A TIME FOR DECISION

by Howard S. Katz
1-5-09

The last day of 2008 was an important day for market analysis. As you know, I have been saying that the sharp drop in the stock market in early October, with corresponding drops in commodities and a rally in the dollar, was not based on fundamental economics. It was based on a prediction made, first by the New York Times and then by their followers in the media, to the effect that the economy was going to be swamped by a massive economic bad, variously referred to as deflation, recession and (by the more radical extreme) depression.

Since there was no economic reality behind these declines, they were all speculative moves, and since this was bad speculation, it was bound to reverse – sooner rather than later. Thus I have been predicting a rather quick reversal in both the stock and the commodity markets. What happened over New Year’s was an important breakout in several technical indicators indicating that that reversal was at hand. The details of these signals will be in the next issue (1-9-09) of the One-handed Economist and are beyond the scope of this blog. (By the way, it happens again and again in the financial markets – far more than can be accounted for by random chance – that important highs or lows or technically significant moves occur on the last trading day of the old year or the first trading day of the newyear.)

But for my purpose here let me just state that my earlier prediction that the financial markets would quickly reverse is now dramatically reinforced, and you will see the results in the next 2-3 months. The stock market (DJI) made its low on Nov. 20-21 and will likely be back to its early October level (just shy of 11,000) within 3 months. Gold made its low on Oct. 24 and will soon be challenging its all-time high above $1,000/oz. Silver and platinum will, of course, follow gold higher. And more significant, the great majority of commodities now have bottoms in and will be higher in 3-6 months time. A rise in commodity prices, of course, is a sign of increasing demand. And the great fear/prediction of the establishment since Sept. 15 has been not enough demand. According to them what I am predicting cannot possibly happen.

So I am going toe-to-toe with the economic establishment. Either they are a bunch of pompous idiots, or I am a loud-mouthed braggart who doesn’t know what he is talking about. You will know soon enough. Actually, I am not terribly worried as I have gone toe-to-toe with the economic establishment several times over the course of my professional life. I was one of the early gold bugs of the late 1960s. I turned enthusiastically bullish on stocks in 1982. I predicted Black Monday 1987. And I called the top in stocks in early 2000.

The economic indicators will take a bit longer to reverse than the financial markets, with unemployment probably being the last to turn. And when it is all over, with the money in the pockets of myself and my subscribers, and the establishment a lot poorer, they will pretend that the whole thing has never happened and erase it from their minds.

Because, you see, the whole “economic crisis” of the past few months has been a gigantic lie. The government is robbing from you and giving to the paper aristocracy. Since you, and the other victims, are the vast majority of the country, you have the ability to vote to reverse government policy and put a stop to the robbery. It is necessary to deceive you so that this robbery can be successfully carried out. Here is what will happen.

The U.S. money supply is in the process of being multiplied by approximately 2½ - 3 times. The monetary base, which is the second step in the process of money creation, has almost doubled since September. The third step, the creation of money proper, must wait on the lending decisions of the private banks, and this is a bit uncertain. Let’s allow 3-6 months for the monetary base hits a triple (of its Sept. ’08 level) and then 1-2 years for the money supply proper to triple its late ’08 level. From that point, expect another 2 years for average prices in the country to triple. (This is assuming that Richard Fisher’s estimate of a tripling of Federal Reserve Credit is correct and that Bernanke does not go beyond this level of printing.) If average prices in America triple over the next 3-4 years, then wages will lag behind. If the average price level moves from 100 to 300, then wages may move from 100 to 250. That is, the real level of wages will drop to 5/6 of what it is now, and the average working man will take a 17% cut.

The other victim in this robbery is the retired person (or those saving for retirement). Nominal interest rates are already down to 0. The real interest rate is the nominal rate minus the rate at which prices are rising. A tripling of prices over 4 years is (compounded) about 33% per year. So the real interest rate received by the nation’s retired folks will be negative 33%. That is, they have no true income, and their capital is shrinking by 33% per year. Here is a massive robbery of the vast majority of the American people. Not only are almost all of these people completely ignorant of what is going on, THEY VOTE FOR THE GOVERNMENT OFFICIALS WHO ARE AIDING AND ABETTING THIS ROBBERY.

The people who benefit from Bernanke’s counterfeiting I call the paper aristocracy. They consist of the banks, their loan customers (mostly big corporations), debtors in general and associated vested interests, such as Wall Street and real estate. It is about 5% of the richest people in the country robbing from the other 95%. Now what would most people do if they had acquired the government approved privilege to counterfeit money and steal from their neighbor?

Would they just commit this robbery on a one-time basis? Would they just steal, say $1 million, and be content to retire on their own private island? Not a snowball’s chance in H___. There is one thing that both history and economics teach us. Everybody always wants more. After they have stolen the first $750 billion, they will be fat and happy for a while. But then they will start licking their chops and start to lust for more. It was so easy to steal the last time. Why not just do the same thing again? After all, the entire media will tell the stupid public that you (the paper aristocracy) are the economy. So wealth taken from them is going to help “the economy.” Then Congress, which created the Fed and could abolish it any time, makes some noises about being against it. But the Fed does it any way, and the media blame the oil companies. for the resultant rise in prices.

So any time the paper aristocracy wants to take some money from you, they have a system in place that will work. They are going to take more, and then more and then more still. They will not stop until you are reduced to poverty. When you object and threaten to rebel, they will take away your democratic rights (such as free speech). All this has happened before, in the dying days of Rome. First they gave up their property rights, and it was all downhill from there.

All of this is playing on my central theme: You are going to die. You don’t have the virtues which human life requires. (Readers of this blog are exempted because you are showing an openness to new ideas.) I was reminded of that when I researched the material on Hoxsey for last week’s blog. Wikipedia begins its piece on Hoxsey as follows:

“The Hoxsey Therapy or Hoxsey Method is an alternative medical treatment promoted as a cure for cancer. The therapy consists of a caustic herbal paste for external cancers or an herbal mixture for 'internal' cancers, combined with laxatives, douches, vitamin supplements, and dietary changes. Reviews by major medical bodies, including the U.S. Food and Drug Administration (FDA), the National Cancer Institute, the American Cancer Society,[1] M. D. Anderson Cancer Center,[2] and Memorial Sloan-Kettering Cancer Center,[3] have found no evidence that the Hoxsey Therapy is an effective treatment for cancer. The sale or marketing of the Hoxsey Method was banned in the United States by the FDA on September 21, 1960 as a 'worthless and discredited' remedy.[4] Currently, the Hoxsey Method is primarily marketed and practiced by the Bio-Medical Center in Tijuana, Mexico. The Hoxsey Therapy is also marketed over the Internet; in June 2008, the FDA National Health Fraud Coordinator noted that 'There is no scientific evidence that it has any value to treat cancer, yet consumers can go online right now and find all sorts of false claims that Hoxsey treatment is effective against the disease.'”

Let us analyze this from an intellectual point of view. What is the essence of Wikipedia’s argument against Hoxsey? It is to cite a long list of authority figures. It was written by someone who gets his opinions from authority and assumes that this is a valid method of thinking.

First, there is the side issue that the theme behind the complaints is always a lack of evidence: “have found no evidence,” “no scientific evidence,” etc. But something is badly wrong with this way of thinking. To say there is no evidence for something is to assume that you (or the authority figure) have all the knowledge in the world, i.e., that you are godlike, and if something has failed to win your approval, then it (and not you) has failed. In fact, when any new idea or product appears, it is the responsibility of the advocate to prove his case, not to any mind, which is impossible, but to a rational mind. And all the people who are convinced by his argument have the right to employ/use the idea/product. Authority has nothing to do with it.

Second, let us look at the authority figures cited: The FDA has compiled a terrible record in all areas of health. It has approved as safe very dangerous drugs (such a Viox or Fen-phen). The drug companies which are regulated by the FDA control its actions in two ways: 1) by political donations to those congressmen who have power over it via their committees; 2) by direct bribery of FDA officials (which is not prohibited by any law). Lacking any other evidence, FDA approval of any statement or product must be weighed as a negative in evaluating that statement or product and vice versa for FDA disapproval.

I am not familiar with Anderson Cancer Center. But the National Cancer Institute, the American Cancer Society and Sloan Kettering are part of the cancer establishment. These institutions get money from the government and are in the business of searching for a cancer cure. This means that, if they find a cure (as happened to the people searching for a cure for polio), they will be out of their jobs. They want to continue searching for a cure but not finding it. And they most definitely do not want anyone else to find it either. So when someone does come up with a treatment which makes some progress in the “war on cancer,” these institutions quickly bring pressure on the FDA to ban it and drive it out of the country.

I briefly had a temp job working at the American Cancer Institute (for their journal, CA) and discovered that they kept a quack list. That is, the ACI, which could not cure cancer, kept a list of other people trying to cure cancer who, in its opinion, were quacks. I remember writing my boss a letter expressing my shock. If you can’t cure cancer, then how can you set yourself up as an authority figure? Maybe Hoxsey is the cancer expert, and you are the quack. The final word is not going to be in until cancer is cured, and at that point the fellow who discovers the cure will be able to speak with some authority as to who is the expert and who is the quack.

We in the general public face this problem all the time. A group of men present themselves to us as experts in a certain field. We do not have technical expertise in the field, and we usually do not have the time to acquire it. What do we do? How do we decide who is the true expert and who is the quack? Duesberg or Gallo?

What most people do is to sweep this problem under the rug. They do not want to make the effort to think. So they imagine a world in which there are experts set up to solve all their problems. If you have a problem, then just go to the recognized “expert,” and he will tell you want to do. Recognized by whom? Do we decide this by majority vote? No, the people who believe in a world of experts do not even recognize that there is a problem. In their minds, these experts just exist. Everyone knows who they are, automatically and intuitively (e.g., the Catholic priest and heaven). Therefore, we live in a universe where it is not necessary for us to think.

Take the world of cancer. There is the world of establishment cancer “experts.” These people have made no progress against cancer in 70 years of fighting it. Against them there is a world of anti-establishment cancer therapists. Both sides claim to be experts. How is the public to know who are the real experts and who are the phonies?

The way this issue is decided in our present society is that one of these two groups has gotten itself established as the experts (by government or media approval), and the public then simply believes that the others do not exist. But we all know that the cancer authority figures in our society have failed to cure cancer. And several of the alternative theories have good evidence on their side. (For example, in 1975-77 Dr. Kanematsu Sugiura at Sloan Kettering conducted several experiments demonstrating that Laetrile cures cancer in mice. Sloan Kettering suppressed the experiments and refused to allow them to be sent to other cancer researchers. When Dr. Sugiura protested, he was fired. Finally the experiments were smuggled out of Sloan Kettering and became public.)

For any human being to live, he must resolve to rely ultimately on the power of his own mind. One can take the advice of an expert, but first one must ascertain – by evidence that makes sense to you – that this purported expert is in fact an expert. Can he do the job? That is the bottom line. Hoxsey won two lawsuits against the AMA (meaning that he convinced 24 out of 24 jurors), and he had a large number of impressive testimonials (including several who were initially his enemies and dramatically reversed themselves). This is not absolute, scientific proof, but it is much better than any the cancer establishment can provide.

Your financial well being and your physical health are two different issues. But most people commit the same error in both fields. They assume that one set of people are the experts, and they refuse to recognize that their “experts” can be wrong (although in fact they are wrong repeatedly). Therefore, these people fail. Right now, they have sold out of stocks and commodities. When these stocks and commodities go much higher and they are forced to buy back at a higher price, they will never question the authority figures who told them to sell. They do not want to make the effort to determine who are the true authorities and who the false.

The same thing is true when it comes to cancer therapy or some other illness. They will go to an establishment doctor. He will prescribe the same therapies that were standard in the year 1950. Many of them will die. Then at the funeral someone will reassure the bereaved spouse or child, “We did everything that could be done.” But that isn’t true. There is a significant list of alternative therapies, with good supporting evidence, which the cancer establishment will not do. They will not even conduct an honest test of these alternative remedies. They did not do everything that could be done.

So you have to make a decision as to how you are going to live your life: obey authority or think for yourself. Your life hangs in the balance.