In thinking about gold, I have drawn the distinction made by San Francisco economist Henry George who talked about the difference between wealth for personal use and capital that is put back into new tools. The good people at Lew Rockwell point out that if I hold my personal wealth in a Real Bank it will be leveraged into Real Capital, therefore there is no Real Difference between wealth and capital. Yet even if this were also true for holdings in Real Gold, I think we can still distinguish between wealth and capital. But I'm willing to grant that Real Gold held by a Real Bank may be somewhat more productive than fear itself.
As for the assumption that Real Banks will take Real Savings and turn them into Real Capital, I think this is the problem. From what I understand, banks are not producing capital investments at any kind of usual rate. And they are not doing it because of the damage done by the great evil that Henry George warned against-land speculation. Therefore, the dramatic increase in American savings is not now being leveraged into new tools for American workers. The pressures of the current economy will keep labor compensation low on one side while disrupting on the other side the assumption that increased savings by labor should be leveraged into capital investment. Instead, Real Banks are gouging labor further on the debt front. Prechter has more to say about what has happened to Real Banks in his July newsletter.
Which brings us to the last word in successful investing, Warren Buffett. No doubt his influence has sometimes weighed down upon wages from time to time as he seeks to maximize earnings from Dairy Queen or Geico. Last week he admitted that he had to cut the jobs of 500 people. Yet Buffett says that it may be time to think about a second stimulus which would be a Real Stimulus this time. What interests me about Buffett's position--all puns intended--is that he speaks as an exceptionally engaged investor who follows carefully how his wealth, and therefore his capital, has effects on precise productive labors.
If Buffett can stomach the idea of a stimulus then we should raise the question of costing into the new generation of investment a better life for labor in long-term salaries, benefits, and pensions. We are the workers upon whose labor the power of U.S. Treasury notes depends--and we have been valued in this crisis as worthy enough to carry the world's savings accounts on our backs. Therefore cost us in at the full value of a whole life.
Maybe there is nothing that can be done about a future that is already written by the finger of God. Just save yourself if you can. But when it comes to the problems faced by the investor classes and their personal wealth preservation in this sick economy, at least Buffett still talks as if the investor classes are in the same boat with the rest of us and how we need to pull together and share some of the risks. While we're at it, we should not be afraid to discuss the opportunities that this crisis holds out for labor. Discussing it today will be cheaper than discussing it tomorrow.
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