Don't be scared away by BRIC inflation … Whether it's been ongoing inflation fears and rising interest rates or the extreme volatility in commodity prices, it's been a pretty rough year for these four darlings of the emerging markets. With investors running scared from all things risky these days, it may get even worse in the weeks ahead, but that doesn't mean that all is lost for the investment play that has led the way during most of the post-financial crisis rally. Indeed, it must not be forgotten that these developing nations have a powerful secular growth cycle at their backs and should ballooning inflation peak later this year as many analysts now expect, better performance from the BRICs will soon return. – National Post
Dominant Social Theme: The BRICs are great.
Free-Market Analysis: The power elite and its controlled mainstream media continue to "talk up" the BRICs – Brazil, Russia, India, China and South Africa. This is a swelling dominant social theme and one that bears watching because the powers-that-be will do anything to continue to prop up the world's central banking economy.
We can see this elite dominant social theme in this article in the National Post, "Canada's source for market intelligence." The article makes the point that the BRICs are fairly troubled economies, but that investors shouldn't be worried about it.
Where have we heard that before? Maybe in the US just before the housing bubble popped. Actually, we hear it ALL the time. "Don't worry, be happy." The powers-that-be badly yearn for pre-Internet days when people weren't as yet, in aggregate, illuminated (and only certain people were).
There IS a power elite, of course, and it has been around for centuries, for millennia. We even found an Indian historian who claimed elite influences go back nearly 20,000 years and can first be found in India. You can read about it here: The Conversation of Freedom is Not Jewish.
In the modern era, the power elite controls societies through central banking and the ability to print money from nothing. This allows the elites – comprised, in fact, of more than one "ethnic" group – to fund their goal of world government.
In the rest of this article, we shall discuss larger monetary concepts to show why the BRICs "miracle" is just one more fear-based elite promotion. The idea is to get people to think that the modern system of central banking is viable, even though it is not.
By pointing to the BRICs, those who are behind the world's current central banking economies intend to make the argument that it is not central banking that ruins economies but other inherent factors: morality, work ethic, etc.
This is not true, of course. It is not culture that determines economic fate in the modern world (certainly the West) so much as monetary and fiscal policy. Monopoly-fiat central banks are themselves inevitably responsible for much of the the ruination of the world, and especially the West, by printing too much money, which causes first booms and then terrible busts. This is now hand appening to the BRICs, too. Their economies are flooded by money printed by their own "public" banks and the results will be drearily predictable.
The mechanism of money printing is effective in any form. It doesn't matter, of course, whether central bankers are mercantilist – hiding behind public authority – or entirely "public" – putatively run by the government itself. This latter formulation is especially naïve.
Proponents of central banking and money manipulation in general (the idea that governments are somehow "of the people" – or ever can be) are increasingly vociferous. If WE can just control the money printing, then the problems of the world shall fade away …
In the late 20th century, it was popular to point to Japan as a good example of a consensus society, where the government and private sector "worked together." Japan, we were told, was a great example of "good governance" and Japan, as a result of its better model, was scheduled to take over the world. (See other article this issue.)
Didn't happen, of course. Japan's economy virtually collapsed in the late 20th century, a victim of the same mercantilistic nonsense that has sunk the West in the early 21st century.
Government planning and money printing only cause ruin in the long run. This is unfortunate but true. It is because of what the great Austrian free-market economist Ludwig von Mises called "human action."
This is the idea, born out by life itself, that shows us that any plans made by central authorities must obviously fail because people will take their OWN action. It is impossible to PLAN for people, because people are not potted plants. They plan for themselves.
This is why free-market economists generally believe that government programs are simply a waste of money. This accounts for the skepticism that free-market thinkers acquire as they begin to understand that they have grown up in an environment where they have accepted elite memes regarding the efficacy of government.
Every rule and regulation stemming from government and imposed by force on the larger masses is a kind of price fix. Price-fixing in the long run simply doesn't work. It only degrades society's wealth and over time pools more and more of society's assets in the hands of an elite.
And this is the point, of course. The efficacy of government is yet another dominant social theme, promoted by the elites for centuries. The elites NEED government because they operate behind the scenes, generating laws and regulations that bolster their OWN interests.
Austrians generally – the Rothbardian wing, especially – have been a thorn in the side of the power elite because free-market economics in its modern incarnation has pointed out the uselessness of government.
The free-market, non-statist approach of the Austrians so irritated German statist economists that they received the name "Austrians" out of contempt. The "Austrians" decided instead to wear it as a badge of honor. And the truth-telling generated by free-market economists has continued to grow, thanks to technology – what we call the Internet Reformation.
Yes, free-market economics has triumphed in recent years thanks to the Internet and the emergence of the alternative news media. It has done so despite increasingly vicious counter-attacks that continue to this day.
Austrian, free-market economics, in its purest (modern) form has been the only discipline that focused relentlessly on making a linkage between the average human being and economic truths. Its top people have decried "experts" and explained in timeless prose that the individual himself not only makes a difference but makes virtually the ONLY difference.
Austrian economics has, inevitably, been susceptible to divide and conquer. The Chicago Freshwater School, with its monetarist emphasis and its embrace of F.A. Hayek's "soft" free-market economics is one such example. Some argue that the overly complex and pedagogical orientation at George Mason University is another such attempt.
The "purist" wing of the Austrian school also has problems, in our view, and we have long pointed them out. The idea, for instance, that fractional reserve banking is a formal crime and that a gold standard ought to be enforced via criminal sanctions seems overly emphatic to many.
Thus, modern free-market economists (not just Austrian ones) take the view that monetary competition ought to be the gold-standard of a free-market economy, not the "gold standard" itself.
Here at the Daily Bell we've long argued for monetary competition as money has proven over the course of history to be whatever human beings decide it is. High-profile economists like Republican-libertarian candidate Ron Paul now take the same view.
We have also observed that bi-metalism, gold and silver, have proven to be a very popular solution to the problem of private money. This is because a bi-metallic standard allows average people to detect if the elites are trying to manipulate metals by cornering the market or some other practice.
The first pure silver coins were created thousands of years ago and thus, logically, humans have operated via a bi-metallic standard of some form for thousands of years. Of late, it's become fashionable in some quarters to argue that only government can be responsible for money. But this ignores the argument that government inevitably creates its mandates via price fixing.
Government works, unfortunately, through force and by transferring wealth from those who have created it to those who have not and often don't know what to do with it. This is the iron-bound fact that pure paper money proponents inevitably run up against.
The idea has been advanced, for instance, that central banking's price-fixing would somehow be made more palatable if it were entirely a "government run" operation – that is, if the public sector alone administered money.
But the problem with central banking is that those in charge CAN NEVER KNOW how much money to print. Only the marketplace itself can adjudicate the price and volume of money. This is why the most successful forms of money involve PRIVATE issuance of money-stuff into the economy.
As soon as human beings are involved in determining the supply of money, the business cycle – as analyzed elegantly by von Mises and others – becomes a main and ultimately ruinous factor in a given economy.
Inevitably, the hand of man creates an overabundance of money. Too much money in the economy makes people feel rich and the overspending starts. Eventually the boom collapses, turns to a bust and the cycle sooner or later starts over again. It is this elegant Austrian/free-market insight that drives modern money-elites bonkers.
The really damaging part of this boom-bust cycle is that it provides tremendous wealth to its controllers, those closest to the money spigot. It doesn't matter how is controlling the spigot – they will be enriched beyond measure. This guarantees corruption.
Another reason that free-market thinkers understand that only the marketplace itself can create money is because any other kind of monetary organization gives wealthy elites the opportunity to retain a money monopoly. Is this so?
Take gold, for example. In a free market economy, private monopolies are unsustainable and can only be perpetuated by force or government favoritism. In a free-market money economy, those who own the gold would find it impossible to sustain their monopoly were they to try various manipulations.
In fact, the manipulations would drain them of their wealth without having a long-term impact on prices. This is standard – and basic – economics. Begin to abuse your "monopoly" and people simply won't patronize your product or service. They will move elsewhere.
This is also the reason that modern monetary schemes such as those offered by Greenbackers and "social credit" theorists are theoretically difficult to implement long-term. Once government (or some other power) acquires the power of monopoly issuance, it will inevitably be abused. "Absolute power corrupts absolutely."
Alternatively, greenbackers, social credit-ers and central bankers all can exist happily under one roof so long as the monopoly force of government is not brought to bear on behalf of any one of them. Yet … we would argue in such a case – within the context of a free-market in money – that gold and silver would find their place alongside other solutions and perhaps even win the day as they have in the past.
Surely over time those who issue paper money would succumb to the temptation of printing too much of it. This is inevitable. No matter the scheme, and even within a non-monopoly context. At some point "man" must determine the money supply. And when man substitutes his judgment for the market … look out!
Too much money inevitably generates price inflation (desbasement). As a given paper currency grows unstable people begin using more gold and silver, which tend to hold their value. If one looks at the sweep of history, this is an observable fact. There is no mystery to it.
This is why many paper-money schemes may end up with their backers insisting on some sort of government monopoly. They cannot really compete any other way. (The exception to this may be fractional reserve banking, as Selgin and White have long observed.)
Also, some of these schemes seem to rely on forcible or voluntary confiscation. We find it difficult to believe that people would voluntarily join a monetary system that proposes to remove their "excess" earnings in the name of redistributive justice. This is another reason why such facilities may end with proponents suggesting government force.
You see? These are very simple concepts and also ineluctable ones. They are the reason, theoretically speaking, why free-market economies that utilize the Invisible Hand are better places to live in than controlled economies that use monetary methodologies empowering certain people to administer the awesome power of government on behalf of others.
Where we really part company from those who advocate various kinds of pure fiat is in their occasional emphasis on the salving effects of government itself. We can understand that a small government is preferable to a large one, but we certainly don't need to make the case FOR government in order to argue for a limited State.
To the degree that monetarist theorists BEGIN with the idea that governmental force is an inevitable adjunct to civil society, we reject it. Make the argument for freedom first – in all aspects of human society, including money. These arguments go back THOUSANDS of years, of course, and we are disappointed they have come under attack even in the alternative media.
Conversations about freedom occupied ancient societies even before the so-called Greek Golden Age. Roman philosophers were concerned with them, too, as were religious economists in Asia and Europe. No particular ethnic group has a choke-hold on a conversation that is as old as humanity as itself.
It's a BIG CONVERSATION. You MAY get to have a voice if you have something new and interesting to say. The Austrians, for instance, are valuable to this conversation in the modern era because of "human action" and the "business cycle," concepts that explain how modern economies work, and why they don't work.
To the degree that Austrian economics has contributed to our understanding of freedom generally, we are grateful to those who have clarified its concepts and made the case for its superiority. We see no reason to concoct conspiracy theories about Austrian economists generally as their WORK speaks for itself. Attacks, seen in this light, are nothing more than an ad hominem fallacy.
Human beings are obviously tribal creatures. But the traditional clan-methodologies of social interactions are constantly perverted by elites that wish to take advantage of human instinct to create larger societies that they can control behind the scenes.
This is the reason for the constant celebration of the "new." Yesterday it was Japan's turn. Today, the BRICs are being talked up as the latest and greatest examples of how Big Society can create prosperity for all. But it cannot.
The fate of the BRICS will be the fate of Japan and of America and Europe. They will inflate themselves into ruin sooner or later. Such bigness – and big money monopoly fiat systems – is unsustainable. The concept is an elite meme floated by the powers-that-be to try to justify their behind-the-scenes control.
Their very bigness makes them unsustainable. As the crashes begin, the elites inevitably begin to foment war and to suggest alternative forms of (big) government that might alleviate problems caused by the previous forms of big government.
It is always bigness that the elites want, the bigger the better. A big PUBLIC central bank would surely be preferable to none at all. Faced with this alternative, elites will likely abandon their current mercantilist. With a public central banking system (with public banks generally) they have a good chance of retaining their monopoly influence. We would certainly question whether the BRIC's public banking systems operate with less Money Power control just because they are in the public perview.
The only real solution is to insist on privatization. To choke the thing that the elites use so successfuly to implement their manipulations. One need not suggest MORE government or DIFFERENT government. Welcome what is inevitable: the eventuality of private solutions to public problems as the current disastrous elite regime, worldwide, continues to collapse.
There IS a difference between private and public/mercantilist sectors. Wall Street, for instance, was, initially anyway, a PRIVATE evolution that built on another PRIVATE evolution of the French auction-based stock market itself … a 1,000-year-old facility that began, supposedly, when someone needed to raise capital to build a mill.
Real prosperity, humankind's past shows us, begins with freedom and individual human action, likely within the context of flexible tribal-oriented communalism, minarchy, etc. This is a clear fact, historically. Why would anyone want to contradict it?