The Future of Physical Gold (Part IV)

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The Future of Physical Gold (Part IV)

Part IV in a five part series about the future roles/values of physical gold, and specifically deals with debunking the theory and implictions of Freegold.

The Future of Physical Gold, Part IV - Deflationary Canyons and Caves


After writing Part III of this series, I received an excellent comment from a reader who enjoyed the articles and summarized many of the Marxian arguments that I had made in a much more accessible form. I understand that the academic structure and technical details of this series has not made it the very easy to digest, and it helps when readers are already familiar with the basic foundations of my argument, which was the case for this specific reader.

I am going to re-post a sizable portion of that insightful reader's comment here, as a means of re-encapsulating the somewhat dry theoretical arguments of Parts I, II and III (Dialectic Foundations, The Evolution of Value and The Final Realization) in a significantly more lay reader-friendly capsule with some clear examples. I will also add a bit of my own commentary within the bold brackets, but just a bit, because the comment is quite good on its own: [Chris Martenson's Forums - The Future of Physical Gold Thread]


"Great series of articles Ashvin!

I think you bring a fresh perspective to the Marx/Keen/Harvey axis in  coupling these theories to the discussion of gold. I had posted  something congruent with these ideas on the ever popular subject of  alternate currencies in another thread. You’re quite right, at the center is the struggle between labor and big  business [the material dialectic of Part I], which I define as multi-nationals.

This struggle sets up a natural and quite healthy tension between the two opposing forces. When this healthy tension is displaced [it inevitably must be displaced over time], to either direction of bias [labor vs. capital], bad  things happen. The convergence over the last three decades of the neo-liberal agenda, and the capture of the mainstream media by conservative business interests has resulted in the disruption of this tension away from the side of labor.

Propelled by the momentum of the burgeoning success in minimizing organized labor, business and conservative interests teamed together to usher in an ongoing era of deregulation and complimentary legislative climate that promoted favorable tax incentives for big business. These incentives were  leveraged to follow with near perfect parallelism along with Marx’s prediction of capital heading to markets with unlimited low cost labor surplus [although Marx may not have envisioned the extent and longevity of economic "globalization"].

It is an irony lost on many that the perfect climate for capitalism's magnum opus was to be under the color of a totalitarian Communist regime- embodied by mainland China [under it's "false flag" of Marxism, so to speak]. This diffuse and disjointed labor base was confronted with several classical Marxist predictions, a profound loss of collective bargaining power as the threat of job outsourcing to China and Mexico stymied any meaningful protests for re-organization.

This resulted in lower wages for those lucky enough to retain jobs, and Marx’s predictions about consolidation of capital are demonstrated in the aggregation of “big  box” stores [i.e. Wal-Mart] designed to lower the sustenance costs for low and middle class labor, furthering enriching the capitalist class- as predicted chapter and verse. With the cratering of the credit market [due to endogenous instability as described by Hyman Minsky and Dr. Keen - Part III), the emperor can be seen to have no clothes, and here is where it gets real interesting.

With a collapsed income, the vast majority of Americans can no longer afford the products of consumerism that capital has morphed into [the final "realization problem" - Part III], having  exhausted by sheer competitive overhang the more productive and  meaningful products and services, the average capitalist is now  presiding over a string of yogurt parlors and useless iPod apps, analogous to unwashed children selling Chiclets gum at the Mexico border crossing.

The bourgeoisie has simply engorged itself so completely and so  effectively on the middle and lower class, there is no money left for the poor fools to purchase the trinkets and trivia that the bourgeoisie  needs to maintain their lifestyle, in effect tuning their gated estates into miniature Easter Islands, replete with carved stone masks and bad artwork. So this leaves us with another problem, what do the wealthy do with all the money?

It used to be a budding capitalist could re-invest and maintain an income stream though investment, real estate purchases, or entering the rentier class to sustain cash flow, all the while ignoring, contrary to free market mythology, risky entrepreneurial ventures and instead focusing precious man-hours on reducing tax liability and preservation of capital strategies... There are not simply enough attractive investment opportunities to go around, a face the music moment in a system that requires perpetual compound growth to function.

Capital abides no limits. It must expand its markets to prevent the  destruction of demand. It must seek larger and larger labor markets, with lower and lower labor costs, as the coercive laws of competition wreak their havoc [continuous re-investment/realization of surplus value and debt issuance/rollover in markets]. Capital consolidates, aggregating smaller, less  powerful firms unable to achieve the international reach necessary to grow into offshore markets, purchased for pennies on the dollar as the multi-nationals observe and track strangling mid-level businesses with a predator’s gaze as they asphyxiate on a contracting domestic market - leaving consumers with even fewer choices."


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