Journalism’s focus on the here and now rubbed the sharp edges off my college libertarianism. On most issues I’m usually on the private-property, free-market side, but occasionally I’ve written pieces in libertarian magazines taking issue with orthodoxy. Non-libertarians may find these a belaboring of the obvious, but they were not obvious to the intended audience.
One of my first such efforts was an attack on the gold bugs, who in the late 1970s were predicting an economic crash. I received their junk mail because I was on libertarian mailing lists. I thought their claims were ridiculous, and attacked them in a libertarian newsletter while a graduate student at the University of California, Berkeley. Written in early 1976, my article was reprinted in Option, a Canadian libertarian magazine, in October 1977.
Three times I found in my mailbox the white envelope with the block letters proclaiming: “God help you if the crash comes and you haven’t taken these four vital steps to protect yourself!” The steps: buy junk-silver coins, buy bullion gold coins, buy penny gold stocks, and buy a subscription to the Inflation Survival Letter. The Inflation Survival Letter is one of the many organs of the gold bugs, who are trying to sell libertarians disaster insurance they don’t need.
The main preoccupation of these economic fundamentalists is predicting the Crash. Thus, the Inflation Survival Letter advertises itself as a sort of DEW Line to alert the chosen few to the coming disaster. Its sales technique is to scare hell out of the reader so that he immediately writes out a check for $24.
Of course, there isn’t going to be any Crash. As the case of Britain shows, it takes a long time to smother an economy, and you can still live in it without resorting to a secret storage of freeze-dried apple chips. An economy is not some delicate mechanism that goes all to pieces at the slightest tinkering. It is the sum of all individuals out to achieve their economic self-interest, which makes it more resilient than doom-criers think.
Take a look through the history books. You will have a hard time finding one of these Crashes; no industrialized country has ever sunk to the point of famine except when it lost a war. The 1929 crash was of the stock market; the economy took three years to get to the bottom, beat down by monetary and trade policies now discredited. At the bottom, 75 percent of the workforce was employed, and few starved. The fall of Rome took hundreds of years.
What the doomsayers are predicting is nothing less than the collapse of industrial civilization — a thing which not even the world’s socialists have accomplished. The only thing that could conceivably cause it is a nuclear war. That prospect, for those of us near cities or military bases, is probably not worth insuring against.
Yet the gold bugs try to scare libertarians with advertisements. Living up to them is another thing. Inflation Survival Letter, at any rate, is considerably less flashy in the flesh. A recent issue had a long article on detecting counterfeit gold coins, another on minimizing income tax, another on how to choose a survival kit for out in the woods. The last was interesting, but hardly useful.
Since then, I’ve received more circulars. There were two from Free Enterprise, (formerly The Capitalist Reporter), which pitches a combination of scare tactics and crystal ball:
“Dear Friend,” it says, “If you’re worried about the future—and feel the easing of this inflation-recession is only the lull before the real storm — I’ve got some bad news, and some good news. The bad news is that your worst fears are going to be realized…”
The good news is that you can subscribe. For this, you presumably get more predictions like the 18 in the flyer.
These start out with confident forecasts of double-digit inflation by 1977, followed by a “catastrophic deflation.” “At least one nation in Western Europe will go communist,” it says, “but it won’t be Portugal or Spain.” (I have the name right here in my hand, boy. Just fork over the twenty bucks.) And: “We doubt that President Ford will seek renomination, but if he does, and is successful against Reagan, he will lose in November. Who will be the Democrat? Not Kennedy!”
Then there is Ruff Times, put out by Howard J. Ruff, the author of Famine and Survival in America (1974). Ruff is a former weather forecaster, so he predicts not only a financial crash, but famine as well. In the January 1976 flyer, he predicts: “A 60 percent possibility of the collapse of the bond and note market, courtesy of New York City; a 65 percent possibility of the failure of the banking system…; a 75 percent possibility of food and welfare riots by 1977; and a 70 percent probability of the end of the American metropolis as we know it.”
We can deduce from this that there is at least a 10 percent chance of the end of the American metropolis without the collapse of the municipal bond market. If you send $55 for a year’s subscription to this biweekly letter, Mr. Ruff might explain that.
If $90 doesn’t faze you, check out International Moneyline. Editor Julian M. Snyder says he talks to central bankers, economists, Wall Street pundits and others in the know. He predicts a soaring of the Dow Jones Industrial Average through its old record of 1,051 this summer to somewhere around 2,000 in 1977, and then a real bust. He uses a combination of orthodox business-cycle theory and the Kondratieff Wave—the latter being about as reliable, at this point, as consulting sunspot cycles. (The Kondratieff Wave is a supposed pattern of 60-year boom-and-bust, which has gone through three cycles in the last 180 years.)
In its ad in the June 1975 Reason, International Moneyline was predicting disaster — and that Ford would be turned out in favor of Rockefeller. Now it is still predicting disaster — and a Democratic victory in November.
Et cetera. Picking up these sheets is like buying People’s Worldor The Watchtower: You know just what’s in them, without even reading them. So why read them at all?
If an Atlas Shrugged-type collapse is not likely — and a look at history should allay those fears — then these letters are worthless. Their whole argument for investing in gold and silver falls apart. Gold and silver become not “real money,” or the ultimate safety, but a risky speculation.
The Austrian economists have given us good arguments why gold ought to be used as money, but it is idiotic to say that gold ismoney. It has no stable value. A ten-year graph of its value against almost any other commodity would look like a seisometer reading of an earthquake. And it is notmoney. You can’t spend gold anywhere in the industrialized world; you sell it for dollars, marks or francs, and spend those. Paper dollars are real money, even though that may annoy some libertarians. I haven’t found one libertarian who refused to accept dollars — including the publishers of these newsletters.
Gold and silver are excellent speculations during an accelerating inflation, as in 1974, or as disaster insurance in a war. It was sensible enough to exchange South Vietnamese piastres for gold if you were facing the communist takeover. But what Vietnamese kept his gold after arriving here? It was better to sell it for dollars, and start a business. Only in freakish times does a lifeless metal grow more in value than a productive asset.
Gold bugs who followed their own advice made piles of money in the early 1970s and have lost about half of it since. They latched onto two commodities—gold and silver—that had been sold at controlled prices since the 1930s, and that governments could no longer keep suppressed. It was a fail-safe investment five years ago. But as those who didn’t get out can testify, prices collapsed after 1974. Silver fell from $7 an ounce to $4.25 today, and gold dropped from $190 to $132.
Those who “invested” in survival foods can take heart that the salesman’s Malthusian calculations were right, that famine is happening, except that it is in Mauritania and Bangladesh, not in North America. Now the only way they can get any value out of their investment is to eat it.
These suckers can always console themselves that they are prepared for the worst, and thus claim that their “investment” is “worth it.” But the worth of an investment is proved in comparison with other investments, not by citing improbable disasters. People’s resources are limited; what they spend on fire alarms, burglar alarms, handguns, bomb shelters, silver coins and freeze-dried peanut butter they can’t spend on something immediately useful. In considering buying any insurance, you’ve got to consider the likelihood of the disaster you’re insuring against, and the cost of the insurance. Gold coins, dried food, and the financial newsletters that push them ain’t cheap.
The Crash is another Comet Kohoutek, and the peddlers of disaster insurance are hangers-on trying to hawk their questionable wares. By citing the economists, they prey on a public predisposed to believe them.
Libertarians have a great economic theory. It is by far the strongest pillar of their creed, and the part of it most useful to the investor. Those with money to invest should read the economists, starting with Bastiat and Hazlitt, and on to Friedman, Rothbard and von Mises. Don’t take the word predigested by Howard Ruff and Julian Snyder. You get ten times as much, and without the high cost and wild-eyed palaver, by reading the economists yourself.
But many libertarians have a solid idea of the theory. What they need is information. What is the monetary policy, the fiscal policy, and the political decision right now? What are the latest economic statistics, and what do they mean? What are the prices and trends of stocks, options, bonds, commodities and foreign exchange? What do leading economists forecast? What is the financial condition of the nation every day?
Here is a service infinitely more valuable than any the newsletter peddlers have to offer. For the libertarian who is tired of being a sucker, or who just wants to find out what is going on, I suggest he take the $55 he would have sent to Howard Ruff, and use it instead to buy a year’s subscription to the Wall Street Journal. The ten bucks left over he could record as profit, and spend on sin.
© 1977 Bruce Ramsey
And I was right about their predictions, too. They were worthless.