from real wealth-creating activities to a society that uses policy and laws to appropriate that wealth from others. This leads to a strike by the true wealth creators, leading to a slow motion collapse of society.

The book is based on a society in the US and it tells the story of a family owned railroad business. At the time the book was written, the jet-setting and interstate car age was only just in its infancy.

A parallel seen today will be with the off-shoring of production and jobs with nothing to replace it. We also see in the West a rise of regulation and other enforcements that strangle new enterprises at birth. You may have heard the phrase ‘Too Big to Fail’ with reference to the banks but we now have ‘Too Small to Succeed’! The sums involved with all this regulation and enforcement are staggering. Ayn Rand comments on this state of affairs in the book:-

“Then you will see the rise of the men of the double standard- the men who live by force, yet count on those who live by trade to create the value of their looted money- the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law- men who use force to seize the wealth of disarmed victims- then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion- when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you- when you see corruption being rewarded and honesty becoming a self-sacrifice- you may know that your society is doomed.

We see today the outworking of this in the case of the ongoing financial scandals in the US and elsewhere (Iceland, Greece, Ireland…), where large private investment bets are  paid out in full, backstopped by the taxpayer.

We see moral hazard: risk has been offloaded to those least able to afford it. People who took the risk are not willing to realise, or are sheltered from realising, the consequences of that risk. There is so much wrong here it would take many essays, books even, to document.

The people of Iceland have said no to paying the debts of private banks with public money and the world has not ended. Are the people of Ireland also about to say no? Austerity seems to now mean the taxpayer pays so that those that took the risk do not have to.

On the subject of Money

“Whenever destroyers appear among men, they start by destroying money , for money is men’s protection and the base of a moral existence.  Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values.  Gold was an objective value, an equivalent of wealth produced.  Paper is a mortgage on wealth that does not exist…Paper is a check drawn by legal looters upon an account which is not theirs:  upon the virtue of the victims.”

Today we have throughout the world paper fiat currencies backed by nothing. Debt is now paid simply by ‘printing’ more out of thin air – the Quantative Easing programmes of central banks around the world. ‘Printing’ was put in quotes as today printing is done simply with a computer keyboard, adding the appropriate number of zeros to an entry somewhere in a computer database.

The account these ‘looters’ draw on is the debasement of the currency, by that insidious process of inflation.

Inflation is a stealth tax on savers and pensioners applied by creating currency in ever-increasing amounts through government deficit spending – the unearned income of ever increasing debt. Inflation is not rising prices but the falling in the value of money.

Guilt – the weapon used against you.

Ayn Rand identifies the weapon used against you to great effect. It is an  insidious tool of manipulation. That weapon is your decency and sense of fair play, it is your guilt. By making you feel guilty about any topic, it disarms you from an effective response. You are made to feel a bad person – the games used here are very cynical. Political Correctness is such a tool, one word accusations which instantly apportion guilt, making you defenceless, innocence denied. You know those words, they enable the manipulator to win the argument without having one. By making you guilty up front you have lost position, do not allow these contemptible frauds to win. Ayn Rand warns of this in the book:

“We are on strike, we, the men of the mind.

We are on strike against self-immolation. We are on strike against the creed of unearned rewards and unrewarded duties. We are on strike against the dogma that the pursuit of one’s happiness is evil. We are on strike against the doctrine that life is guilt.

Moreover:

“Guilt is a rope that wears thin.”

“The worst guilt is to accept an unearned guilt”

“To hold him guilty in a matter where no innocence exists is a mockery of reason.”

This book should be mandatory in all schools for study. It teaches you how to think, not that I agree with everything, as I did note a certain self-centred sterility which would not work in a family setting. The book exposes well the cynical manipulation by others who try to exploit one’s good nature against yourself.

A comment on the Justice system

“When one acts on pity against justice, it is the good whom one punishes for the sake of the evil; when one saves the guilty from suffering, it is the innocent whom one forces to suffer. There is no escape from justice, nothing can be unearned and unpaid for in the universe, neither in matter nor in spirit—and if the guilty do not pay, then the innocent have to pay it.”

In Conclusion

Finally, what we see today can be summed up with this following quote which preceded Atlas Shrugged and was written during the Great depression by Adrian Rogers (1931):

“You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half get the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is the beginning of the end of any nation. You cannot multiply wealth by dividing it.”

One question may be, “Will the film be true to the book?” However the question may be, “Will Ayn Rand’s insights come over in the film or will it just be an excuse to defame capitalism with a straw-man cartoon of crony capitalism?”

What should be portrayed in the film is the ultimate bankruptcy of Marxism/socialism and the Robin Hood class of a self enriching elite, always claiming to act for the benefit and in the name of the people they ultimately oppress. In the book the society decays and collapses because those in control do not create any wealth but conspire to appropriate and consume the wealth created by others, wrapping it up of course in the obligatory self-justifying but bankrupt cause.

George Orwell’s sage words are ever more applicable today: “In the time of universal deceit, telling the truth is a revolutionary act!”

Economics

Incredible shrinking money

The UK’s shilling (5p) over time 1916 to today.

(All coins are equivalent to one twentieth of a GBP pound sterling, 5p today)

Over the Christmas holiday while tidying up I came across some old coins left to me by my late grandmother. The coins are just a general collection of ones found in general circulation, so not much in numismatic value. What I was taken with was a few old shillings nearly spanning 100 years from 1916 to today. The old shilling, now 5p had also shrunk. That brought back to me a memory from 1974 where I spent the Summer in a student job giving change in a foreshore bingo in Scarborough. At that time the application of Gresham’s law was in full force. This law states that bad money drives out good. In this case the silver coinage, the ones which contained real silver, were being taken out of circulation as fast as people, who knew what they were looking for, could find them. Why were they being taken out of circulation you may ask? Pre 1920 silver coins were sterling sliver (note the word Sterling) that was 92.5% silver content. Silver coins 1920 to 1946 (pre 1947 silver) contained 50% silver. A premium was paid for any real silver coin at 3 to 7 times face value, free money so to speak. Over this 2010 Christmas holiday the spot price of silver had reached it’s highest point since the 1980 high of $50. Using the 31 Dec 2010 spot price of $30.75 (£19.87), here’s what my shillings (left to right) are worth:

Silver content Weight (troy oz) value
George V shilling, 1916 92.5% 0.1682 £3.34
George V shilling, 1920 50% 0.0909 £1.81
George VI shilling, 1946 50% 0.0909 £1.81
George VI shilling, 1947 0% 0.0 (face value: 5p)
Elizabeth II shilling, 1966 [1] 0% 0.0 (face value: 5p)
Elizabeth II shilling, 2002 [2] 0% 0.0 (face value: 5p)

Not only has the money shrunk in size, it also shrank in value. The whole point of coins and money is that they must cost less to produce than the face value stated on the coin or else Gresham’s law comes into effect and that money, the one of value, the ‘good’ money, is taken out of circulation.

At the time in 1974 all one had to do was collect these coins, and when you had  enough you went along to a coin or other such shop where you exchanged them: pre 1920 coins for 7 times face value, and pre 1947 ones for 3 times face value. The shop I used was in a parade of shops by the Victorian Grand Hotel overlooking Scarborough’s South Bay.  In the Summer of 1974 these coins were becoming scarcer and scarcer. While these coins may look quite similar it was quite easy with practice to tell the difference between these coins, even on a counter at 5 paces. Certain customers never had such quick and prompt service if tendering the right year of silver coin. A game on the bingo was sixpence (6d old, 2.5p new) so there was the odd pre ’47 sixpence in the float, however the manager filtered these first and had a glass jar filling up for himself. After 8 weeks and many hours of change giving I managed to collect just over £7.00 worth. I wish I still had them.

This experience instilled in me a sense of the precious metal history of money. The generic terms are still there, in silver for coinage and Pound Sterling for instance. Also, when I started to read up on the current financial crisis, no-one had to explain to me that gold and silver have a monetary past and the benefits of holding them. 8 weeks in 1974 searching for the good money in the bad had done its work. Incidentally, in that same summer I worked from 9:00am to 9:00pm 6 days a week for £4.00 a day, this morning my student daughter worked 3 hours and earned the same as I took home in a week. I also remember that most other jobs at that time for students paid 35p an hour; students could also sign on the dole if not working for around £6/7 a week.

From the table above it can be seen that the pre-1920 shilling has a silver content value of £3.34, a value of 66 times the shrunken later 5p. The pre-1947 shilling has a silver content value of £1.81 a value of 36 times the face value of it’s modern equivalent.

Just how has inflation affected the UK currency over the years. In graphical form this is well illustrated here

(the pound has declined so quickly that the note is hardly recognisable, even to those who remember it)

Further figures on the devaluation of the currency can be found on the official UK government website

Inflation: the Value of the Pound 1750-1998

This document only goes up to 1998, but taking an inflation rate of 4% up to now, just devalue 1998 figures by 60-70% to get current value. The loss of value of the £ is tracked quite well in the face value and content value of these silver shillings.

I hope this article demonstrates the shrinking value of money over time. Who does this hit hardest? It hits those reliant on fixed income, pensioners and savers. It is an insidious stealth tax on saved wealth which is not tax deductible. This has been recognised by governments through the ages. Inflation is the destruction of the value of money; the symptom is overall rising prices. The switch from thinking in terms of rising prices, to the falling value of a currency, is a better way in understanding the process of inflation.

You will have seen in this article an illustration of shrinking money. The shrunken 5p is not the end of this. Ask yourself how often do you use debit or credit cards, electronic transactions.  I will leave you with this question, what value will the 2011 electrons or magnetic domains have on a computer hard drive in 95 years time?

Even more to the point, what value will a 92.5% 1916 silver shilling have, on that date in 2106? (also think of how much more debt the government will have borrowed by that date, and if the last load of debt was ever paid off, inflated away or defaulted on)

Further information and quotes

Today there will be no wheelbarrows; money is created simply by entering keystrokes on a computer keyboard. Money created from nothing, from thin air, but that is how banks have always created it… ad infinitum by fractional, now fictional reserve banking, until there is so much it no longer has any value.

A few quotes from the past on debt and deflation

Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society (destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose

- John Maynard Keynes, The Economic Consequences of the Peace.

The abandonment of the gold standard made it possible for the welfare statists (government bureaucrats) to use the banking system as an unlimited expansion of credit. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation… Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process.

- Alan Greenspan

Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism

– Karl Marx, Das Kapital, 1867