Experts -- updated 12/14/2011

I was thinking today, and I said as much over at the Monty Pelerin site, that people who are supposed to be the experts have no idea what they are doing.  Almost any fool can keep a plane in the air on auto-pilot if there are no storms or mechanical problems.  It's when you run into trouble that you need a pilot -- a man like Sullenberger.  It does not take much skill to take a float trip down a Class I river.  It's when you get to Class IV and V that you need to know what you are doing.  And you need to have enough sense to stay out of Class VI.

Anybody can make money in the stock market on a long bull run such as occurred from 1987 to 2000.  I haven't researched it, but I would guess that Warren Buffet made a significant portion of his billions during that period.  You can look like a sage by not doing anything stupid during good times -- and we have had some good times.  If the federal government would stick to the Constitution, you could put a half-wit like Obama in charge and even he could not really screw it up.  The Founders handed us a republic as an almost turnkey operation.  If we had stuck to the limitations instead of trying to "do good" or "fix" something, we would have many fewer problems.

It was the experts who created the explosive atmosphere for World War I.  It was the experts who decided the best way to punish Germany was to handicap that economy with a war debt that could not be paid.  In doing so, they laid a stumbling block for the German financial system which caused it to collapse.  It eventually became a foundation stone for the spectral fortress of the Third Reich and the great slaughter of the Second World War.  The authorities all believed that socialism was the wave of the future and tried to turn our own nation into the United Soviet of America with the New Deal, creating, deepening and prolonging a stock market correction into the Great Depression, ended only by war production.

A victory in Vietnam won by men who still understood fighting was forfeited by the Ivy League golden boys and professional diplomats. The elites declared a War on Poverty, and the American people lost.  The elites declared a War on Drugs, and the American people lost.  The brilliant MBAs of Harvard, Yale, and Princeton, whether heading investment banks or Executive Branch agencies, apparently declared War on Recession because we are losing that one, too.

So here we are.  We have our experts telling us how to get out of the hole we are in -- or, in the case of our brilliant, though credential-less President, telling how to dig our way out -- possibly through China.  Let's put aside for the moment, the experts and authorities who are telling us there is no inflation, that the Great Recession is over, that all we need to do to get out of debt is borrow and spend more money, because, obviously, common people like ourselves lack the capacity to breathe in the rarified Olympian heights where such god-like creature tread.

We will, instead, stick to our fellow travelers who claim to know what is going to happen economically in the near- to mid-future.  Go out in your yard, shake any tree, and you are liable to unseat a roughly equal number of inflationists and deflationists, along with the occasion hyper-inflationist and a stoner who will lift his head from the ground to declare, "Ron Paul, 2012!"  

Almost without exception, they will agree on the basic idea that the world economies are in a mess and we are about to deflate/inflate/hyperinflate/go to Disney World.  With the exception of the stoner, they will also hedge those statements.  Here is an excellent example from Seeking Alpha.  And I am not criticizing the writer.  In fact, I agree with everything he says.  I just see him making the same point that I often make.  Deflation is what would happen "naturally" and that would rectify much of what ails the economy after some degree of suffering and austerity.  Nevertheless, it looks like we are probably going to go into inflation because the more responsible and more honest deflation track requires an "expert" like Bernanke to eat crow and to throw his banker buddies and his politician buddies over the side.  I will say it again:  the best argument for the inflation scenario is that governments with massive debt obligations cannot afford deflation.  And they, at least to some extent, control the central banks.

Does anyone think that Greece would not have been printing money by the bushel basket if they were still on the drachma?  Or that Italy would not be ordering ink by the tanker load if they were still issuing their own lira?  They would indeed, and it would make sense.

There was a point to all this when I started.  Oh, yes, experts.  They are not much help at this point.  For the moment, cash is probably still king.  Stay away from European bonds.  Be very cautious about American municipal bonds.  Commodities look scary after MF Global.  Some metals are a good idea.  Be alert and be ready to move decisively.  

Update:  notice that gold and silver have fallen sharply over the last few days.  Why is that?  There has been a sharp decline in the euro against the dollar, which is part of it.  But also, leverage is coming out all over Europe.  Gold has been a highly speculative commodity over the last couple of years in light of US Fed quantitative easing.  A lot of metal has been bought on margins.  Right now the futures on large lots of gold and silver are higher than on gold and silver per ounce.  It does not seem to me to be a good time to be actively trading significant amounts of precious metals, or any other commodity.  But that's just me.  

The Fed will most likely -- not certainly but likely -- make a move to again devalue the dollar after Christmas.  If I survive the next couple of weeks (far from a foregone conclusion), I might mosey down to the local coin dealer to see what his prices are for the new year.

And remember, like a blind pig, even an expert can find an acorn once in a while.

Ron Paul, 2012!