Thursday, March 24, 2011

Right Wing Goldbug Rhetoric

Egon von Greyerz (von G) is a goldbug. His writings at zerohedge.com are laced with scary assertions about impending financial doom, mixed with facts that, on close analysis, have little relevance to his conclusions. I admit to some fascination with his rhetorical approach, which seems quite typical of the goldbugs and conservative doomsayers that I have previously encountered. I think his message is mistaken, but like so many theories emanating these days from conservative ranks, the rhetoric is very persuasive. Let me use von G’s essay “A Hyperinflation Deluge is Imminent, and Why, Therefore, Bernanke’s Motto is ‘Apr├Ęs Nous le Deluge’” to analyze this particular goldbug’s reasoning, and why such rhetoric as his makes it seem persuasive.
Von G starts by sarcastically stating what he thinks is the opposing point of view—that “Obama and Bernanke are the dream team making the US into the Superpower it once was.” He follows up with invective: “amazing the castles in the air that can be built with paper money and deceitful manipulation of all economic data. And Madame Bernanke de Pompadour will do anything to keep King Louis XV happy…” Note that all these statements are devoid of fact. But the sneering sarcasm serves a purpose, as it does for Rush Limbaugh and Fox News commentators. It expresses contempt for those who do not begin by agreeing with him. In doing so, it appeals to the authoritarian instinct in all of us, implicitly saying “I know what’s true and right, and I only respect those who agree with what I am going to say.” The sneering and sarcastic tone thus becomes a marker, which frequently reappears to remind the reader of the disrespect that he would earn by questioning the author’s thinking.
The next paragraph is a good example of how the sneering tone signals to the reader how to view the facts that are stated, even before the reader has thought about them for him or herself. While von G truthfully says that Obama and Bernanke pushed a lot of paper currency into the market, he signals his disapproval with the loaded term “flooding the market with paper” (emphasis added), where “flooding” means that the action is destructive. They do this, he says, knowing “they are committing a cardinal sin” to retain power. These additional claims are pulled from thin air, but tell the reader that printing paper is not just a mistaken policy, it’s really an illicit one that only selfish and despicable people would do.
The claimed consequences are then described in a series of apocalyptic statements and predictions, all without evidence or attribution, and some without relevance. A “deluge of unprecedented magnitude is both inevitable and imminent” and “life will be very different for coming generations.” Next, we learn the sad but unrelated fact that “we have reached a degree of decadence that in many respects equals what happened in the Roman Empire before its fall.” Also sad but irrelevant to the financial problem is that “Children are neither taught ethical or moral values nor discipline” and “Both press and television create totally false values and ideals.” There is more of the same, as well as some overstated demographic data: “More than 50% of children in the Western world grow up in a one parent home” (perhaps in the US, but in Europe too?); “Most families do not have a meal around the dinner table even once a week” (ditto); “Everyone must be young and beautiful often enhanced by surgical or digital means”; “Old people have little value.”
With the reader now depressed, frightened, and compliant, von G makes his economic argument. Here it is, in its entirety: “Since most of the prosperity that has been achieved in the last 40 years is based on printed money and debt, it is totally false and unsustainable. A major part of the Western world has improved their [sic] living standard, by exchanging services and swapping houses at ever-rising prices financed by printed paper and credit. The perceived wealth that is created out of this is totally illusory and ephemeral. We have created a world economy which is based on debt and thin air.” (original emphasis) Let us consider his points.
(1) “most of the prosperity that has been achieved in the last 40 years is based on printed money and debt.” There is a name for printed money plus debt: purchasing power. An increase in purchasing power is virtually synonymous with increased prosperity; what von G is saying, therefore, is nothing more than a tautology, or in mathematical terms, an identity. His implication, however, is that while currency and debt have increased, true prosperity has not really grown as well. If his claim were true, there would have been rampant inflation throughout the last 40 years, since adding to purchasing power without increasing real prosperity achieves nothing but a rising level of all prices. Indeed, von G implies that this happened when he attributes this illusory prosperity to “exchanging services and swapping houses at ever-rising prices financed by printed paper and credit.” But that is not true of the last 40 years. The quantity of money and credit has risen without a corresponding rise in inflation. Some prices have, indeed, gone up; many others have fallen. As well over a billion people around the globe, lifted from abject poverty to middle class or better lifestyles, well know, the increase in prosperity has been real.
(2) The prosperity “is totally false and unsustainable.” It makes no sense to claim that 40 years of prosperity are illusory. They happened, and whatever happens now or in the future, those 40 years cannot be taken away. Of what does prosperity consist? My answer would be that it consists of the means to satisfy desire. The more desire, the more is required to satisfy it. The aggregate level of desire was once closely tied to population growth, but in modern times innovation and marketing have become key drivers of desire and prosperity as well. To claim, as does von G, that modern prosperity is illusory is to assert two ridiculous falsehoods: that during these decades there has been no population growth, and no marketing and innovation.
(3) “The perceived wealth that is created out of [“exchanging services and swapping houses at ever-rising prices financed by printed paper and credit”] is totally illusory and ephemeral. We have created a world economy which is based on debt and thin air.” (original emphasis) Without question, both currency and credit have grown greatly. But prices for housing and services have not risen at the same rate; what was exchanged for $50,000 in 1971 is not now exchanged for $300,000 in 2011. Many services have not risen, but actually fallen in price, and most housing prices are back to pre-bubble levels despite huge increases in paper money during the last two years. In other words, the simple correlation von G suggests does not hold and does not make any sense.
As to von G’s claim that “the perceived wealth that is created out of this is totally illusory and ephemeral,” he is not making an argument or providing reasoning; he is simply re-stating an opinion.
At bottom, then, von G’s views rest on factual errors and illogical reasoning. Nevertheless, his writing can seem persuasive. The reason, I believe, is that in addition to the authoritarian and superior posture that he assumes from the start, there are two more rhetorical devices embedded in the key paragraph discussed above. First is the frequent repetition of the same damning charge: that the current prosperity “is totally false and unsustainable,” “totally illusory and ephemeral,” and “based on debt and thin air.” Repetition illustrates the depth and force of his conviction, and since von G writes authoritatively and coherently, the reader who does not or cannot analyze what he says is swept along, just like the listener to a Rush Limbaugh radio broadcast. The second rhetorical device is to mix truthful claims in with the erroneous and questionable assertions upon which he actually relies; for example, von G points out that levels of printed money and debt have risen, and how much, and so have prices. As I think I showed, these true assertions do not lead to the conclusions that von G draws. They are actually beside his point. But just as advertisers pay famous people for endorsements, even of products they never use, so the presence of true factual claims lends plausibility to the other claims and assertions, however illogical or mistaken they may be.
In short, von G’s rhetoric is brilliant and highly persuasive, but his actual point of view is badly mistaken.

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