If Bullion Were Not a Threat Government Would Not Attack It- Paul Craig Roberts

Mike R 04/10/2013  •

Hi Greg,
I’ve held gold bullion since before the year 2000, and started buying my first few coins when the price was below $300. For the longest time I was concerned about inflation. Also I studied a lot about deflation. I’ve followed folks like Jim Sinclair, John Williams, and many other guests you’ve had on here for interviews. I’ve followed these guys for quite sometime and far before the popularity and followers they have today. The reason I begin with this preface, is for the past year or so, I’ve been changing my mind about causes and outcomes.

First of all, I do think gold will hold its value. Probably other precious metals will too. But not quite for the reasons people talk about today. The race to debase, as I call it in terms of currencies, is really a misguided reaction by monetary policy makers. Ok, nothing than probably any of what your guests might suggest.

However, I truly don’t think we are going to get hyperinflation, and we will likely continue to experience a continued gradual deflation in a whole lot of consumer goods, services, and durable goods.

The reason I say this, is actually very simple to say, but far more complex in terms of the impacts occurring and the acceleration of numerous convergences. Primarily, we are witnessing a wholesale transformation in the use and adoption of technology. Up to now, job destruction here has been a combination of outsourcing of cheaper labor, better use of more effficient machines, and global competitive currency devaluations.

However, in parallel, and about to rapidly accelerate in the next 5 years, is going to be the massive adoption of machine learning practices, neural networks, and fuzzy logic as it relates to all sorts of industries. Entire industries are going to be turned upside down worldwide, if not destroyed forever. This has been happening in earnest for the past 2 decades, but it’s going to really increase now. The US labor participation rate is declining because of this, and many millions are getting left behind. Our country truly cannot educate, and convert its populace fast enough, despite our economy being the most advanced in the world. This is occurring worldwide, and is why we are seeing massive unemployment in so many countries across Europe, and even Asia. China, Asia and Russia and India are in the worst possible position. Why ?

Well for one, their populations, mostly china and India, have been on the verge of gaining an actual middle class. The problem now is that technology advances are going to simply overwhelm the worlds ability to keep so many billions employed. Many are on the precipice of being kicked back into the stone age. Sure we have a lot of worldwide debt, which is problematic it of itself, but all that debt could be destroyed with the stroke of a few pens, written off completely,and we could have an entire global reset. That still leaves us with the primary problem. Technological advances in crucial areas, enabled by the ever increasing collaboration and communication fostered by the Internet and computers and mobile communications, is simply going to render a good portion of today’s “labor” in the way we know it, obsolete, and unneeded. Machine learning, which fairly closely resembles the critical thinking of the human mind, is advancing things like robotics and manufacturing lines, sorters, and even the most previously complex and/or minute tasks normally done by humans, such that it is going to more rapidly than ever before replace the need for humans. Couple that now, with massively rising healthcare costs, taxes, and other costs, the company’s that do far more with far less human labor are going to wipe out the ones who refuse or don’t know how to adapt. This has been ongoing and seemingly gradual, as extremely low cost labor, essentially created and fostered by US business in other countries, the developed by those country’s governments, brought a whole lot of the worlds population out of an agrarian, or poverty ridden culture. They have risen close to the middle class, but essentially those “billions” of humans can never be educated quickly enough to become an integral part of a very advanced society. People who have kept up with this and adapted, and are largely above American middle class standards, will likely survive and prosper.

Others, and largely, probably 75% of the worlds population won’t be needed for the labor, to produce the goods or services the rest of the world can afford. It’s complicated, but truly we are at an major inflection point in human history. The path from here, will be governments attempting to figure out how they can support 75% of their populations, with only 25% needed for “labor” much of it being critical thinking, innovation, working on computers and working with advanced technology. Some governments might (diabolically speaking) decide they need a war, to “cull” the population, while others may attempt vainly to take a more “humane” approach and adopt a much more socialist model. (ie. the many, living off the “backs” or rather “minds” of a few.

Thus in this type of environment, I am hard pressed to see any sort of inflation no matter how much money is printed. As the money, simply won’t be getting into the hands of the populace, unless they are at work. As labor participation rate keeps dropping, more people are going to be on government “welfare” or family and community welfare. Why are we seeing records of numbers of people on food stamps ? It’s not because there are no jobs. It’s because they simply have not learned, and many not ever learn, the skills needed to obtain work that is mind work, rather than just labor or basic thinking. They either need to adapt on their own, which may be very hard, if their iq’s are around the average of 100, or even just above that at 120. People can be mentored and coached to a certain degree, but these machines, robotics, computers, are simply going to continue to proliferate at an accelerating pace, fostered by companies who strive to stay relevant and in business. Monetary policy, and debasing currency doesn’t solve this problem. Only human innovation will. Our governments have no idea how citizens will react, as the critical mass of unemployed, and not seeking employment increases. Which is why we are probably seeing the billions of rounds of Ammo purchased, and an increasing number of so called “FEMA camps” being built. These may never be needed, ever, but they have to prepare for worse case. In the meantime, the best thing everyone can do is focus focus focus on getting educated and using the internet to access resources and materials on advanced skills and technology. There are only so many policemen, fireman, teachers, garbage collectors, or news people needed. Of course government service workers will be growing, as will health care workers. But it’s impossible for those to be high paying jobs. If America is lucky, it will have a massive energy boom, to allow it to export a lot more in the way of energy, technology, and keep a whole lot businesses ultra competitive, serving the billions of others on the planet. Most likely those others it serves will have to be upper middle class or “rich” to be afford the goods we provide. Fewer and fewer people will be operating machines. So that won’t be a solution for employment. Who knows how this all evolves. But rest assured, 5 years from now we won’t be in hyperinflation, we will likely be still dealing with many deflationary pressures, and whoever is fed chairman, will either be printing money or very very very slowly raising interest rates.

Rick Szymanski 04/10/2013  •

A thanks again to you, Greg, for having Dr. Paul Craig Roberts back on USAWatchdog. I always listen very carefully to him on his take as to what the government is up to. He is a very knowledgeable and astute fellow when it comes to the workings of the Fed. and it’s Siamese twin, the Federal government. I would like to add my thoughts regarding the Japanese policy of inflating their currency, the Yen, in order to pull their economy out of Deflation. At first I thought that it would be a zero sum game for Japan as it has to import energy and raw commodities for it’s export manufacturing sector and would have to pay more because of it’s depreciated Yen. Then, I recalled your interview yesterday with Jim Willey as to the latest oil trade negotiations between Russia and China and how China will pay for it’s oil with U.S. Treasuries, of which it is the largest foreign holder at $1.15 trillion dollars. Japan is the second largest holder at $885.9 billion dollars, therefore, it too will have no choice then to cash in the Treasuries to pay for it’s imported commodities that are quoted in the reserve currency, the U.S. Dollar.

How will the Fed. handle all these foreign U.S. Dollars returning home to roost ? Another nail in the coffin of the Dollar.

ncdirtdigger 04/10/2013  •

And while they are working towards taking away our guns, they are buying up all the ammo. What good is a gun, without ammo?

Mark_BC 04/11/2013  •

Great interview. But it’s even worse than you’re making it out to be, much worse, because of Peak Oil. The US peaked in production in 1971 and it’s been going down ever since with a few short lived bumps (of which the latest tight oil boom is one). Oil consumption in the US has been maintained over that period via the US trade deficit, i.e. from the reserve currency status of the dollar. When that ends, so too will America’s oil imports (it currently imports about half of the oil it consumes). What will make this especially hard is that, unlike Bangladesh, America’s infrastructure is built to function by burning lots of oil, and it can’t function without it. In this respect, Bangladesh will weather the storm better than America will.

The natural gas boom is about to crash; there is simply nowhere near “centuries” left as the media proclaims. The problem is that all the new fracking gas comes from tight shale plays, just like the oil, which have very steep decline rates, and there aren’t enough rigs available to drill the gazillion new wells needed to maintain production. And we’re decommissioning nukes to instead burn natural gas for electricity because of the supposed “glut” on the North American market — just wait a year to see where NG prices go!

What’s worse, modern agriculture requires huge fossil fuel inputs to produce food — in North America, 7 calories of fossil fuels to produce 1 calorie of food. When oil and gas decline (fertilizers are made from natural gas), then so does food production! The only hope left is coal, which the US may still have quite a bit of. And solar. Nuclear is a fantasy — they can barely keep the things running today, how are they going to build and maintain new ones when society collapses? And I thought America lost all its skilled labour due to outsourcing. Who’s going to build all these new nukes? Just watch Jeopardy and you’re lucky if you get 1 science category.

This is the beginning of the end of modern humanity. We probably won’t go extinct, but we may be reduced to a few hundred million globally over the next century. The numbers describing our predicament are truly terrifying.

Robert 04/11/2013  •

Here are eight step solution to US problem

Stop all government subsidies of capitalism: “a sweeping divorce of the state and the market economy” ending “crony capitalism.”

Eliminate incumbency: A “sweeping constitutional surgery” with “amendments to give the president and members of Congress a single six-year term, with no re-election.”

No more elected officials as lobbyists: “Prohibiting, for life, lobbying by anyone who has been on a legislative or executive payroll.”

Overturn Citizens United: End the fiction that corporations are humans.

Balanced budgets: “Mandate that Congress must pass a balanced budget.”

Close all Wall Street derivatives casinos … Purge “corrosive financialization that has turned the economy into a giant casino since the 1970s.” No cheap Fed loans, no bailouts, no deposit insurance.” Reenact the Glass-Steagall.

Stop Fed micromanaging the economy: No more cheap money. No debt buybacks. No investing in private companies. Fire the Fed’s central planners. Restore “The Fed’s original mission: to provide liquidity in times of crisis but never to buy government debt or try to micromanage the economy. Getting the Fed out of the financial markets is the only way to put free markets and genuine wealth creation back into capitalism.

Steve 04/11/2013  •

Greg,

This was a profound interview.

It is just the tool I need in the ongoing attempt to convince family members with their heads in the sand that danger is on the horizon and that the highs being achieved in the market are a house of cards.

Thank you.

Pedro Alfonso 04/14/2013  •

Mike R may be right in something but is likely wrong on others.

If the debt gets wiped out by the stroke of a pen as he says it means that pensions, 401ks, deposits, money in the stock market, social security… and more will be erased. They cannot do that without erasing also the personal debt and that includes the mortgage debt. Erasing the debt means erasing all or the debt and issuing clean deeds or they will really piss off the people AKA the most heavily armed population in the world.

Hyperinflation may never come but the currency or paper money will be destroyed and there is where the precious metals will come into use. When no one accepts paper money they will accept gold and silver. Another way of looking at this is that precious metals could not be valued against a currency that does not exist. Other than that, people better have something to barter with.

Democrats will be more humane dealing with the people than the NeoCons (the same guys who did 9/11 and would nuke us in a heartbeat). This is the main reason and perhaps the only reason why in the last election I voted Democrat for the first time ever and perhaps in the last election in many years.

If the world economy crashes who is going to buy what the corporations produce. If they kill 50% of the people that is 50% that will be buying nothing from corporations that will go bankrupt. There are many things that could happen but two things are for certain: The life of paper money and Dollar supremacy will come to an end and since the debt is unpayable it will not be paid and these two alone will turn our world upside down.

major 04/14/2013  •

There is something missing. Please explain to your readers exactly what techniques are being used by the Fed to depress the price of Gold so deeply. Conspiracy theorists always level the charges but rarely have the smoking gun. Hence their credibility is shaky at best. If they can get away with these techniques how the hell are we supposed to fight back??