END OF THE ROAD (documentary with Peter Schiff, Mike Maloney, etc. 2012)

   This film offers up one of the few decently clear pictures of the flaws in the world monetary system, relating the drier facts to recent events like the 2008 "recession" or collapse, followed by stimulus moves intended to fix the instability.  It's open to criticism, though, on three fronts: first, it quotes mainly money managers who could be called "gold bugs".  Second, it concludes on a fairly simplistic suggestion that buying gold is the way to increase the safety of one's financial position going forward.  Finally there's the problem that it repeatedly describes the current system as a Ponzi scheme, which is a critical stance (like trying to use an insult as an argument) rather than a more descriptive one.

   It's refreshing to see commentary which, in orderly fashion, describes the postwar Bretton Woods agreement (which defined the US dollar as 1/35th of an ounce of gold bullion and other world currencies in terms of the US dollar), then the 1971 Nixon severance of gold convertibility, then the inflation of the 1970's and beyond.   The process of the sale of government bonds by the US Fed to finance the paying of past obligations (with each new bond issuance represented by a cartoon IOU which appears on the graph with a "boing" sound, suggesting another bouncing check) arguably is similar to a pyramid scheme and is properly compared to inflationary actions of governments in the past, which as the film points out "have a 100% failure rate" in that they have never succeeded in their goal of producing stability.  

   But to answer the third problem first, an insult is in fact not an argument.  While it's true that Ponzi's plan of paying off earlier investors with the funds of later ones (while creating no new value) is similar to the support of a fiat dollar standard by "new money" creation continuing, while not limited by required metal convertibility, it's important to note that the defenders of the current arrangement don't see it as a Ponzi scheme.  They would need to be gold-standard advocates to see the current system as fake.  The philosophical stance of a defender of fiat currency is that convertibility between currency and metal (or whatever) standard units is unnessecary and irrelevant.  The fiat argument is that value is whaever we (qua government) say it is, not what a ratio says it is.  This indicates a totally different metaphysic, a different picture of the way the world works, and it is that difference that must be noted at the start of any comparison.

    The film can also be criticized according to its large amount of screen time given to what could be considered a group of interested parties: investment managers of bullion interests and other advocates of same.  This isn't proof of lack of objectivity as such, but a critic would focus on the lack of competing theories represented.  But the biggest problem (possibly due to cuts made in the editing room by the film's director or emphasis contributed by the film's writing and editing) is the suggestion that to buy precious metals is the answer.  This sells the value of the film short.  The strength of the film is that it establishes, not the superiority of a metal standard as such, but the reason that money with a standard performs better than money without one.  If a unit of currency is limited by a unit of gold, silver, lead, pork bellies or Barbie dolls, it therefore is not possible for a government (a group of politicians) to print as much money as they'd like. While there is always the possibility (and the recorded historical occurance) of particular currency standard basis materials (like gold) to experience changes in supply and demand themselves, thereby affecting the supply of and demand for currency that represents the materials, the ups and downs of such periods have been less severe than those after August 15th, 1971, when as he cancelled gold/dollar convertibility, Nixon remarked "we are all Keynesians now".

   What this film should be understood to say is not that one should buy gold or something else, but that one should NOT primarily store wealth in the form of currency - but in the form of whatever else one can think of.  The man-hours description of a product is mentioned in the film at one point (I forget the exact wording), similarly to my common personal example of a chair.  A certain company in Hickory, North Carolina, to make a certain model of chair, needs X amount of wood, X amount of nuts, bolts, other metal fittings and cloth and X amount of skilled labor hours to make that chair.  In ten years that will not change from 11 hours to 14 hours; it will be the same.  If the price goes up, it's not because the job has become more complex or takes longer, but because the vaule of the dollar has gone down. More currency units in this example have been inflated into existence and are now chasing the same chair.

   So value (particularly in a fiat currency regime) does not lie in printed cash.  It can lie in gold, silver, tin, pig iron, experience, education, art or talent.  How about real estate?  It can lie in something created by you that did not exist before.  It can lie in achievement, discovery, a collection, a rediscovery, a renovation, the restoration of a fallen column of Rome.  Value is a very broad concept and should be pursued in every way possible, certainly beyond piles of paper produced by politicians, which is doubtless the worst store of value ever concocted.   Value lies in things, in goods, in STUFF, both physical and intellectual.

EPILOG:  In the rereading here, I don't think I've properly stressed the shortcomings of this otherwise valuable presentation.  This film describes very effectively the predicament that the postwar dollar standard places world finance in today, and perhaps does it better than any other presentation of the matter I've seen so far.  Its descriptions, however, do not support conclusions for monetary standards on some metal or pork belly basis, etc. and they also do not support conclusions amounting to investment advice.  Rather than recommend where one SHOULD place one's wealth, the film properly describes where one should NOT place it (currency).  Money standardization and investment advice should be addressed elsewhere.

11/29/2013