11/08/2013 04:54 PM

Paradise Lost

Paranoia Has Undermined US Democracy

By Dirk Kurbjuweit

 
 Photo Gallery: State of Paranoia

While far from a dictatorship, the United States has employed a number of paranoid tactics that delegitimize its democracy. This phenomenon is on display in the fictional TV series "Homeland," which depicts hysterical CIA agents in a hysterical country.

Agent Carrie Mathison is a topical figure. The main character in the American TV series "Homeland," played by the wonderful Claire Danes, shows her true relevance in the first few episodes, in which Mathison is nervously sitting at home, observing and listening in on the life of a terror suspect on a large screen. His apartment is bugged and Mathison is determined to find out as much as she can about him. She is hysterical, bipolar, paranoid and sick -- all advantageous traits for her job.

The real-life intelligence services of the United States take things much further than agent Carrie Mathison. They spy on just about anyone, even German Chancellor Angela Merkel, who, so far, has not been suspected of maintaining ties to Islamist terrorism, and yet whose cellphone was tapped.

It is often assumed that intelligence agencies are worlds of their own, and that they sometimes act on their own authority. However, they are also an expression of the societies in which they exist, especially of their fears. In other words, it is quite possible that there are not just paranoid agents, but also paranoid democracies that act in hysterical ways out of fear. They are characterized by a strong freedom myth, which leads to paranoia. It, in turn, poses a threat to freedom. The United States is currently in a late phase of this cycle.

Freedom means that there is an endless range of possibilities, and that anything can happen, including both good and bad things. That's why freedom engenders fear. The greater the freedom, the greater the fear. Where does America's fear come from?

To answer this question, it's worth taking a look at scenes from a typical Hollywood Western, in which covered wagons pass through a harsh, unwelcoming landscape, and where the silence feels ominous and the settlers are constantly casting anxious looks at the hills to the left and right. Is anyone there? Of course there is. A group of Indians has congregated and will soon attack the wagon train. There will be deaths, and a few crosses will be left behind in the wilderness.


Paradise of Freedom?


The United States is a relatively young country that began as a society of settlers. They came to America to escape oppression at the hands of European monarchies, and they developed a strong desire for freedom in the process -- a freedom they could find in the continent's vast expanses. As political individuals, they refused to accept that even though they lived on the other side of the Atlantic, they were still controlled by the British colonial power, and they fought for their independence and democracy.

Because the settlers made such great sacrifices to seize their magnificent country -- from British troops, from the Indians and from the wilderness -- their achievements became imbued with a religious exaggeration. The country was essentially declared a paradise, or, in the words of the national anthem, "the land of the free and the home of the brave."

But the nation's genetic code has also retained the fear that many settlers had to endure, both on their treks and in wars. A covered wagon with a man, a woman and a horde of children -- it's the perfect symbol of the land of unlimited opportunity, a land where total freedom and maximum vulnerability go hand-in-hand.

To understand the United States, it's worth taking a look at other paranoid democracies. In southern Africa, Boer settlers battled the local population for land. To this day, the Boers still have a glorified view of their history, as suggested by Boer expressions like "Eie land, vrye volk," or "One land, free people." A strict apartheid system was implemented in South Africa starting in 1948.

The system enabled the Boers to isolate themselves from the black majority and create a democracy, but only for whites, making it entirely undemocratic. Fear was the basis of that state. It built nuclear bombs, even though it had no enemies.


Politics Shaped by Fear


Israel is the promised land of the Jews. It was created primarily to give Holocaust survivors a place where they could feel free and safe. That freedom and safety was fought for and preserved in wars against the Palestinians and neighboring powers, wars that claimed many casualties. To this day, Israel retains elements of a settler society, as the country continues to expand into the West Bank.

In Israel, too, politics are shaped by fear -- and a justified one. The country is surrounded by enemies, some of which have made the renewed extermination of the Jews their objective. But does that mean that the Israelis have to have their presumed enemies murdered abroad? One of today's symbols of political paranoia is the giant wall that seals off Palestinian areas from Israeli territory. "Homeland" is actually based on an Israeli TV series.

The United States differs in many respects from South Africa during apartheid and Israel today. But the three countries are similar in terms of the triad of freedom myth, paradise and fear. This has led to the development of a tremendous ability to put up a fight, but also a heightened sensitivity.

Political paranoia requires an enemy, or at least the concept of an enemy. For a long time after the society of white settlers had destroyed or banished the Indian tribes, there was no enemy to threaten the Americans in their paradise. It was only the Soviet Union's bombers armed with nuclear missiles that made the United States vulnerable again and fanned new fears. At the same time, the rival in the East served as the alternative model to the freedom myth, because it was a society of compulsion and limited opportunity. It also offered an austere alternative model to the American paradise, which by then had become primarily a paradise of consumerism.

America felt threatened to its very core. A defeat against the Soviet Union would have turned the United States into either a nuclear desert or a Socialist satellite with cheap goods and no more than two available car models -- two nightmares for Americans that generated considerable fear.

Soon a paranoia developed that was reflected in one of its early excesses, the McCarthyism of the 1950s. Those suspected of harboring sympathy for communism were persecuted. Throughout the Cold War, anti-communism remained a hysterical and fundamental element of American policy.


Need for Enemies, at Home and Abroad


After the Soviet Union collapsed in 1991, the United States experienced a relatively relaxed decade, until hijacked jetliners crashed into the World Trade Center and destroyed parts of the Pentagon on Sept. 11, 2001. The men at the controls were belligerent Islamists, whose ideas also formed an antithesis to American society.

They were foes of a liberal and individualistic way of life, and they yearned for a paradise where credit cards would be worthless. They were also the first to severely wound the United States in its own "homeland." They were the ideal enemy for the next wave of paranoia. The hour of the Carrie Mathisons of the intelligence world had arrived.

While far from all democracies are paranoid, virtually all dictatorships are. For dictators, paranoia helps shape and preserve their autocratic systems. Autocrats need an enemy -- always an internal enemy and sometimes an external one, too -- to legitimize violence and coercion, and to generate allegiance.

The Nazis are unparalleled in this art of hysterical governance. Their declared internal enemies were Jews, Communists, Social Democrats, the Sinti and the Roma, homosexuals and anyone who told jokes about Adolf Hitler. The external enemies were all the countries that Germany attacked, which was a large number, as well as the overseas democracies, especially the United States. For the Chinese party dictatorship, dissidents are the internal enemies, often people who express their criticism with a paintbrush, pen or laptop. Although China lacks an external enemy, it does have an aversion to Japan.

The United States cannot be compared with Nazi Germany or with China. Unfortunately, however, a paranoid democracy tends to use tools that are beneath a democracy, the tools of a dictatorship, and they include as much surveillance as possible.


US No Longer a Model of Democracy



Information is the most valuable thing in a paranoid world. Those who feel threatened want to know as much as possible about potential threats, so as to be able to control their fears and prepare preventive attacks. Even in the days of covered wagons, alertness was an important protection against attack. Before Sept. 11, the intelligence agencies were asleep at the wheel and overlooked many of the clues the attackers left behind during their preparations. One of the reasons agent Carrie Mathison is traumatized is that she let her guard down once, and she is determined not to let it happen again, even if it means breaking the law.

Now the intelligence services have developed a giant information procurement machine, which is also useful in industrial espionage. To ensure that nothing escapes their notice, they violate the privacy of millions and millions of people and alienate allied nations and their politicians.

Another form of paranoid information procurement is torture, used by American intelligence agencies to gain information about terrorists. Torture is the negation of democracy, freedom and human rights. If a democratic country allows itself to sink to the level of torture, it must already be extremely hysterical and anxious.

It isn't as if nuclear bombs were at issue. The aim of some of today's intelligence methods is to prevent attacks that could be very painful for America, but in truth do not threaten the American founding myths and are not capable of extinguishing the American paradise. Only the Americans themselves can do that. The fear aspect of freedom is destructive to freedom, because it allows the need for security to get out of hand.

While paranoia legitimizes a dictatorship, it can achieve the opposite effect in a democracy. The United States is no longer a model of liberal democracy. That much has been made clear in light of mass surveillance, torture, the extralegal detention camp at Guantanamo and an isolationist ideology that leads to author Ilija Trojanow being denied entry to the country, presumably because of his criticism of American policy.

Other nations also have their fears, but they lack the power to turn the world upside down. Power and paranoia are a dangerous mix.


Translated from the German by Christopher Sultan


4 Arguments Against Gold & Why They’re Wrong 

Written by Adrian Ash & Miguel Perez-Santalla

November 08, 2013




Four reasons to waste your time with the deeply historic, deeply human value ascribed to gold.

People love to debate, but sadly sometimes it crosses a line and turns argumentative. That's what is happening right now with the debate over gold.

There have been several high-profile articles, most recently in the Wall Street Journal, saying you should eliminate gold as a worthwhile part of your portfolio, primarily because of this year's lower price.

Against that idea, many bloggers and private investors, wondering why gold prices have fallen, say that it shouldn't have dropped, that there must be some conspiracy driving down prices when money-printing and our still-weak economy should be driving gold higher. But that still puts current price performance front and center in the debate over whether it should or shouldn't feature in your portfolio. So it misses several key points about why gold is uniquely valuable as an investable asset.

We'd like to look here at some of the common arguments now offered for why gold should not figure in your investment strategy. Yes, working at BullionVault, the physical gold and silver exchange, we're biased. But there are also people who always say gold doesn't warrant your investment dollars.

To have any intelligent understanding of your own position, you need to welcome debate. That way you can challenge your own opinions and, if you find they're correct, improve your arguments, too, such as whether gold investing continues to warrant attention.


1. Gold Does Not Yield Anything


When you buy any commodity outright you can no longer deposit it with a bank or investment company to earn interest. If you are looking to yield a dividend or interest, then physical gold ownership will not yield anything. Yet that is only half the story.

Gold ownership yields security for the investor, the type of security a person seeks from insurance. It is the only physical form of insurance that exists to counterweight your investments in bonds and stocks, and that is also a liquid, easily traded asset.

Gold is also noncorrelated with those more "mainstream" markets, meaning that its price moves independently of where other investment prices are heading. So the goal for most investors in holding gold is first as a safety net for their other assets. This metal has held value for thousands of years, and will hold value for thousands more.


2. Gold Is Worth Only What the Next Investor Will Pay for It


This statement is weak from the onset. There are no stocks, bonds, commodities or goods that are worth more than the next person will pay. That being said, gold has something that the others do not. Gold is 100% transparent, in that, unlike other easily traded investments, it is only one thing: a pure and precious rare commodity that requires little space for storing great value.

This commodity has acted as money for thousands of years. In fact, after World War II, the Bretton Woods agreement used gold to bring stability and sanity to the world's currency markets once more. If that history of human use doesn't give intrinsic value to gold, why would you give that title to any other asset?

People had their life savings in Lehman Brothers stock. Other people invested in mortgage-backed securities or were holding Argentine bonds or got sold the claims of Bernard L. Madoff Investment Securities LLC.

Stocks and bonds, though there are many facts available about them, are never 100% transparent. It is much like a hiring a baseball player. You may have his statistics and you may place him in the perfect spot on the best team in the league. Yet he may perform poorly due to an unknown injury or a problem with the change of venue or any other number of unknown reasons. This is the same for stocks and bonds. Though we have their statistics, we never know when some problem may cause some of these instruments to fail.


3. Gold Is Neither a Good Hedge for Stocks, Nor Inflation


Anyone looking at the 1980s and '90s and concluding that gold is a poor inflation hedge misses the point. You didn't need an inflation hedge when cash in the bank paid 5% above and beyond the rate of inflation each year, as it did on average for U.S. and U.K. savers for the last 20 years of the 20th century.

But gold doesn't make a good hedge for stock market investments either, according to a long-running thread of comment. The frequent comparison is usually to the stock market overall, or the Dow Jones industrial average.

Never mind that gold and stocks have, over extended periods, gone in opposite directions. That measure is not a just number to use, because the stock indexes frequently change. This is also true of the overall market, where stocks are delisted if they underperform or go bankrupt. If these types of stocks were kept on, how would the indexes and averages have changed? The stock market of 1989 did not have the same listed companies as that of 1996, 2000 or 2013.

In contrast, the gold of 1989 was the same gold of 1996, 2013 and even 2000 BC. Gold does not change, and its supply cannot be expanded (or reduced) at will. This is why gold functions so well as a form of exchange and transfer of value. It holds value due to its permanent unchangeable form. World history has shown us again and again that in the final analysis; only gold, out of all investable assets, holds value in catastrophic situations.

You can lose value owning gold if you buy high and sell lower, but you never lose it all. You could easily pick out a point in any chart of the stock market where an investor could have bought and then another time where you may have sold and lost money. There is no point to this kind of example, because it never speaks to an individual's overall performance with their assets. They may have liquidated their stock at the low price because they needed the cash to invest in a particular business or real estate opportunity. All assets including gold have to be looked upon as part of a strategy for the investor and not as independent pieces of life's asset management puzzle.


4. Gold Is an Article of Faith, Not Rational Investing


Some people denigrate gold to a relic of the past in terms of its economic importance. The most recognized of today's detractors is perhaps Nouriel Roubini, the famed NYU economist who repeats John Maynard Keynes' cry of the 1930s that gold is a "Barbarous Relic". Still others go further, saying that choosing to own investment gold is anti-social.

The argument is that there is no longer any need for gold as a form of exchange, nor as a store of value. Governments and central banks have done away with the need for gold. So apparently, gold's only value today lies in the jewelry and electronics trades.

In addition, other analysts write about gold being a faith-based investment and mock it as a type of religion. There are certainly those who invest on faith, and they can be loud, giving the impression that investors in gold are extreme. But this can also be said about the defense of the U.S. Dollar. That currency in the end is only a piece of paper that has no other use than that ascribed by the government. If you put fire to a dollar bill it will turn to ashes and float away. But if you put fire to gold, at the right temperature, you get a liquid metal that not only is useful to the arts but important in the electronics and high-technology industries.

"We may one day become a great commercial and flourishing nation," wrote George Washington, the first president of the United States of America, on the subject of paper money in a letter to Jabez Bowen, Rhode Island, on Jan. 9, 1787. "But if in pursuit of the means we should unfortunately stumble again on unfunded paper money or similar species of fraud, we shall assuredly give a fatal stab to our credit in its infancy.

"Paper money will invariably operate in the body of politics as spirit liquors on the human body. They prey on the vitals and ultimately destroy them."

It is difficult for those in power to try to overcome this truth, embodied by all of recorded economic history. And it becomes more ludicrous as governments also hold gold bullion in vast amounts.

The modern central banking system, now more than 100 years old, may seem to shape this perception. Yet in the last decade, central bankers themselves, albeit in Asia and other emerging economies, have been significant buyers of the yellow metal. Western governments as a group have stopped selling gold.

Why? Economic chaos causes distrust among governments and central banks, leading those in power to seek out avenues to strengthen their position with other parties. The position central banks look for to strengthen their balance sheet and ensure their place in the global economy is gold. The United States rose to dominance worldwide alongside its dominant gold reserves. Now becoming a market economy, and hoping to become the next big global economy, China is also building its central bank gold reserves. It becomes obvious that gold has a very deep, very human value, ascribed to it by history and by all major powers today.

Value isn't the same as price, of course, which explains, perhaps, how gold investing remains such a mystery to some people.



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Adrian Ash is head of research, and Miguel Perez-Santalla is vice president of business development for BullionVault, the physical gold and silver exchange founded a decade ago and now the world's No. 1 provider of physical bullion ownership online. There you can buy fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission today.