A hundred years from now, someone may ask why America was allowed to run up astronomical deficits. I think a large part of the answer may lay in a small step…As putting a man on the moon became a reality; the US dollar became a nebulous concept, backed primarily by the implied threat of technical superiority. It’s been forty years…and I’m still not sure if we are falling or flying.
I once heard that, “Genius connects the seemingly unconnected“, but my wife insists I remind you that psychotics do this as well.
I’m not sure whether or not Neil Armstrong and Buzz Aldrin actually walked on the Moon July 20, 1969. What I will say with absolute certainty is that either way, the world got swindled, unless you consider Tang® and Tempur-pedic® mattresses “payment in full”. What NASA represents to me is the beginning of a national tradition of white-collar welfare that continues to this very day (Wall St. – I’m looking in your direction…..).
I’m also concerned with our president’s apparent infatuation with events that unfolded when he was eight years old. On at least a half-dozen occasions, I have heard him refer to the Apollo missions as a rallying cry for our current situation. Why? Because if you piss enough money away, you get some cool pictures and a warm, fuzzy feeling? If you are truly looking to cut wasteful spending, you start by giving pink slips to eggheads that have produced nothing useful in 50 years at a cost of over $850 Billion dollars (inflation adjusted). The tangible contributions of these guys make those so-called “union slobs” at GM look like …well …um …rocket scientists. Maybe I’d think differently if they had developed Velcro® (whose awesomeness is undeniable), but they didn’t.
Before you assume that I am somehow anti-geek, let me assure you, I am not. And not just because I consider “the Geek Factor” the primary reason I do not have to die a virgin. Remember the brainiacs you knew in high school? I remember having the fear that, despite their intelligence, most were very poorly equipped to successfully navigate planet Earth. It is only natural that they would imagine a wedgie-free world where dweebs don’t get books knocked out of their hands.
Here’s the thing: Fantasies are free, rocket fuel and radio telescopes cost money. Bloated budgets combined with vague objectives and zero accountability have proven to me that, left to their own devices, our “best and brightest” will run completely amok.
This is not your crazy uncle’s conspiracy theory…
I consider the Apollo missions wildly successful, but I think very few people understand what objectives were actually achieved, even after four decades. I’ve stated before that I am an unapologetic conspiracy theorist (CT). That said, I find myself sitting alone, even in the midst of my tin-foil clad colleagues, most of whom sight the real “purposes” of the moon missions as follows:
- Cold War prestige – proving to the world we were smarter than the Russians.
- Distraction – The Apollo missions provided Americans an opportunity to view the government in a positive light. This helped offset the unrest brewing over the national disdain of the continuing war in Vietnam.
My view is that while these were desirable side-effects of the moon landings (whether genuine or bogus), they were not the primary benefit. If you allow me a little latitude; I’ll connect the dots (I promise you’ll get your nickel’s worth).
*****If you believe that we never went to the moon, yet somehow encountered aliens there, I think we used to date…*****
From the Constitution of the United States (article 1 section 10):
No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.
Sure it’s a run-on sentence, but the meaning is clear. There is no “unless you’re exploring new worlds” exemption. Yet America’s interpretation of that seemingly simple concept has been nothing short of schizophrenic from the start. At various times, we have demonetized silver and made it criminal for American citizens to own or trade gold anywhere in the world. But as the race to the moon unfolded, our founding fathers intentions were somehow forever lost in space.
Beginning in 1945, the Bretton Woods System established rules for international trade and settlement to help the world recover from the devastation of WWII. The US was the world’s undisputed economic powerhouse. The US also had 60% of the World’s gold reserves (thanks to FDR’s gold confiscation 12 years earlier).
The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments.
And so the world was put on a gold standard, with the US Dollar as the world’s reserve currency and convertible to gold at a rate of $35/oz. King Dollar was born, and everything was fine, for a while….
- 1950 – US balance of payments negative.
- 1958 – Imbalance termed a “crisis“.
By 1961, when Kennedy arrived in office, it was clear to all that the imbalance was not temporary. Make no mistake, the Bretton Woods System had many flaws, but it was the system the US had more or less dictated to the world. And as the 1960s progressed, the US was faced with three perennial budget busters:
- The Arms Race - considered a “necessary evil” by many; part of the atomic age’s new reality that no one really wanted to think about.
- The Vietnam War - grew more unpopular with Americans as casualties mounted; primary source of civil unrest by the late 60’s.
- The Space Program - Superfluous but likable. It was evidence that technology could provide us with more than just better ways to kill each other. In spite of pressing fiscal realities, no one wanted to see this white elephant starve.
Something had to give, and unfortunately, that something was the US dollar. Massive government spending was creating a brave new welfare state.
How many disingenuous statements do you see?
“I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth.”
John F. Kennedy, May 25, 1961
“…I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
John F. Kennedy, July 18, 1963
“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963
While we’re here, I’d like to mention a small talking point. Even with my limited understanding of the English language, it seems clear that the word will indicates more of an imperative than the word should. So is it possible that selective hearing is to blame for funding the moon expedition?
The Silver Lining
Although the private ownership of gold had been outlawed in 1933 (with some exceptions), 90 percent silver coins jingled in the pockets of every American for more than 30 years after. Even in the absence of a true silver standard, and without a silver certificate (another unholy mess), any citizen who chose to could exchange a paper dollar for coins that would contain more than ¾ oz. of silver. The price of silver rose as the US dollar slid further into jeopardy. In 1965, the US mint began producing dimes and quarters composed of nickel-plated copper and a half-dollar that was 40% silver (produced until 1970). Over the next decade, Gresham’s Law removed silver from circulation.
Not-so-Fun Fact: The first dollar coins produced by the US mint with no silver or gold content depicted the Apollo 11 landing on the reverse side.
Maybe this fills your heart with national pride, but if you compare melt values, it takes 76 of theses beauties to equal one Silver Peace dollar, so it feels more like a kick in the nuts to me.
Hope You’re Sitting Down….
In a horrifying plot twist that no one (especially me) saw coming, I, your humble narrator, am about to quote Alan Greenspan extensively, and sincerely. In 1966, before the Body Snatchers got to the bubble-blowing Fed Chair, Greenspan wrote an essay entitled Gold and Economic Freedom:
“But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is affected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.”
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal……. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.”
“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
I can’t say for sure if Greenie and I would agree about who the productive members of society and welfare state beneficiaries were, but his words described what was happening with laser accuracy.
In July, 1969 the world watched some grainy video in absolute astonishment. While the veracity of that footage has been called into question, its impact on the psyche of the world at the time is indisputable. The US laid claim to an achievement that no one else could (and can’t to this day), and that claim has proven to be almost as good as gold.
“Almost only counts in horseshoes and hand grenades.”
Impressed as the world was, it continued to request payment in gold, especially as the US began running trade deficits in addition to the growing current account deficit (the world had not yet embraced Dick Cheney’s axiom, “Deficits don’t matter”). On August 15, 1971, eight days after Apollo 15 concluded what NASA has called “the most successful manned flight ever achieved”, President Nixon unilaterally terminated the direct conversion of dollars to gold. It was the death blow for the Bretton Woods system. With the gold window closed and silver coins no longer being produced, the US dollar undeniably became nothing more another fiat currency, paper backed only by promises. The phrase “cold, hard cash” would begin its life as an American misnomer. As Chris Martenson points out, the “paper is money” experiment has failed more than 3,800 times.
“Insanity: doing the same thing over and over again and expecting different results.”
~ Albert Einstein
Perhaps the most amazing part of this story is what didn’t happen next. 40 years later, the US dollar is still the world’s reserve currency. The Wile E. Coyote moment hasn’t happened. The world continues to subsidize our excesses…begrudgingly. So by process of what passes for scientific method (at least in my house), we are left with an unlikely trio:
Einstein, Cheney & Wile E. – The Final Frontier
Maybe next time you’ll take the caveat more seriously.
I think it’s safe to dismiss fiscal discipline as a reason for King Dollar’s continuing royal status. A fearsome nuclear arsenal was not enough to save the Soviet Union from collapse. Somehow the US and the dollar have seemingly defied gravity for four decades, on a blend of credit and hot air (“a strong dollar is in our nation’s best interest”). It seems to me that credit can only provide the illusion of prosperity until a day of reckoning (which I am presuming to be inevitable). Personally, I refuse to accept Cheney’s notion that deficits don’t matter. I have only one explanation why the day of reckoning has been indefinitely postponed. It’s a sobering thought that everyone, even the Chinese students who laughed at our Treasury Secretary’s assertion that their assets were safe, must face:
We’ve done things you haven’t and we know things you don’t.
So laugh all you want, but until you prove otherwise, our deficits don’t matter, and the joke’s on you.
We didn’t get flying cars, energy independence, or pictures of stars from the $30 Billion plus spent on the moon missions. What we did get was a line of credit and credibility that has lasted forty years. If it was mindfreak, it’s the greatest mindfreak the world will ever see. We can debate the virtues and pitfalls of fiat money and deficits so big, only the likes of Carl Sagan could comprehend, another time. I only wanted to show the connections. I hope I’ve done that.
Your Nickel’s Worth (almost)
Fun Fact: The US five cent coin currently is the closest thing to real money produced by the mint, with a melt value equal to 82% of its face value.
If you don’t mind the funny looks, your local bank will give you a $100 box of nickels. This technically fulfills a promise made earlier in the post.
Here we go again?
Mark Twain would be glad to know that, 99 years after his death, history still rhymes. This era has a very expensive evil necessity (bailouts), a lingering war (two, actually), and a young, charismatic President. Seems like all that is missing is a space mission, right?
I Know a Trekkie when I see one…
Dear Mr. President,
Despite your cool demeanor, dubious origins, and unusual auditory appendages, you are not Spock. Don’t even try to sell me that you didn’t grow up idolizing the crew of the Starship Enterprise. Whenever you leave a room, people are talking about a certain striking similarity:
Coincidence?…………I think not
I would strongly suggest that you abandon any talk of new manned space missions and focus on 2009: A Fiscal Odyssey. A recent survey suggests that 46% of Americans believe most of our problems are inside the Van Allen belts (this statistic becomes more impressive when reconciled with the fact that 55% of Americans have no idea what the Van Allen belts are). Here’s the thing: If the moon missions were real, you can fund your health care plan by selling “Been There…..Done That…” T-shirts when someone else lands on the moon. And if it was fake, well, I think it’s too late and too expensive to fly a bunch of trash to the moon, arrange it, then make tire tracks and footprints to match the pictures…..so we’ll just make T-shirts that say, “Suckers!!!” (These probably won’t sell as well).
I don’t really blame you for confusing TV heroics with real life, because Hawaii doesn’t have any real sports going on (and no, the Pro-bowl doesn’t count). You see, kids need to look up to deeply-flawed, drug addicted ego-maniacs like Lenny Dykstra and Michael Vick so they can experience the kind of crushing disappointment that will shape their existence at an early age. We can’t all grow up to be president, so if you really want to help, sign an executive order or something that sends the Cubs to Honolulu.
One more thing, you may think you’re all special and everything because you’re getting to hob-knob with the big-shots of the financial world and give them scads of money. I wouldn’t get too excited about being asked to “beam down” to planet Bailout. Every Trekkie should understand The Lesson of the Red Shirt:
2012 may be closer than you think, Ensign.
HERE’S YOUR PROOF!!!!
In doing research for the piece, I ran across one of the best goofs I’ve ever seen!
You can write on Einstein’s blackboard to prove whatever you want!
Here’s the link:
List of Significant events
1873 – Coinage Act of 1873 (silver de-monetized)
1900 – Gold Standard Act
1933 – FDR’s gold confiscation
1944 – Bretton Woods Agreements signed. International gold standard established.
1958 – US balance of payments crisis begins.
1961 – JFK proposes moon missions.
1962 – First American earth orbit (John Glenn).
1963 – Kennedy’s dollar “good as gold” speech.
1963 – Fed Chair’s “down to the last bar of gold” speech.
1964 – Last year 90% silver coins were produced for circulation.
1965 – Silver removed from quarters and dimes, half-dollar reduced to 40% silver.
1967 – Apollo 1 fire kills 3 astronauts during a test exercise.
1968 – Apollo 8 first lunar orbit
1968 – End of silver certificate redemption
1969 – Apollo 11 moon landing
1969 – Last US circulation coin with any silver content minted (Kennedy half Dollar)
1970 – Last three Apollo missions cancelled
1971 – US unilaterally terminates conversion of dollars to gold
1972 – Apollo 17 – last manned moon mission
To anyone who made it this far:
Thank You so much!!!!