The Beatles on Ron Paul, Marc Faber and Jim Rogers Double Team, and Why Gold Plunged

Got my very first LewRockwell.com article today titled "The Beatles Would Support Ron Paul."  An excerpt:

Lennon’s criticism of Chairman Mao and communism in "Revolution," is certainly in line with Ron Paul’s beliefs. Paul has always acted on the side of liberty and decentralizing power, not empowering the state for the sake of achieving his ends. In an interview with Reason magazine:
Paul: "Martin Luther King is one of my heroes because he believed in nonviolence and that's a libertarian principle. Rosa Parks is the same way. Gandhi, I admire. Because they're willing to take on the government, they were willing to take on bad laws."
Ron Paul’s position is one of peace and cooperation. The State, by definition, supersedes voluntary cooperation by establishing itself as a monopoly on coercion and violence. This has grown to include drug prohibition. Just in the federal prison system alone there are approximately 103,000 people locked up for drug offenses, that’s 50% of the whole federal prison population.
The influence of drugs on the composition of the Beatles’ music has been speculated for years. While it is widely known the Beatles used drugs during the recording of their most popular albums, they never endorsed their use. Ron Paul has never endorsed the use of drugs either but has held the strict belief that individuals have an absolute right to their body and therefore the government should abstain from prohibiting the use of narcotics.

With songs like "Revolution" and "All You Need is Love," the Beatles catalog contains many songs promoting peace and non-violence. While "Revolution" is often characterized as the Beatles’ most political song, "Taxman," written by the under rated George Harrison, is a scathing attack on the State’s parasitic need for more revenue:

"If you drive a car, I'll tax the street,
If you try to sit, I'll tax your seat.
If you get too cold I'll tax the heat,
If you take a walk, I'll tax your feet."

If the Beatles were still together and all with us today, it is not farfetched to assume they would support a presidential candidate such as Ron Paul who embraces the libertarian philosophy of non-aggression that detests coercion and violence. Though John Lennon may have drifted toward anarcho-communism (think "Imagine") later in life, his message of peace and cooperation is completely in line with Ron Paul’s principles.
All America needs is not another slick talking politician ready to throw his grandmother under the bus for the sake of one vote. What the country needs is a principled intellectual who holds a record of not only speaking out against the impoverishing policies of the federal government, but one who consistently advocates for peace. Ron Paul is all we need.

Big thanks to everyone who emailed me and expressed their enjoyment with the article, I really appreciate it.  Someone emailed me some more interesting info on the subject:

"Written by George after he realized he'd been catapulted into Britain's notorious highest tax bracket -- one in which he was expected to give back 95 percent of his earnings -- "Taxman" was the Beatles' strongest rocker to date, and also their first overt political statement. Indeed, Harold Wilson, then Prime Minister of Britain, and conservative opposition leader Edward Heath are mentioned by name, albeit in the background vocals."

"I had discovered I was paying a huge amount of money to the taxman. You are so happy that you've finally started earning money - and then you find out about tax.

In those days we paid 19 shillings and sixpence [96p] out of every pound, and with supertax and surtax and tax-tax it was ridiculous - a heavy penalty to pay for making money. That was a big turn-off for Britain. Anybody who ever made any money moved to America or somewhere else."

I also stumbled upon a mention of my Mises Daily piece on Paul Krugman's "Pop Internationalism" on an archive of RealClearMarkets last night.  So a big day indeed.

Now onto some actually important matters, though Jim Rogers has been singing this type of stuff to the choir for a while now, here is another great interview with CNBC:

Via Wall Street Pit:

• The U.S. dollar is going higher “against major currencies,” well-known investor Jim Rogers told CNBC Thursday. The dollar “is going up against everything right now” for a number of reasons, said Rogers. One may be that everybody is panicking “and for some reason they’re rushing into the U.S. dollar.”  “The U.S. dollar is not a safe haven, if you ask me, but I do own it,” he added.
• Also, Rogers noted he would own the U.S. dollar, or the Swiss Franc, or agriculture. “Agriculture prices [are] getting banged right now. I am kind of planning on buying Swiss francs, more dollars and agriculture.”
• In addition, he weighed in on China’s economy, saying, “They’re doing their best to cool things off … I expect them to continue to do it, and that is causing more slowdown around the world.”
• But “the major problems are coming from the west,” Roger stressed. “They are coming from Europe and the [United States]. We are much worse off than we were in 2008 because the debt has gone through the roof.”  “At least in 2008 there was the possibility that the governments could bail us out. Now, of course, the governments have gotten deep, deep, deep into debt themselves,” he added. “Everybody is in much worse shape.”
• Plus, there are all sorts of trade tensions and currency tension developing, Rogers went on to say. “Brazil  is sort of ignited a trade war [by putting a 30 percent import tariff on China and Korea ]. And right now China is trying to get the Europeans to let them open up the trade with China more. The Europeans are saying no, so China is saying, ‘No, we won’t bail you out.’”
• “I hope the trade war doesn’t break out” because throughout history when it does it has “caused depressions,” Rogers added. “You saw what happened in the 1930s. It led to depression and it also led to war. So I hope it can be contained.”
• Ben Bernanke’s idea that low-interest rates are good, “is killing the people who save and invest, and that’s really hurting a very, very large part of the population,” concluded Rogers. (something we’ve said countless times).

For a slightly better and more entertaining interview, see the impeccable Marc Faber- video after the jumps:

Zerohedge excerpts:

You don't need the Fed to tell you that something is wrong.

...at least this time around, Mr. Bernanke did the right thing [...and...] what they said yesterday is better than what they've said for the last 12 years.

...if the S&P drops to around 900-950, we'll get QE3 for sure...

I'm not selling my gold because I think in the long run, they will print money.

I don't know anyone who owns Greek bonds. But who owns them? The ECB and European banks.

The banks, the problem is that they're not run as banks where they have a fiduciary duty...They take the capital and go and gamble left, right and center.

They should default.

The Greek people in Greece, the only way for them to survive economically, half way decently is to leave the EU.

...countries like Greece and probably Portugal will leave the EU, or the strong countries like Germany will leave the EU and then there'll be dual currencies,

Faber is right on as usual.  I would be surprised to see Bernanke even let the Dow Jones hit 950, but maybe Ron Paul is really having an impact.  Unfortunately his impact is amounting to "well we won't start printing right away, we will let things slosh along for a bit to make people want money printing."  Like Paul, Rogers, and Faber (and any Austrian) always says, all Bernanke has is money printing.  That's how he was educated, that's all he knows.  Previous money printing caused this downturn? Print more!  Newly printed money alleviates downturn for short period and then another crash? Print more!  Beware the evil deflation fairy!

While gold took a fairly large hit yesterday, a few, including myself, placed blame on the CME margin hike.  Barry Ritholtz has a really good post outlining the rational for the margin hike today:

I do not think people understand what this means, and why the CME is doing this.
To begin with, commodities are purchased with futures contracts, which offer enormous leverage to speculators. As of this Monday, the minimum cash deposit for trading gold futures will be $11,475 per 100-ounce contract — at $1700 per ounce, that is a $170,000 position. The leverage is nearly 15 to 1. Stocks and bonds, for comparison, trade at 2 to 1 maximum leverage using firm margin. At 15-1, a less than 7% move against you wipes out your capital entirely.
Put it in other terms, if you have $100,000 to speculate with, you can purchase $200,000 worth of stock, or using the same $100k, you can buy $1,481,481.48 in gold futures.
Back in Q1 2009, when Gold was $1000 per ounce, you only needed $5,807.70 to buy 100 ozs of gold in futures (worth $100,000); That’s a little more than 17 to 1 leverage. At those levels, a less than 6% move against you wipes out your capital.
Hence, as Gold has been purchased by more speculators who are highly leveraged, the exchange is trying to ensure that these gold traders have sufficient posted cash as a margin of safety in case of any significant move against them.
Given the vertical spike in Gold prices the past few months, this is merely prudent risk management. Call it managing margin and counter-party risk — something we haven’t seen in other non exchange traded items like CDS or CDOs. Had they been exchange traded with margin rules, perhaps the 2008 collapse would not have been as significant as it was.

While I was fairly aware of the rational behind margin hikes initially, Ritholtz makes a lot clearer.  Ritholtz says that the margin hike shouldn't be blamed for the price fall, but this is the same kind of illogical thinking that dominates such economic schools of thought that promote central bank intervention to deal with a downturn.  It's not the bust that demands stimulus, it was the boom financed initially by money printing that should have never occurred.  In this situation, the margin call shouldn't have brought down gold prices, gold prices should not have risen so much before another call.  To illustrate this point more, Mish offers his explanation on the fall of the price of gold:

Four Reasons for Metals Plunge

1. Fed did far less than expected
2. Mutual fund redemptions
3. Margin calls at hedge funds
4. China growth story fading

Mish places the blame mainly on the reluctance for the Fed to print more.  Once investors had Bernanke slap them in the face while doing "The Twist," gold suddenly became less attractive.  Again it's because the Fed isn't printing money the price of gold fell; it's not the correct explanation of the Fed shouldn't have been printing money to begin with that drove so many people to gold.  Though I am sure Mish would agree with me on this point.  His take on China slowing down is apt though and it doesn't look good for commodities.  Overall, with the Fed, ECB, and Bank of China not announcing any new printing, gold was bound to fall a bit.  But the money supply is still growing in the U.S. and God only knows what's going to play out in the Euro zone.  At least we might finally have a decent timeline on Greece's last hurrah:

More from Sky News correspondent Ed Conway (via Twitter):

• G20 now preparing itself for Greek default after October - Sky sources. Will be on Sky News imminently with more
• G20 sources: all efforts behind the scenes (by G20 members) are now going into recapitalising banks, preparing economies for default.
• G20 sources: default not expected until after Cannes G20 early November. Emergency funding should still keep Greece afloat thru October
• G20 sources: No suggestion Greek default need imply country leaving the euro
• G20 sources: @ Washington summit marked difference in attitude. Confident euro members edging closer to recapitalising banks, expanding EFSF

An orderly default is what is desired, time will tell if it actually plays out.  As long as the bankers are happy with it though, it will occur.