Trading Batteries
Research for Online Investors

by John Dalt

11/30/09

Growing up with a brother close in age to play with, explore and discover interesting things with, that is a gift that lasts a lifetime.  Reading the weekend news this morning causes me to ‘flashback’ to one of our economic lessons.

Kids play together building things outside with tools and saws.  We built a ‘jet engine’ out of an old tin can and copper tubing.  Add gasoline, funnel and a match; we were lucky not to burn dad’s barn down.  He would have been mad!

As we got older many of the toys we played with, and the experiments we conducted required batteries.  This created a battery market between the two of us, trading back and forth depending on the other’s need to power his latest gizmo.

We didn’t realize it at the time, but batteries were our ‘currency’, they had value.  They couldn’t be replaced by anything else.  They were rare.  New batteries cost ten cents, MORE THAN A CANDY BAR.  Mom wouldn’t just go buy a battery because we wanted a new one.  We lived in the country, and went to the store only on Saturday.  Ten cents didn’t ‘grow on trees.’

Batteries were our gold.  Limited supply, in demand and always needed.  We would trade them back and forth, whoever ‘needed’ the batteries the worst letting his desire overcome his common sense for the value of a battery.  Mom was our Federal Reserve, she would introduce a new battery into the inventory every couple of weeks or so.  This served to curb our enthusiasm, or battery values would have spiraled into the stratosphere, even almost dead ones.

Ben Bernanke, Chairman of the Federal Reserve, wrote an op-ed piece in the Washington Post this weekend.  Uncle Ben extolled the virtues of “managing the banking system….system of financial oversight…foster financial stability….promote economic recovery without inflation.”  The Chairman of the Fed is ‘talking his book’ so to speak.  He has a stake in a powerful Fed, where many believe the Federal Reserve is the problem.  Congress is holding hearings on oversight of the Fed.

The idea that money must be controlled; that the economy must be managed is only enticing in the dreams of bureaucrats.  Perhaps the problem is too many people never learned a trade like gardening or plumbing.  Their interests are beyond the mere living of a full life, they want to organize civilization.  Our mother didn’t try to restrict the trade of batteries; she just bought a couple of new shiny ones every so often to replace the dead ones.  Kind of like replacing worn out money or torn dollar bills.

This organization of messy things (commerce) is the providence of world improvers.  Control allows them to push their agenda.  One quote from Chairman Bernanke tells the lie about the Federal Reserve, “Promote economic recovery without inflation.”  In 1913, gold was worth $20 per ounce.  If the government wanted more money in circulation, they had to buy gold and put it in a vault.  It was a system that constrained the government from printing money.  It was a system that did not allow for lengthy foreign wars, entitlement spending, or expansionist dreams.

Thomas Jefferson famously attacked the Bank of the United States, "I sincerely believe…that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

Is it any wonder that gold is worth over $1100 dollars per ounce today?  Ever since the Federal Reserve was created in 1913, the dollar has suffered from continual inflation.  The Fed is a political creature in that it only exists to do the politicians will.  Continually inflate the money supply to encourage economic growth thus keeping unemployment as low as possible.  Employed voters don’t vote the bums out of office.

Today’s dollar can buy less than two cents of a 1913-dollar bill.  The last Consumer Price Index shows that inflation has taken away 35% of the value of the dollar in just the last 10 years.  We brought you this information three weeks ago in, “What is in Your Wallet?"

The Federal Reserve works daily to destroy the value of the dollar, but do it in an orderly fashion.  By continually inflating our economy they destroy the value of savings, and push tax collections higher on everything from property, sales, capital gains, and income.  All these taxes increase, without the congress ever recording a vote.  Witnessing the workings of congress, they would not have the same finesse exercised by the Federal Reserve.  Nevertheless, does that mean we need it?  I would rather trade batteries with no outside influence.

Witness the planned Destruction!

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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