A tear for America

Those born in Europe to parents who survived the horrors of the last world war have no trouble recalling the genuine admiration, and perhaps even reverence, that their parents held for the United States of America. A mere sixty seven years ago, at the war’s end, America possessed not only an unparalleled economic advantage but, more importantly, national virtue—the moral capital that fueled its great bourgeois culture of individualism, laissez faire and liberty. Lamentably, this is no more.

“The truth is that we simply no longer understand America,” writes Jakob Augstein in Der Spiegel. He explains: “Looking at the country from Germany and Europe, we see a foreign culture. The political system is in the hands of big business and its lobbyists. The checks and balances have failed. And a perverse mix of irresponsibility, greed and religious zealotry dominate public opinion.” He is not alone in such assessment. Most intelligent admirers of that old America who have witnessed its deliberate march on the road to ruin over the last few decades would readily admit that something, somewhere, has gone terribly wrong.

The “freedom” about which the American political class babbles incessantly is not even a distant cousin to the freedom from government coercion that its Founding Fathers sought to enshrine in the Constitution. To the modern Yank, the word has degenerated into a decadent demand to possess freedom from responsibility and freedom from the consequences of folly. It is no wonder that Americans had no real choice for their President. They had to choose between an intellectually vacuous neo-conservative charlatan and a Marxist demagogue committed to destroying whatever is left of the American way of life through divisiveness and radicalism. And in the end, we can be certain that Mr. Obama’s victory was not the result of some demographic change as much as the unavoidable consequence for any degenerate democracy: the rise and prominence of an unproductive and parasitic tax-eater class.

“Our Constitution, which was intended to limit government power and abuse, has failed,” said Ron Paul in his recent farewell address to the House of Representatives:

The Founders warned that a free society depends on a virtuous and moral people. The current crisis reflects that their concerns were justified. … If it’s not accepted that big government, fiat money, ignoring liberty, central economic planning, welfarism, and warfarism caused our crisis, we can expect a continuous and dangerous march toward corporatism and even fascism with even more loss of our liberties. … Restraining aggressive behavior is one thing, but legalizing a government monopoly for initiating aggression can lead only to exhausting liberty associated with chaos, anger, and the breakdown of civil society. … I have come to one firm conviction after these many years of trying to figure out the plain truth of things. The best chance for achieving peace and prosperity, for the maximum number of people worldwide, is to pursue the cause of liberty.

To that, we can only say “Amen.” But in the meantime, we shed a tear for America.

This article was previously published in Edelweiss Journal, Issue 10 (23 November 2012)


Why Nations Fail

Why Nations Fail is the title of the lavishly praised recent book by two academics: Daron Acemoglu (MIT) and James Robinson (Harvard). It is impressive if only on account of its range, ambition and incredibly rich historical examples. Its topic, the subject of many inquiries on political economy, it is also the kind that sells books — especially when it comes with a presumptuous title.

Among others, not too long ago, Jared Diamond made a small fortune with his Guns, Germs and Steel, despite the gross charlatanism. As to why some countries are rich and some are poor, Diamond’s answer was geography. His arguments were ingenious but wrong. On the other hand, Acemoglu and Robinson argue that the answer is politics or, rather, the presence of political institutions, that is (in their view), property rights, economic freedom, equality before the law, the sanctity of contracts and so forth. They argue that the free markets are insufficient on their own to make a difference. If an economy is to prosper, they suggest, governments are the only ones who can and must supply such institutional advantages.

Sadly, the authors’ enormous and ambitious undertaking ends up with answers that confuse cause and effect — an elementary but common intellectual trap. Political correctness avoids a crucial and necessary component in the understanding of economic development: inequality. Not only are we born unequal in every respect but we do tend to labor with unequal effort, objectives and time preference. We seek to alleviate the gap in wealth that separates rich and poor without the understanding that such division is a historic and long-standing problem.

In the pursuit of wealth, failure or success are ultimately determined from within, not imposed from outside.

So writes David S. Landes, a Harvard historian whose striking and iconoclastic 1998 magnum opus The Wealth and Poverty of Nations remains my favorite on the subject.

If we learn anything from the history of economic development, it is that while many have become rich over time, the security and permanence of wealth in a society is a function of the appropriate cultural traits.

Reviewing the book for the New York Times in 1998, Andrew Porter summarizes Landes’s thesis on prosperity as

the product of a society that had developed a sense of national cohesion; a capacity to compete; a respect for, and a concern to impart, empirical and technical knowledge; and a preference for advancement by merit or competence.

Such a society’s members

had the ability not just to acquire but to use money, they respected honesty, and their institutions provided security both for property and for enjoyment of the rewards of labor or enterprise.

That is, as he argues, government is the result of a culture and not the source of its traits.

To gain a meaningful understanding of the political and economic issues that dominate the news, whether in Greece, Spain, Germany, Europe in general or, by inference and reflection, even the United States, one ought to start with political economy and history. Only as a start, we have two recommendations:

  • David S. Landes, The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (W. W. Norton & Co, 1999). It is in stock at
  • Erik von Kuehnelt-Leddihn, The Intelligent American’s Guide to Europe (Arlington House, 1979). Unfortunately, this book is out of print and difficult to find.

This article was previously published in Edelweiss Journal, Issue 7 (26 June 2012)


It’s about the law, Senator!

“No presidential aspirant has ever had such an exotic financial portfolio,” suggested US Senator Dick Durbin recently in reference to reports that US presidential candidate Mitt Romney once had a bank account in Switzerland. As if his standing is insufficient (and it is), Mr. Durbin solicited confirmation from Mr. Cherry Coke-breath from Omaha: “I asked Warren Buffet in a meeting we had recently, ‘Have you ever had a Swiss bank account?’ He said, ‘No, there are plenty of good banks in the United States.’” And if the musings of the man from Omaha are not enough to persuade you, Mr. Durbin went straight to the man on the street:

So I started asking people: ‘Why do you have Swiss bank account?’ One, you believe the Swiss Franc is a stronger currency than the United States dollar. And that is apparently the decision the Romney family made during the Bush presidency. And secondly, you want to conceal something. You want to hide something. Why would you have a Swiss bank account instead of one in the United States? I would like to … ask the press to really press some of these questions, the obvious questions. When is the last time a presidential candidate for the United States had a Swiss bank account? I think the answer is never.

I am irked even as I expect nothing intelligent from anyone holding political office. I am irked not only on account of the sheer banality of what goes for news but equally as much for the utter ignorance, pompousness, hypocrisy and disrespect. Does not Mr. Romney or any other person have the right to dispose their own property in a manner that suits them? Is it not his property? If you have the right to exchange your money for a Japanese television or a German car or Italian shoes or bananas from Honduras, why is it not any different that one chooses to have a bank account in Switzerland, or London or Istanbul for that matter? If you have the right to buy a condo in Puerto Vallarta, why not the right to have a bank account in Bangkok? And why is it that Switzerland irritates so many people? Why not Monte Carlo, Hong Kong, Singapore, Jersey, London or even New York?

Let’s be fair. Swiss banking became famous not on account of one having “something to hide” as much for its sheer and inimitable skill (yet unknown in most lands), efficiency, superb organization and, yes, a system of law that respects and protects private property and private contracts. One is at a loss as to why America (among others) has drawn its sword against Switzerland alone, while their citizens are free to bank in Asia and other so-called havens in Europe and elsewhere. In my own view, the attack on Switzerland is solely an attack on its legal traditions. Very sadly, most Swiss people don’t understand the nature of this attack, either. Yes, Mr. Durbin, the Swiss view a bank account like you view your underwear drawer. You may have nothing to hide in there but it isn’t anyone else’s business. It is your private property. Since you are a US Senator, we excuse you for knowing next to nothing about the law—particularly as it concerns property. And thus, we can see why you see it as “exotic” if only on account of the fact that the law in Switzerland recognizes and protects the right of an individual to have ownership over his own property without the meddling of larcenous nincompoops like you. This must surely be an “exotic” idea to a politician from Chicago, no?

This article was previously published in Edelweiss Journal, Issue 6 (13 April 2012). For a free subscription, write to


Consider a crash course in money, Mr. Buffett

Dear Mr. Buffett,

Now that my hair is grey and since I’ve learned so much from you over the years, I feel compelled to express my gratitude for your wisdom and example— but perhaps also qualified to offer some observations pertinent to the criticism you have recently received.

The wisest among our peers would agree that despite one’s learning and past accomplishments, there are two immutable attributes that outstanding investors ought to possess: a sense of humility and one of skepticism. My own knowledge of you has come as a result of reading your own words and examining your actions rather than reading the hagiographies that our contemporaries have bestowed on you or the silly postings on

In that spirit of skepticism, allow me to suggest that there are perhaps two of you: The old Buffett (Old B) and the new one (New B). As I reflect upon your words and record over the many years, I can clearly see that the new replaced the old sometime around 1997, give or take a year or two. The Old B was a real investor: skeptical, keen, introspective, intellectually honest and possessing an unwavering eye as to what was right and wrong. I used to read your letters to Berkshire shareholders with a sense of appreciation for the judgment and clarity of your thoughts and convictions. But now it’s all gone. The New B is lost in his own self-importance. He has become obsessed with his own legacy, having transformed himself into a participant and apologist for the failed credit culture of our times, even an evangelist for state intervention, favoritism and political entrepreneurship. Worse, this New B seems to have also lost his penchant for value and even become intellectually sloppy if not outright dishonest.

My personal library contains an archive of all your letters to Berkshire shareholders, going back to the brilliant days of the old Buffett Partnership in the late 1950s. I would be the first among many to acknowledge the trove of wisdom and judgment that can be found there. But I am thinking of discarding the letters of the New B. He writes too many words that are worth less and less.

Your most recent letter is an example of the intellectual sloppiness I mentioned earlier. There is nothing outstanding to be found among the many words but only warmed-over and self-exculpating arguments in your failure to see either the genesis of or the ongoing nature of a financial calamity that has become nothing short of tyrannical for the owner of any savings.

You are eager to remind us of your long-term track record. Often, it is to be found prominently in the first paragraph of your letters. But why is it that you never give it to us in inflation-adjusted terms? It’s not that you don’t understand inflation. Did you know, for example, that in the 10 years ended in 2001 the Berkshire shareholder had a total return of 536%— after inflation? But that in the subsequent 10 years ending in 2011, despite the sweet deals that you seem to get from your politically connected friends, your shareholder was merely 18.6% ahead? For ten whole years? It’s the Old B and the New B, you see? Something happened somewhere, Mr. Buffett, and you seem to have missed it. Your value-seeking nose has steered you wrong. You know it but you want to pretend it isn’t so.

But you don’t just pretend. You preach to us the futility of owning gold as a useless and non-productive asset. Why mention it now, Mr. Buffett? Is it because you want to discredit something you don’t quite understand, or because you want to defend your recent record of buying banks and homebuilding companies that are on a slow and winding road to extinction? Or is it that you want to defend the criminal government employees bent on money debasement as a way to save your railroad traffic? Wouldn’t you agree that the rest of us have a right to have savings (in addition to long-term investments) including the right to object to someone destroying them?

I suggest you consider reflecting on the very yardstick you use in measuring value—money. You are quite right that wealth is created on factory floors and not by holding a metal such as gold. We agree. Yet, what you do not seem to know, or perhaps have conveniently forgotten, is the nature of money in itself. Imagine a brilliant engineer who is indifferent as to the distinction between inches and centimeters but only minds the numbers. That’s you. Your investment calculations have failed over and over again (well, except for those sweetheart deals you get with the warrants and everything), yet you don’t seem to be concerned with the root cause of the distortions that have caused you so much grief. That’s fine. But what I don’t get is the arrogance and self-importance that is attached to your attack on those who see gold as a means of capital preservation—and have profited handsomely from their foresight for 11 years in a row. Why attack this now, Mr. Buffett? Why offer disingenuous arguments to support a thesis that is not even part of your own investment methodology? Why attack? Are you envious? Did someone put you up to it? Did you have a bad morning?

You are not too old to go to basics and learn about money, Mr. Buffett. Moses did not lead his people out of Egypt until he was 80. By your own admission, you have long years ahead of you. So, if you still possess a bit of the humility and skepticism of old, consider a crash-course in money. You ought to start with Mises. That’s Ludwig von Mises. Beyond that, you may wish to consider the idea that perhaps, just perhaps, you may be wrong about a few things. Barring such remedies, and being far too unimportant to give you advice, I will echo the sentiments of Mr. Chris Christie, the New Jersey governor. When he was recently asked by a reporter to comment about your silly neo-Marxist everyone-according-to-their-means idea, he suggested that you just “write a check and shut up.” That’s two pieces of advice. I’d forget about the check.

Sincerely yours, OvS

This article was previously published in Edelweiss Journal, Issue 5 (15 March 2012)