The Daily Reckoning January 21st


The Morality of Money

Louis: Doug, let’s talk about money. Is it all you care about?

Doug: No…just because I see the high moral value of money doesn’t mean it’s all-important to me. In fact, I find money less and less important as time goes by, the older I get. Perhaps that’s a function of Maslow’s hierarchy: If you’re hungry, food is all you really care about; if you’re freezing, then it’s warmth; and so forth. If you have enough money, these basics aren’t likely to be problems.


My most enjoyable times have had absolutely nothing to do with money. Like a couple times in the past when I hopped freight trains with a friend, once to Portland and once to Sacramento. Each trip took three days and nights, each was full of adventure and weird experiences, and each cost about zero. It was liberating to be out of the money world for a few days. But it was an illusion. Somebody had to get the money to buy the food we ate at missions. Still, it’s nice to live in a dream world for a while.

Sure, I’d like more money, if only for the same genetic reason a squirrel wants more nuts to store for the winter. The one common denominator of all living creatures is one word: Survive! And, as a medium of exchange and store of value, money represents survival… it’s much more practical than nuts.

L: Some people might say that if money were your highest value, you might become a thief or murderer to get it.

Doug: Not likely. I have personal ethics, and there are things I won’t do.

Besides, crime — real crime, taking from or harming others, not law-breaking, which is an entirely different thing — is for the lazy, short-sighted, and incompetent. In point of fact, I believe crime doesn’t pay, notwithstanding the fact that Jon Corzine of MF Global is still at large. Criminals are self-destructive.

Anyway, what’s the most someone could take, robbing their local bank? Perhaps $10,000? That’s only enough to make a wager with Mitt Romney. But that leads me to think about the subject. In the old days, when Jesse James or other thieves robbed a bank, all the citizens would turn out to engage them in a gun battle in the streets. Why? Because it was actually their money being stored in the bank, not the bankers’ money.

A robbed bank had immense personal consequences for everyone in town. Today, nobody gives a damn if a bank is robbed. They’ll get their money back from a US government agency. The bank has become impersonal; most aren’t locally owned. And your deposit has been packaged up into some unfathomable security nobody is responsible for.

The whole system has become corrupt. It degrades the very concept of money. This relates to why kids don’t save coins in piggy banks anymore — it’s because they’re no longer coins with value; they’re just tokens that are constantly depreciating and essentially worthless. All of US society is about as sound as the dollar now.

Actually, it can be argued that robbing a bank isn’t nearly as serious a crime today as robbing a candy store of $5. Why? Nobody in particular loses in the robbery of today’s socialized banks. But the candy merchant has to absorb the $5 loss personally. Anyway, if you want to rob a bank today, you don’t use a gun. You become part of management and loot the shareholders through outrageous salaries, stock options, and bonuses, among other things. I truly dislike the empty suits that fill most boardrooms today.

But most people are mostly honest — it’s the 80/20 rule again. So, no, I think this argument is a straw man. The best way to make money is to create value.

If I personally owned Apple as a private company, I’d be making more money — completely honestly — than many governments… and they are the biggest thieves in the world.

L: No argument.

Doug: Notice one more thing: making money honestly means creating something other people value, not necessarily what you value. The more money I want, the more I have to think about what other people want, and find better, faster, cheaper ways of delivering it to them. The reason someone is poor — and, yes, I know all the excuses for poverty — is that the poor do not produce more than they consume. Or if they do, they don’t save the surplus.


L: The productive make things other people want: Adam Smith’s invisible hand.

Doug: Exactly. Selfishness, in the form of the profit motive, guides people to serve the needs of others far more reliably, effectively, and efficiently than any amount of haranguing from priests, poets, or politicians. Those people tend to be profoundly anti-human, actually.

L: People say money makes the world go around, and they are right. Or as I tell my students, there are two basic ways to motivate and coordinate human behavior on a large scale: coercion and persuasion. Government is the human institution based on coercion. The market is the one based on persuasion. Individuals can sometimes persuade others to do things for love, charity, or other reasons, but to coordinate voluntary cooperation society-wide, you need the price system of a profit-driven market economy.

Doug: And that’s why it doesn’t matter how smart or well-intended politicians may be. Political solutions are always detrimental to society over the long run, because they are based on coercion. If governments lacked the power to compel obedience, they would cease to be governments. No matter how liberal, there’s always a point at which it comes down to force — especially if anyone tries to opt out and live by their own rules.

Even if people try that in the most peaceful and harmonious way with regard to their neighbors, the state cannot allow separatists to secede. The moment the state grants that right, every different religious, political, social, or even artistic group might move to form its own enclave, and the state disintegrates. That’s wonderful — for everybody but the parasites who rely on the state (which is why secession movements always become violent).

I’m actually mystified at why most people not only just tolerate the state, but seem to love it. They’re enthusiastic about it. Sometimes that makes me pessimistic about the future…

More tomorrow…


Doug Casey and Louis James
for The Daily Reckoning

The Morality of Money appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Government Will Lose the War on Piracy

It began as a skirmish. Then it was a battle. It became a war. Now it is a bloody conflict that is global in scope. Both sides have passed the point of no return. There is no question who is winning and going to win totally in the end, despite massive carnage along the way.

The field of battle in this case are the digital networks that swirl around the world in arrangements so thick and wide — seemingly infinite points of light that represent human contact backed by technological genius– that they surpass the capacity of the human mind to conceptualize them.

The two sides: everybody vs. everybody’s governments.

The death of Aaron Swartz, the 26-year-old digital genius, seems to have been some sort of turning point. The government hounded him, threatened him, planned to jailed him and bankrupt him for life. The ostensible reason for the persecution was that he downloaded research papers with the intent to distribute them. The real reason was that he was using his skills to pioneer new methods of subverting government’s attempts to thwart Internet freedom.


His tormentors broke his gentle spirit. He killed himself before they could get their way.

But since his death two weeks ago, there have been thousands of tributes written about his life. His interviews and writings have gone viral online. The organizations he founded have seen new life. His causes have gained new adherents. Hundreds and thousands have been showing up to events to give tribute to his work and ideas.

I’m thinking here of the life and death of Martin Luther King, Jr., and how it became a symbol of the urgent and non-negotiable desire for racial justice and peace. After he died, there was no turning back. The arguments and struggles largely ended. There would be no more legal barriers to the freedom of people to associate.

One wonders if the death of Aaron Swartz will take on a similar significance in the demand for the digital freedom to associate. After all, the war against the mass migration from physical to digital cannot be won by the state. The cloud is humanity’s new home — a world without borders, coercion, or barriers. Aaron was a prophet of this dramatic change in the social order that took place from 1995 onward. He understood it like few others.


But is the winner in this war really decided? Think of this. The war on online sharing (“piracy”) has been ongoing for ten years. It has involved ever more spying, ever more warnings plastered everywhere, ramped up intimidation in every sphere of life.

The penalties are more intense. Civil infractions have been converted to criminal acts. Kids have been fined, humbled, jailed. Enforcement has involved military raids and body bags. Every voice of government authority the world over has weighed in to denounce the pirates, the infringers, the copiers, the stealers, and looters.

We’ve been told that viewing unauthorized material, sharing things without permission, saying stuff without checking with the authorities, is tantamount to robbing grocery stores and stealing cars. The penalties are higher than for kidnapping and manslaughter.

And yet look at the results. Right now, this instant, “pirated” material has never been more available online. You can stream practically anything that has ever been filmed or recorded, instantly. The waves of information, licit or illicit, are rising and crashing ever harder in every minute that goes by.

It is impossible to police, impossible to stop, impossible to control, and ever more brazen by the day. The more governments try to stop it, the more there is to stop. And yet the politicians and bureaucrats still swear that they will fight to the bitter end, unconditional surrender as the only terms. It’s the ultimate unwinnable war, even more absurd than the war on drugs or the war on demon rum.

It’s not criminals who are thwarting the efforts of governments. It is human beings who are seeking out ways to connect and share information. They are acting as people do, using the tools they have been given to find and share value. They are seeking ways to push progress in the world of ideas.

They are using the magical capacity of the Internet to copy — that’s its real power and real function — in order to universalize whatever is wanted by others. The driving force is the burning desire on the part of people to link up to their mutual betterment. And this is taking place outside the artificial borders of the nation state and creating new forms of human engagement and innovation on a scale that no one imagined possible.

But are the “pirates” wrecking enterprise and profits? That’s what we are told. But look at it. The Wall Street Journal reports that the slide in revenue for Hollywood over the last ten years has been stopped as “online revenue grew enough to offset a continued drop in DVD sales and rentals.” Subscriptions to streaming sites rose 45%, and digital download sales are up 35%. Digital distribution accounts for 30% of spending on of home entertainment.

Meanwhile, people are still going to the movies. Last year was a banner year. Same with music. We are living in a new renaissance of all forms of art, creativity, media, books, research, ideas — and there are plenty of profits to be made by the smart, creative, savvy, and talented. More than ever before!

As always, the key to profitability is to deliver value to consumers in ways that match their most intense desires. It matters not at all that nearly everything on iTunes can be pirated in some other way, that most everything on Netflix can be streamed through another venue, that most proprietary software can be snagged somewhere for nothing, that smart phones can be hacked to get things that otherwise cost money, that services from phone calls to online conferencing are available in a gigantic range of pricing from six figures down to zero.

The governments that have battled against digital networks have worked tightly with reactionary interest groups in industry. Their dominant assumption has always been that if the Internet wins, the rest of us lose. That is obviously false. There is no zero sum game here. Those who have made money in this digital world have done so the old-fashioned way: selling valuable stuff to people at prices that people are willing to pay.

We’ve lost Aaron and it is a terrible loss. But look who we have: people like Kim Dot Com, the file storage pioneer who was coming up with new ways to take power from the industry/government establishment and put it into the hands of users.

The government tried to ruin him. Read my piece on his case from this time last year: “The Death of File Sharing.” He and his service seemed to be doomed.

He fought back. His servers were destroyed but he has started a new company with new servers: This new service is even more amazing, super encrypted with enough filed storage and sharing capacity for a good part of humanity to use. It is also the product of learning. This machine will not be destroyed.

The new systems live in the digital cloud where governments have little to no access. Encryption ensures privacy. These combinations of technologies give all users an opportunity to “secede” from government. If you are looking for a large-scale, anonymous, and affordable file-storage system run by a company that is a proven survivor, you could probably benefit from Mega:

Mega is only one of many new systems that challenge the governments of the world. There will be many more. They will get even better. The revolution can’t be stopped.

This is the way of the future. The watchwords are voluntarism, commerce, and laissez faire, the French expression meaning that if you just leave us alone, society can manage just fine. We don’t need their wars, their authority, their impositions, their legislation, their threats, their fines, their jails.

Aaron is gone, but his spirit not only lives; it pervades the future in every way. Be not afraid: join the side of the winners.

Jeffrey Tucker

Original article posted on Laissez-Faire Today 

Government Will Lose the War on Piracy appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

A Curious Question…

A curious question to start today’s issue…

A few readers have written to ask if the editors, here at Agora Financial, follow any particular, top-down “script” from the “front office.” Stated another way, do we “coordinate” our ideas?

I take it to mean is there some sort of daily or weekly Agora Financial “talking point” note? Or do we follow a centrally-managed party line? That is, if, say, I’m discussing oil or gold or copper or such, is my overall theme designed to dovetail with what other editors are discussing?

Easy answer. No. We collectively don’t follow any script or party line. With Agora Financial newsletters, you receive the benefit of distributed thinking. Every editor, and support team, has his/her own way of viewing things, and fulfilling our respective angles of a paid-up subscription.

In my writing, you get my take on energy and mineral investment ideas, and whatever else I think is pertinent. My job is to stick to that “hard asset” investment-based theme. The good news is it’s a wide-ranging body of knowledge. I can take ideas and run with them, and I always want to keep it interesting and informative. But at the end of the day, I need to help readers be better investors in the energy and mineral areas.

Let me say a few more words on that point. I certainly like my editorial colleagues. They’re all smart. They’re perceptive. They’re well-traveled. They are great writers. They come up with great ideas. They have different approaches to investing, and I enjoy reading their newsletters.

Sometimes, our collective ideas even tend to converge. That’s not due to guidance from any front office – actually, there’s no real “front office” in the building – but more because we all follow facts, and apply solid logic to innumerable situations. Thus do different minds often come to similar conclusions.

Then again, sometimes editors differ in our assessments. For example, I’ll say something about oil prices, and another editor will say something quite different in his newsletter. Conflict? Not really. Often as not, it’s just two ways of looking at the same information, and working up different future scenarios.


Overall, with the Agora Financial newsletters, readers receive a broad, continuing series of well-reasoned viewpoints, on all manner of investment approaches. As far as predicting the future? We connect the dots we see, as best we can.

More Dots…

Speaking of connecting dots, last week, news was breaking about “Al Qaeda in the Islamic Maghreb,” and the attack on a natural gas operation in Algeria. Apparently, it was blowback from the French incursion into northern Mali, to take on the Islamist fundamentalists who captured that real estate last year.

The morning headline is that numerous Americans, plus Brits, Norwegians and others, are hostages in the Algerian takedown. The Westerners include employees of BP and Statoil. It makes for a couple of points.

First, when we discuss investing in energy and mining companies, it’s easy to get tied up in ideas like cash flow, investment patterns, barrels of oil, tonnes of ore, price-earning ratios, etc. But at root, these companies are made up of people, and often these people are scattered all over the place – some of which places are austere and dangerous. It’s worth keeping that in mind… always.

Second, this Algerian situation is just another part of the ongoing “oil war” scenario that I’ve developed (with readers of Outstanding Investments) over many years. That is, the Middle East-North Africa area (MENA) is a tough place in which to do business, for all manner of reasons. It’s austere and dangerous, with the particular issue of religion-based extremism and strife.

In the past decade, MENA has erupted with wars in Iraq and Afghanistan, the downfall of authoritarian governments in Libya and Egypt, civil war in Syria, revolution in Yemen, more revolution brewing in Jordan, ongoing unrest in Saudi Arabia and Bahrain, constant saber-rattling with Iran, and now the fighting in Mali and Algeria. Oh, and everybody in MENA hates Israel. Other than that? Piece of cake, right?

Thank God for Elsewhere!

I could spend all day discussing how hosed-up things are in MENA. But my point is that the troubles within this region make a strong case for energy investing elsewhere. Thank God for elsewhere! Insha’Allah!

In a fortuitous development of history, North America is experiencing a rebirth of its own fossil fuel energy industry. We can harvest our own hydrocarbon molecules. And this could not have come at a more opportune time. There are vast new investment opportunities here, although it means that entire generations of politicians, academics, media talking heads and such will have to confront the obsolescence of their anti-oil-company, anti-industry prejudices. Long story.

The problems in MENA are also why I still like development of big oil plays away from the trouble, offshore Brazil for example. Indeed, MENA makes me like the offshore sector even more, because it’s just harder for a bunch of revolutionary religious zealots to drive their Toyota “technical” trucks up to a drilling ship that’s 100 miles offshore, moored in 2,000 feet of water.

Oil Prices

Obviously, MENA is a big source of the world’s crude oil – over 40% of daily global production, and way over 60% of the oil that moves in international trade. So what happens in MENA affects global oil pricing.

And what can happen in MENA? Well, things could settle down, and peace could break out, along with serious economic growth. Not likely, but I’m just sayin’… And then, MENA will continue to produce oil, and use more and more of it internally, with less and less available for export, over time.

Or we could see more revolutions and small-, medium- and/or large-scale fighting in one or more parts of MENA. To the extent that it interrupts the production and/or transport of oil, there’s less available for export, over time.

One way or the other, I foresee less net oil coming out of MENA. To the extent oil does sail out in tankers, more and more of it is bound for Asia, not Europe and certainly not the U.S., over the long haul. Here in the West – especially in the U.S. – we need to change our way of thinking about MENA. Not a moment too soon, some might say.

There’s more dots to connect, including an interesting turn in the gold market. But I’ll save that for tomorrow. Stay tuned.

Best wishes…
Byron W. King

Original article posted on Daily Resource Hunter 

A Curious Question… appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

avatarThe Daily Reckoning - The Daily Reckoning posted Monday, January 21st, 2013.

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