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More Worrisome Signals From The Eurozone
Platinum Looking Weak For Now, But Prices May Be Set To Rise Next Year
Huldra Silver Receives Geochemistry Results Up to 124 Grams Per Tonne Silver
Best Value: Gold and Silver Mining Stocks
SILVER: What Every Politician Needs to Know
WATCH: Guillermo Jasson on Argentina’s Collapse
Platinum Price Has Great Potential
Gold Is Crucial Diversification
Standard & Poor’s Rains On Europe’s Parade
New Independent Research: Gold Is Crucial Diversification…
Hugo Salinas-Price: What Every Politician Needs to Know About Silver
Precious Metals, Canned Goods, Small Calibre Weapons
Desperate Fed to Provide Unlimited Liquidity
Top UBS analyst: Buy precious metals, canned goods, and small-caliber weapons
Twenty signs the U.S. "nanny state" is now completely out of control
Morning Outlook from the Trading Desk - 12/07/11
Extorre Announces More High Grades From Zoe Vein at Cerro Moro
The Goldman Saching of Europe
Withdrawing Money Will Make The Recession Worse
Remember That Little Housing Bubble?
Sprott Frustrated With Hostage-Taking Paper Silver Market
Interviewed by MineWeb, Sprott scorns paper silver market
Indians Carry Gold Worth Over $950 Billion: Macquarie Research
Financial Crisis Gives Investors More Reasons to Love Gold
Philip Pilkington: Libertarianism and the Leap of Faith – The Origins of a Political Cult
Corvus Gold 12-6
How to Make Money in a "Fugly" Stock Market: Bob Moriarty
Gold FIX Driving the Price
Gold Stocks: 30 Minute Chart Tool In Play
Will European Governments Tighten Up?

More Worrisome Signals From The Eurozone

Posted: 07 Dec 2011 06:30 AM PST

By Marc Chandler:

Opinion polls and surveys are finding an increasing number of people expect one or more countries to leave the eurozone. Investors are anxious. What is to be done? What makes this so difficult is that there are so many moving parts and possibilities. The way the question is asked often conditions the answers.

The initial reaction to what happen in the eurozone breaks up is that the new German mark would appreciate. However, that assumes that capital will flow more or less freely, but this seems unlikely to be the case. A break up of the eurozone would likely be coupled with capital controls. Moreover, given the exposure of the BBK through eurozone payment system, Germany would not necessarily be immune.

The dollar, sterling and the yen would seem to benefit from the havoc that is likely to follow a breakup of the eurozone, even if capital controls are introduced,

Complete Story »

Platinum Looking Weak For Now, But Prices May Be Set To Rise Next Year

Posted: 07 Dec 2011 06:25 AM PST

By MetalMiner:

By Stuart Burns

Although precious metals have suffered recent heavy falls, there is at least some evidence of price support for platinum and palladium next year, if not gold. (See our recent coverage of the palladium outlook.)

Recent price falls have been accompanied by a growing net short position on Nymex, characterized by 62,700 ounces being added to speculative short positions, according to Standard Bank, bringing speculative shorts to 311,600 ounces compared to last year's average of 112,300 ounces, while ETF holdings dropped 41,000 ounces, the largest fall this year. Palladium also added 117,000 ounces to net short positions, suggesting the market is expecting further price weakness next year.

As these graphs of ETF holdings show, platinum and palladium prices have been falling during the last quarter, reflecting the markets' oversupply position and slowing growth in Asia on top of the fear of recession in Europe:

Source: Standard Bank

However,

Complete Story »

Huldra Silver Receives Geochemistry Results Up to 124 Grams Per Tonne Silver

Posted: 07 Dec 2011 05:21 AM PST

Huldra Silver Inc. (TSX-V:HDA, HUSIF.PK) (the "Company" or "Huldra") is pleased to provide geochemical results from the 2011 exploration program at its Treasure Mountain project. The results included 124 grams per tonne Ag, 3.98 ozs/ton Ag, 0.79% Pb, 0.32% Zn, 0.78% Mn and 17.3 ppb Au in sample 315 from the Camp Zone.

Best Value: Gold and Silver Mining Stocks

Posted: 07 Dec 2011 03:58 AM PST

Gold and Silver Mining Stocks Offer the Best Value of Any Sector in the Stock Market By a Wide Margin

by JS Kim, The Underground Investor:

Today, gold and silver mining stocks offer the best value by far of any sector in any stock market anywhere in the world. Due to the recent massive volatility that bankers have introduced into the PM stock sector, and the fact that commercial investment advisers worldwide have erroneously re-educated millions of people with the concept that volatility equals risk, the majority of people worldwide will miss a massive opportunity in gold and silver mining stocks over the next several years due to their misguided belief that gold and silver mining stocks cannot escape the throes of banker manipulation.

There has been much acceptance of the theory that Central Banks and bankers perpetually manipulate gold and silver spot prices through the gold/silver futures markets due to strong circumstantial, non free-market evidence such as gold/silver futures prices being significantly higher in Asian futures markets versus Western futures markets for long stretches of time as well as out-and-out flagrant behavior such as the irrational raising of initial and maintenance margins on silver futures five times in nine working days into falling prices instead of into rising prices.

¤ Yesterday in Gold and Silver

The gold price got sold off about fifteen bucks during early trading in the Far East yesterday morning...but by 1:30 p.m. local time, a rally of sorts began that took the price back up almost to its New York closing price on Monday.

The price developed a slightly negative bias from there, but the selling pressure really didn't pick up until the Comex opened in New York at 8:20 a.m. Eastern time. Gold then got sold off to its low of the day at the London p.m. gold fix at 10:00 a.m. Eastern.

Then a more serious rally developed...and the gold price rallied a bit over thirty bucks going into the close of trading in the New York Access Market at 5:15 p.m. Eastern.

Gold closed at $1,729.40 spot...up $6.20 on the day. Net volume was around 144,000 contracts.

As I commented in 'The Wrap' section of yesterday's column, the big silver rally that began about the same time as gold's rally, got smacked minutes after the price rise began to go vertical at the London open.

It was all down hill from there, with the low of the day [$31.52 spot] coming about ten minutes after the Comex opened. Silver began to rise from there, but the real serious rally began shortly before noon in New York...and ended abruptly at the close of Comex trading at 1:30 p.m. The silver price then drifted a few cents higher to its high of the day, which Kitco recorded as $33.00 spot, before selling off a bit into the close.

From its New York low to its New York high, silver rise $1.48 spot. It closed at $32.76 spot...up 68 cents on the day. Net volume was around 38,000 contracts.

The dollar spent all of Tuesday trading within about 20 basis points of 78.65...and was certainly no factor in the precious metal market yesterday.

The gold stocks pretty much followed the lead of the gold price itself. The London p.m. gold fix low tick is very obvious...and it was onwards and ever upwards after that...with a little profit taking after gold's high tick before the close of equity trading. The HUI finished up 1.87% on the day, a very respectable performance.

Despite silver's robust performance, the silver stocks did only so-so...and Nick Laird's Silver Sentiment Index was up 2.44% yesterday. They, too, got sold off a bit going into the close. I'd guess it was the day-trading crowd taking profits and closing out their positions. Ditto for gold.

(Click on image to enlarge)

The CME Daily Delivery Report showed that 367 gold and 3 silver contracts were posted for delivery on Thursday. In gold, all the usual suspects were present...and virtually all them were trading in their proprietary [house] accounts. The Issuers and Stoppers Report is worth skimming...and the link to that is here.

There was no report from GLD yesterday...and a smallish withdrawal of 194,520 troy ounces from SLV was reported.

And, for the second day in a row, the U.S. Mint had a sales report. They sold another 5,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and no silver eagles.

It was a very quiet day on Monday over at the Comex-approved depositories, as only 5,066 ounces of silver were shipped in...and a smallish 29,401 troy ounces were reported shipped out.

Nick Laird over at sharelynx.com compiled a number of graphs showing the cost of various things during the Weimar hyperinflationary period. This chart is for bread over a two year period. The scale is logarithmic.

(Click on image to enlarge)

I have the usual number of stores...and the final edit is up to you.

JPMorgan et al are still pretty much in control of precious metal prices at the moment.

Indians Carry Gold Worth Over $950 Billion: Macquarie Research. Financial Crisis Gives Investors More Reasons to Love Gold. John Hathaway - Desperate Fed to Provide Unlimited Liquidity.

¤ Critical Reads

MF Global fallout delays U.S. farm seed, land deals

For the first time in 25 years, Minnesota farmer Dean Tofteland has missed his deadline to buy seed for next spring's corn and soybean crops.

With $200,000 of his money yet to be returned from the accounts of MF Global, his former broker, the 49-year-old farmer has missed a $5,000 discount for early buyers, and is watching friends and neighbors snap up the best varieties of seeds.

In the latest sign of how MF Global's failure is continuing to cascade across the commodity industry, Tofteland and other farmers who have yet to recover more than a third of their money from the bankrupt broker now find themselves in a cash crunch that risks rippling far beyond the futures market.

Reader Scott Pluschau sent me this Reuters story posted from Chicago yesterday...and the link is here.

View full GSD edition

Fed's Evans: Willing To Risk Higher Inflation To Boost Growth

If the price of restarting economic growth in the U.S. means the Federal Reserve would have to tolerate higher than desired inflation for a time, that is something policymakers should be willing to pay, an official of the U.S. central bank said Monday.

In a speech Monday, Federal Reserve Bank of Chicago President Charles Evans didn't argue that higher inflation would be ideal or even likely. But as part of an address in which he again laid out arguments for guiding monetary policy by explicit levels in employment and inflation, he said allowing inflation to move above the Fed's current de facto target of 2% wouldn't necessarily be a problem.

Believing the U.S. economy is mired in a "liquidity trap" where savings and investment are badly mismatched, Evans said the environment "requires the central bank, if necessary, to allow inflation to run higher than its target for some time over the medium term." He explained: "I believe the inflation- safeguard threshold needs to be above our current 2% inflation objective-- perhaps something like 3%."

When the Fed starts talking dirty like that, you know that the next round of Q.E. can't be that far off. I thank West Virginia reader Elliot Simon for sending me this Dow Jones story that's posted over at the nasdaq.com website...and the link to this very worthwhile read is here.

View full GSD edition

We've been down this path before

As civilizations mature, they tend to make the same mistakes. We are in the middle of one of those mistakes right now.

We are in an unholy mess and however loudly the sane few may plead, the chances it will get turned around without disaster striking are slim indeed. The type of restructuring both America and Europe need is so difficult and painful that, even if the current political systems were functioning, it would still take many years and the kind of courage and sacrifice that does not seem to exist. One of these days, some unforeseen event, akin to the child in Hans Christian Andersen's The Emperor's New Clothes declaring "But he isn't wearing anything at all!" may serve as the tipping point that brings the entire financial system to its knees.

This extremely well written piece showed up last Thursday in The Vancouver Sun in British Columbia. It's not overly long...and it's your first must read story of the day. I thank Roy Stephens for sharing it with us...and the link is here.

View full GSD edition

S&P has no choice: Euroland risks bankruptcy on current policies

Very quickly, Standard & Poor's is of course right.

The immediate eurozone crisis cannot be solved by punishment measures alone. There needs to be some form of joint debt issuance and a lender of last resort to halt "systemic stress".

It was well-timed to drop this bombshell on Monday night after the Merkozy fudge (though S&P made the decision earlier), since the duumvirate yet again failed to offer any meaningful way out of the impasse.

This Ambrose Evans-Pritchard offering was in yesterday's edition of The Telegraph...and is worth your time if you have it. I thank Roy Stephens for sending it along...and the link is here.

View full GSD edition

'Completely Exaggerated' - EU Leaders Angry at Standard and Poor's Ratings Warning

Ratings agency Standard and Poor's has piled pressure on EU leaders to come up with a deal to save the euro, warning that it may downgrade 15 of 17 euro-zone countries -- including powerhouse Germany. EU politicians have criticized the move. But the agency on Tuesday added that it may downgrade the euro bailout fund as well.

European policymakers criticized the timing of the announcement, just three days ahead of a make-or-break EU summit on Thursday and Friday, and said the agency hadn't taken into account proposals for far-reaching reforms of the euro zone's debt rules agreed by the leaders of France and Germany on Monday.

This story was posted over at the German website spiegel.de yesterday. I thank Roy Stephens once again for bringing it to my attention...and the link is here.

View full GSD edition

A Controversial Paragon: Europe Shudders at Germany's New-Found Power

Germany, admired and envied for its economic success, has become a model for Europe in the debt crisis. The Continent is becoming more German as countries get serious about fiscal discipline. But the nation's new dominance is also stirring resentment, and old anti-German sentiments are returning.

When Sarkozy appeared in front of his supporters in Toulon last Thursday, he spoke of the "fear that France could lose control of its own destiny." His dramatic words were an appeal to French national pride, but his response to those fears was anything other than nationalist: "France and Germany have decided to unite their fate," he announced. So-called "convergence" -- greater alignment of the two countries -- was the only way out of the crisis.

In these days of crisis in Europe, the "German model" has become something of a magic formula. Like it or not, the dusty, dry Germans now seem to hold the key to European salvation.

This is another story out of yesterday's edition of spiegel.de...and another Roy Stephens offering. The link is here.

View full GSD edition

Desperately Seeking Capital: Berlin May Have to Nationalize Giant Commerzbank

Europe's banks urgently need fresh capital to meet tougher EU rules, but they will have problems raising it amid the current crisis of confidence plaguing the euro zone. The survival of Commerzbank, Germany's second-largest bank, is at stake, and Berlin is considering a full nationalization of the bank if necessary.

One-quarter of Germany's second-largest financial institution alrea

Interviewed by MineWeb, Sprott scorns paper silver market

Posted: 06 Dec 2011 09:14 PM PST

Interviewed by MineWeb, Sprott scorns paper silver market

Here's a GATA release from yesterday. Like John Hathaway in the previous post, anything that Eric Sprott has to say falls into the same category. Chris Powell has already done the heavy lifting, so I'm not going to re-invent the wheel on this one. This is another must read...and the link is here.

Indians Carry Gold Worth Over $950 Billion: Macquarie Research

Posted: 06 Dec 2011 09:14 PM PST

Indians Carry Gold Worth Over $950 Billion: Macquarie Research

A new study of Indian gold-buying practices showed its citizens carry gold in their households worth over $950 billion, representing 50 percent of the country's GDP.

Global research firm Macquarie found that Indian households own 18,000 metric tons of gold which is 11 percent of the global total.

Macquarie further noted that 7 percent to 8 percent of India's 329 billion households held their savings in gold in 2009-10.

Gold imports are India's third-largest merchandise imports after crude oil and capital goods. In 2010, 92 percent of the supply was met through net imports and the rest through recycled gold and other sources.

Financial Crisis Gives Investors More Reasons to Love Gold

Posted: 06 Dec 2011 09:14 PM PST

Financial Crisis Gives Investors More Reasons to Love Gold

US investors—both retail and professionals—poured $3.6 billion into gold exchange-traded funds last month, quadruple the $813 million in October, according to numbers crunched by research firm Birinyi Associates.

"It is going to be a go-to asset once everyone digests that if Europe is to be saved, the ECB will have to directly or indirectly print money and the inflation trade will be all on once again," said Michael Block of Phoenix Partners Group. "I would be buying gold opportunistically."

But gold has become more than just an inflation hedge or a safe haven from the world's woes. It's now its own asset class—and one that has outperformed stocks over the past decade.

Philip Pilkington: Libertarianism and the Leap of Faith – The Origins of a Political Cult

Posted: 06 Dec 2011 07:53 PM PST

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

You wanted God's ideas about what was best for you to coincide with your ideas, but you also wanted him to be the almighty Creator of heaven and earth so that he could properly fulfil your wish. And yet, if he were to share your ideas, he would cease to be the almighty Father.

– Søren Kierkegaard

Political cults often have the strangest and most obscure origins. Take Marxism, for example. Today it is well-known that Marxist doctrine essentially sprang out of the obscure 19th century economic debates over the source of 'value'. By 'proving' – that is, lifting the assumption from classical political economy – that all 'value' came from labour, Karl Marx went on to show that it was therefore only logical to assume the existence of something called 'surplus value' that was sucked out of labourers by a parasitic capitalist class. From out of this obscure debate flowed an awesome political movement – and a tyranny to match.

What is less well-known is that today's most popular political cult – that is, libertarianism – was born in very similar circumstances; it too, arrived into the world out of the obscure 19th century debates over economic 'value'. But before we explore this in any detail it might be appropriate to speculate a little on what characterises a political cult and why so many of these find their sustenance in economic theories of value.

What is a Political Cult and Why Do they Often Love Economic Value Theory?

A political cult is characterised by a political or economic doctrine that answers all the 'big questions' about life, the world and everything else. The doctrine that is handed down is then to be conceived of as a way to live one's life – a project, handed down from Mount Sinai, that one is under the moral obligation to spread far and wide. This is why we refer to these movements as cults. And it is this that gives them such an awesome status in the glazed eyes of their devotees.

Under such circumstances, politics becomes a sort of religious calling. In these doctrines there is usually an 'Evil Being' who is opposing the spread of the 'Good' on earth and it is these that are to blame for all the bad things in the world. In Marxism this Evil Being is the capitalist; in libertarianism it is the figure who is at different times referred to as the 'collectivist', the 'liberal' or the 'socialist'. Needless to say that, since these figures are usually ones of Extreme Evil they must be 'liquidated' or 'eliminated' at the first possible opportunity lest they spread their Demonic Gospel to the masses.

Political cults thus provide their devotees with a firm identity in an otherwise changeable and, let us be frank, confusing world. Like all cults they provide an anchor for their devotees with which they can fasten themselves to a rigid doctrine. They also typically lend their devotees a Holier-Than-Thou attitude as they provide them with 'secrets' that those outside of the cult cannot grasp. Not only does this allow the devotees to feel 'special', in modern political cults it also gives them practical, albeit 'secret' advice about what they should do in their day-to-day lives. (Think of the advice to buy gold or foreign stocks coming out of certain libertarian front men, for example).

Finally, the political cult will usually offer their followers the possibility of a Heaven on Earth. If the follower behaves well and spreads their beliefs to others they will eventually arrive at some sort of Utopia. This is their reward for believing in the doctrines, despite these doctrines being ridiculed by others.

So, why do these cults spring out of economic doctrines based on value? Well, this is a very complex question but there is one key aspect that is absolutely fundamental. In order to understand it a little better we must think for a moment about what economic 'value' supposedly is. It is, in fact, when we boil it right down, a moral entity. If we can tell what people 'value' and why, then we can make prognostications on what is Good for society as a whole.

In times past organised religions handed down fixed value systems to their adherents. Today people have become disillusioned with religious systems – ostensibly because they conflict with these peoples' supposedly 'scientific' worldview. But the impulse among some for the self-assurance provided by a religion is so strong that they seek out 'scientific' systems that operate in an identical manner to religious or cult systems.

This is why the economic doctrine of 'value' is such a good foundational stone for such a cult. It provides a pseudo-scientific account about how people attribute value to things and in doing so tells the cult member a 'Truth' that they can use to make turn the world into a Utopia in which the optimal amount of 'value' is realised by the optimal amount of people.

Karl Marx claimed that 'value' was embodied labour and hence his followers concluded with him that all that was Good sprang from labour and that society should thus be based on free labour. The libertarians – together with the neoclassicals that they otherwise scorn – believe that all 'value' springs from utility maximisation. While the neoclassicals simply tinker with toy-models of 'value' to bolster their pseudo-scientific prestige, the libertarians undertake a leap of faith into the unknown and claim that in the theory of marginal utility they have found a 'Truth' that must be brought down from Heaven to Earth.

The Birthing of a Cult

Libertarianism was born out of the late 19th century doctrine of marginalism; a doctrine that went on to gain popularity with those opposed to Marxism. We will not dwell too much on the doctrine of marginalism when applied to the analysis of 'value' – having done so elsewhere. Here we will merely note that marginalism provides a moral defence for the supposedly 'free market' system that we live under today.

Marginalism, when applied to 'value' analysis, holds that it is in Man's nature to follow a certain path in his consumption habits. These habits are determined by his maximising his utility. Most modern marginalists claim that they can use this concept to show that a 'free market' system is the fairest social system possible, since it responds automatically to Man's marginal utility preference it delivers 'value' in a perfect and harmonious manner.

Markets deliver this 'value' through the mechanism of price. Prices, which reflect peoples' desires to maximise their marginal utility, ensure that the most equitable distribution of 'value-in-the-abstract' is accommodated for by the 'free market system'. And this is the point at which marginal value analysis becomes a value judgment in a very real sense.

The neoclassicals held, and continue to hold, that their models could capture this complex dynamic. Such an assertion was and is, of course, absolute rubbish. But the Austrians took a different tack. "Yes," they said, "marginal utility theory is the correct way to go, but we cannot formulate models that adequately capture the inner workings of this great mechanism."

In their book Modern Political Economics: Making Sense of the Post-2008 World, the authors provide a good summary of this approach. In the book they discuss what effect the discovery of marginalism's inherent uselessness had on the Austrians:

Faced with the impossibility of mathematically deriving prices and quantities on the one hand and a metric of social welfare on the other, some Marginalists understood the limitations of their utility calculus. Mainly of an Austrian persuasion (most notably Ludwig von Mises, Friedrich von Hayek and Joseph Schumpeter), they even gallantly tried to use this failure to the advantage of their claims on behalf of untrammelled markets and against the encroachments of collective agencies, trade unions, governments etc.

This was a clever move. While the neoclassicals tinkered with their silly toy-models, trying to show how prices are determined through a sort of grand marginal calculus, the Austrians shrugged their shoulders as to how such a Divine Event could occur. Instead they began to think of price as a sort of Miracle that proved the divinity of the Market mechanism. They then went on deploy this argument to show that anything that encroached upon this Divine Being's presence was inherently Evil:

If no degree of mathematical sophistication can pin down the 'right' prices and quantities, how can a government or any other form of collective agency work them out? How could a socialist economy, or even a national health service, ever price things? Thus, the market mechanism is indispensible because of the radical indeterminacy of prices.

Note what is happening here. The Austrians, like their marginalist brothers and sisters, thought that in marginal utility theory they had found the source from which 'value' truly flowed. They never for one moment questioned that. Even when they came to conclude that marginalist analysis could never definitively show anything useful about price determination, they remained confident – indeed, they became even more confident – that such an analysis was Truth.

In short, they postulated a theory and then when confronted with the inconsistencies of the theory when it was applied to any practical ventures they simply threw up their arms and claimed that such inconsistency showed just how true theory was and how much we should respect it. The knowledge that the theory imparted then became, in a very real sense, Divine, in that we meagre humans would never be able to grasp it and instead should simply bow down in front of the Great Being that possessed this knowledge – that is: the Market.

This is what gives the libertarians their religious zeal. In their quest for the Grand Truth they find this Truth to be inaccessible to Man. But in this inaccessibility they find a Higher Truth again; namely, that there is some other entity out there – a benevolent entity called 'the Market' – that possesses this Truth and all we have to do is follow the Laws which it has handed down to us and we will eventually reach Utopia. This is, of course, a leap of faith – a truly Kierkegaardian Leap of Faith.

From the Leap of Faith to the Knight of Faith

The Austrians were never quite content with the chicanery and political posturing that they had passed off as scientific debate. As alluded to above, their theories about market prices were forged in the debates with those who advocated a socilialistic planned economy. Being ideological to the core, the Austrians were, for a while at least, perfectly content with saying that while no economist could say anything worthwhile about price determination – and thus, any attempt at a socialist planned economy would be doomed to fail because there could be no perfectly informed coven of evil socialist economists who could administer it – they were still happy with the airy theory of market prices that they had just poked such a large hole in. Yes, they had undertaken a Leap of Faith by admitting that their logical constructions would never be whole but, as Kierkegaard well knew, every Leap of Faith needs a hero, a Knight of Faith – and the Austrians soon found theirs.

The Austrians had, although one suspects that they never fully realised this, essentially proved that their theories were inconsistent. There was always, lurking somewhere, that element that disturbed the calculation of prices in the market models.

Let us emphasise here that this element of disturbance was found, not in reality, but only in their models and in their minds. The fact is that the Austrians, even in out-stepping their neoclassical brethren, were still only exploring their own fantasies. This fact must always be kept in the front of one's mind when considering their doctrines.

We highlight this because it was precisely at this point that the Austrians could have conceded that they were building castles in the sky – ideologically and emotionally motivated castles in the sky, no less – and that it might be time to grow up and give up on the whole sordid venture of trying to establish a 'logical' 'economic' basis for 'value' that would temper them with the moral certainty they needed to carry on their political crusade. But not so. Instead they found a Kierkegaardian Knight of Faith to fill the gap in their logic. And that Knight of Faith was the entrepreneur.

The Austrian economist Israel Kirzner put it as such in his fine paper 'The Economic Calculation Debate: Lessons for Austrians' (which is also an excellent historical overview of much of what we have here been discussing):

[T]he truth is that Hayek opened the door to an entirely new perspective on the "goodness" of economic policies and institutional arrangements. Instead of judging policies or institutional arrangements in terms of the resource-allocation pattern they are expected to produce (in comparison with the hypothetically optimal allocation pattern), we can now understand the possibility of judging them in terms of their ability to promote discovery.

And this 'discovery', of course, comes from the entrepreneur who was hereafter identified by the libertarian as the social hero who broke through all barriers in the pursuit of the creation of new 'values' – and by that, we mean economic 'values' – for the community as a whole. Kizner again:

For Austrians, prices emerge in an open-ended context in which entrepreneurs must grapple with true Knightian uncertainty. This context generates precisely the kind of choice that stimulates the competitive discovery process. In this context, the entrepreneur does not treat prices as parameters out of his control but, on the contrary, represents the very causal force that moves prices in coordinating directions.

In Kierkegaard's writings which, like the writings of the Austrians sought to establish a theological metaphysic from which an individual could derive principles of moral certitude, it was the Knight of Faith – the true believer with complete faith and certainty in both himself and God – that filled in the logical gaps inherent in even the greatest philosophical systems. For the Austrians the entrepreneur filled the same role – except that this was a great hero that had both full faith in the Market and the ability to find opportunities to inject disequilibrium into the price system through innovation.

By now we are far outside the realm of anything even remotely resembling a science of 'value'. What we have instead is a vast metaphysical and moral system that is built around a very specific – not to mention very narrow – conception of value, together with a sort of existential appendage in the form of the hero-entrepreneur. The hero veneers over the logical flaws in the metaphysical system, while that system remains in place as a faith-based explanatory schema which can be applied to the world around the libertarian.

Note how fantasy blends into reality almost completely at this point. No longer do we separate our supposedly 'factual' ideas about 'value' from the mythological figure of the entrepreneur. Fact and fantasy merge to form a sort of continuum the purpose of which is to insulate the devotee from any empirical evidence that might arise to prove them wrong – or, at least, misled – regarding, for example, more fundamental and more pressing macroeconomic questions. They simply know what is what because they have it all worked out – and no silly facts are going to tell them otherwise.

From the fertile source of marginal utility value calculus the Austrians thus constructed a pristine moral and metaphysical system. But in doing so – like all metaphysicians – they allowed their imaginations to run away with them. They never noticed the point at which they crossed that fateful line; that line that separates our attempts to represent the world accurately and dispassionately to ourselves from our attempts to create a fantasy world in which we can live. The Austrians had, at first, attempted to use their imaginations to explain the world around them and, in doing so, had fallen into a dream world of their own creation.

And so the foundations of the political cult we call libertarianism were firmly in place. It is an ingenious creation which even came to include what CG Jung and other mythologists might call a central 'archetypal' or mythic figure. Even more specifically, what the Austrians have done is insert into their narrative what the great American mythologist Joseph Campbell called the 'monomyth'. The monomyth is a recurrent theme in mythologies from all over the world. It is essentially a 'hero myth' and, as Campbell argues, can be located in most major religious narratives (Christ, Buddha etc.). In this the Austrians provided the libertarian religion with their very own version of the monomyth.

That most libertarians are ignorant of the source of their beliefs – just as most of them are not very conversant with economic theory generally, their protestations to the contrary notwithstanding – only adds a sociological dimension to their cult. Their cult forms a hierarchy where those who are closer to the Grand Truth are supposed to know more than those who are less conversant. Those who are less conversant then scrutinise the Great Texts – which are largely taken to be Holy Writ – until they can advance up the priestly ranks.

The Malign Consequences of Political Cults

After experiencing what used to be called 'Bolshevism' we are well aware of the dangers of political cults if they should ever ascend to power. Indeed, we already had forewarnings of this danger in the cult of Reason that Robespierre erected in revolutionary France upon the intellectual architecture that Jean-Jacques Rousseau had constructed for him. All of these cults espouse liberty and freedom and end up creating regimes of pure tyranny. Why? Because in their violent desire to turn reality into a Utopia, they stamp all over reality as it fails to conform to the images in their minds.

Some have objected to fellow Naked Capitalism writer Andrew Dittmer's 'interview' series as an attempt to misrepresent the libertarian movement by espousing the ideas of an extremist. This is unfair. The views of people like Hoppe may be fringe among libertarians – then again, they may not be – but the zealousness is the same across the whole movement.

Libertarians think that they have unearthed a Truth that no one else can grasp (because, of course, this Truth being so pure, anyone who could possibly grasp it must then by default recognise it as Truth). And they think that if they can get adequate social and political power to enforce this Truth we will all be better off for it. Hoppe's vision of a totalitarian, corporatist future is thus realistic in that if libertarians were ever truly to get into power they would have to enact an immense violence upon the world to try to get it to conform to their vision of Utopia. In this, they are like every other political cult that has ever existed. And they are just as dangerous.

In fact, the libertarians are the direct heirs to the Marxist-Leninist throne. Even though their motives differ substantially, their Faith is based on very similar principles – which is not surprising given that both movements grew out of the same 19th century debate over economic value. In this regard it is useful to recall John Maynard Keynes' characterisation of Marxism-Leninism:

[It] is the combination of two things which Europeans have kept for some centuries in different compartments of the soul – religion and business.

Keynes also highlighted an important point about how such cults become influenetial:

[They derive their] power not from the multitude but from a small minority of enthusiastic converts whose zeal and intolerance make each one equal in strength to a hundred indifferentists.

The goal may have changed, but the unswerving faith in pseudo-scientific – or, to be very precise, in the Austrians case, because they tend to eschew 'scientificity': pseudo-rational – economic doctrines has not. Let us just hope that such a cult does not deliver to us another era of primitive tyranny and medieval inquisition. It is our democracies that are at stake.

Corvus Gold 12-6

Posted: 06 Dec 2011 06:01 PM PST

Here is my interview with Jeff Pontius, the founder and CEO of Corvus Gold. Corvus is a sponsor of TheDailyGold.

How to Make Money in a "Fugly" Stock Market: Bob Moriarty

Posted: 06 Dec 2011 06:00 PM PST

Despite the "fugly" future that Bob Moriarty, founder of 321gold.com, talks about in this exclusive interview with The Gold Report, he's downright bullish on the U.S. dollar for the time being. He...

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Gold FIX Driving the Price

Posted: 06 Dec 2011 05:25 PM PST

Gold Forecaster

Gold Stocks: 30 Minute Chart Tool In Play

Posted: 06 Dec 2011 05:11 PM PST

Will European Governments Tighten Up?

Posted: 06 Dec 2011 04:29 PM PST

Not much to report from yesterday. Dow up 78 points. Gold bouncing around.

All eyes are on Europe. If the European governments can pull off a save...well, we're all saved. At least for a few weeks. Maybe through the holiday season.

The euro has been remarkably stable. It has never collapsed — despite all the talk of Europe falling apart. Apparently, people with money don't think it is in real danger. They think it is too important to let go. They may be right. And the more people talk about the 'end of Europe' the more it doesn't end. Instead of letting it go, the authorities become more and more stubborn in trying to hold it together.

It's hard to know how this will play out. But we feel we know how this week will go. Frau Merkel and Monsieur Sarkozy will put together a new plan... It will include promises of fiscal tightness along with monetary looseness. The EZ money is expected to put short-term investors' fears at ease. The fiscal austerity, it is hoped, will help long-term investors sleep better at night.

European governments will pretend to tighten up. The ECB will lower interest rates and print up some new ersatz money. What could go wrong? The combination of mendacity and counterfeiting should do the trick...for a while. The liquidity from the central bank will come like Christmas pudding, or perhaps more like spiked eggnog. It will put some cheer into the markets during this 'dark passage' of the winter solstice. And then, the promises of austerity will allow everyone to think that things will be fine in the long run too.

So...keep your eyes on Europe...and your hands on your wallet.

Regards,

Bill Bonner
for The Daily Reckoning Australia

Save Your ASSets First

Wednesday, December 7, 2011