The Joy of Central Planning

Fri, Nov 1, 2013 - 5:08am

When thinking of central planning, the things that often spring to mind are the 3- and 5-years plans of the Soviet Union, PRC or any number of Eastern Bloc states in Europe during the cold war. We can think of grey, soulless bureaucrats in a Kafkaesque maze of government offices, or the upstanding Party members in the grey concrete halls of the Ministry of Plenty.

But centrally planned economies are not by any means new, nor are they exclusive hallmarks of communist regimes. Some oft-forgotten examples:

  • Park junta and 3rd/4th Republic in South Korea
  • Military dictatorships in general, such as Burma (Myanmar)
  • Religious autocracies, such as Iran
  • Monarchies such as Saudi Arabia
  • Any economy during major war (esp. one threatening existence of nation – see most participants of WWII, though arguably the United States was least at risk)
  • Dictatorships in general (Gadaffi’s Libya, Hussein’s Iraq, Mubarak’s Egypt)
  • Joseph and the Pharaoh, collecting and storing 20% of the grain and foodstuffs during plenty, for redistribution / sale during the subsequent years of famine and drought

The United States is most often held up as the shining example of a ‘market economy’ or a ‘free market’ – where objective, impartial and (in the long run) infallible rules of the market shape the economy, development, resource utilization and output. It is the so-called ‘textbook example’ of a free market, indeed, the champion and guarantor of free markets worldwide – thanks to its economic influence, trade relations, investment prowess and expertise, available investment capital, rule of law, benevolent military might…

While you may notice that I am drifting into sarcasm, most of the world still hold many or most of these to be true, even if they might consider the US misguided on one policy or another, too arrogant, too interventionist, etc. But in truth ALL of these factors can be questioned and if not laid to waste, certainly taken off their perceived pedestal:

The US Central Bank dictates, in concert with (who is the marionette and who is the puppeteer?) the Government monetary policy for the global reserve currency, and thus the world. The cost of currency/capital/loans are by definition of the current system FIAT – centrally planned.

Regulatory laws (or lack thereof) in ALL industries and areas directly influence, shape and guide the course of development – from deciding the survival/regeneration/downfall of entire sectors, down to the required thickness of workboot soles.

Property regulations, at both the Federal, State and Local level dictate the terms of property and productive asset ownership, the type, number and specific characteristics of enterprises which may be established in a given locale as well as in the country as a whole.

Tax and benefit laws are central to shaping societal behavior, social stratification, wealth transfer, performance incentives, investment and saving patterns. They are also used as an alternate/unofficial regulatory mechanism, again fundamentally altering the economy’s structure.

Six words: Patient Protection and Affordable Care Act

In Communist economies and societies, there was once a widely known doctrine that ALL activities could be divided into three categories:

  1. Supported
  2. Tolerated
  3. Forbidden

This applied to EVERYTHING, from personal expression, art, economic ventures, research, trade relations with specific countries or companies – even the citizens themselves, ultimately fell into one of these buckets.

In looking at the system in the US or most other developed Western countries to some degree, I am hard-pressed to not see the exact same type of categorization taking place on a daily basis. The size of these categories may vary, the boundaries between them may be more permeable (mainly through the judicious application of ‘lubricant’ to the palms of those involved formulating policy).

The size, power, resources of the state have become so large as to seem Olympian in scale to the average individual member of society. Not just big, but SO huge that its size no longer even bears discussion, or consideration. In spite of all the rhetorical battles over whether .gov should regulate more or less, whether companies have too much power/status or if they are being stifled by regulation, the question that seems to me to be most important is very rarely asked: why should .gov have the power at ALL to be the arbiter of how and whether the economy develops? How and whether the citizenry is able to survive, work, earn a living, educate their children? And if we decide that yes, government SHOULD do these things, how can we expect it to carry out this task with so few citizens expending any effort to think through and be involved in the affairs of government? Currently in the US, there is not even a single-year budget, and can-kicks have sharply decreasing half-lives. At least the Communists had (have) 5-year plans, indicating some modicum of forward-thinking and long-term planning.

The problems with central planning remain the same, no matter how sophisticated a planning model is used, how accurate the measurement of economic activity is, or how powerful policy tools are available to shape the development and speed of the economy. In the end, the artificially created construct of the system becomes dependent on the ‘shaping’ or ‘managing’ forces for its survival. Maintaining these forces requires energy, which must be derived from the output of the system. What we are seeing today is the approach of the point where the energy required to keep the structure together, coupled with the amount of energy being leeched off by parasitic entities of many stripes, ultimately exceeds the surplus output of the economy. Like the great white shark, the system laboring under these conditions, as well as a debt-based money system, must constantly keep moving to survive. As Turd and others keep telling us, QE is ∞, and in my view this 'structural drag' is the other reason for it, besides exponentially growing 'monetary base' required by compound interest and currency based in debt. Whether you look at this as just part of the buttress supports holding up Jim Willie's Tower of Treasuries, or more broadly the Petrodollar Reserve Currency, or even more broadly the Fiat Ponzi (TM), one of its functions is to maintain central planning control.

When communist regimes switched from centrally planned economic models to ‘free market’ ones, many of them implemented a shock doctrine: a rapid, forcible transition with quick, sudden moves, quick privatization and drastic monetary policy shifts. The rise of the oligarch class, the political instability and government corruption/ineptitude, the eventual (but apparently all but inevitable) drift towards nationalistic, authoritarian-leaning political leadership in these countries was directly caused, or indirectly enabled by BOTH: the central planning AND the rapid transition to a different model. Whether this is something that could or would happen in the US is debatable, my crystal ball is very much clouded on this aspect. The structural stresses caused by ‘central planning’ are, however quite apparent -- and one might argue that the 'shock doctrine' has begun long ago, and is well underway.


Turning back to the topic of the ‘original’ central command & control economies, specifically the USSR – is ‘collapse’ inevitable? Was the ‘liberalization’ of economic policy and the current setup REALLY an abandonment of central planning – or could it be argued that current conditions in Russia are just as, if not more, centrally planned just like the US – minus the benefit of the global reserve currency? Just so there is no lack of conspiracy theory, there is a fascinating story to be found in the accounts of Anatoliy Golitsyn. He was a KGB defector to the US, who warned that the Soviet communist regime was playing a decades-long game of deception – faking its death to try to take over the world by exporting communism. Interesting alternate view of modern history… His books are ‘New Lies for Old’ (full book in PDF here) and ‘The Perestroika Deception’ (full book in PDF here).

For those with a couple of hours to kill – interviews with the editor of Golitsyn’s second book:

Perestroika Deception Series 1 -Communist Long Range US Takeover Deception Strategy
The Perestroika Deception Series 2_2003

Some Golitsyn predictions from 1984:

“It is more than likely that these cosmetic steps will be taken as genuine by the West and will trigger a reunification and neutralization of West Germany and further the collapse of NATO. The pressure on the United States for concessions on disarmament and accommodation with the Soviets will increase. During this period there might be an extensive display of the fictional struggle for power in the Soviet leadership. One cannot exclude that at the next party congress or earlier, Andropov will be replaced by a younger leader with a more liberal image who will continue the so-called "liberalization" more intensively.”

About the Author


Nov 1, 2013 - 5:14am


good morning!

Spartacus Rex
Nov 1, 2013 - 5:27am

Wait A Minute...

My economy is not "centrally planned", is yours?

Nov 1, 2013 - 5:38am

Red wine thurd!

A little intoxicated!

gold slut
Nov 1, 2013 - 6:31am

Spread of communism.

Excellent article! Best so far.

Some very interesting dots getting joined-up here, for example, Angela Morekill, Mustkill, whatever her name is, was an East German Communist Youth Organizer in a previous life, and is now one of the leading figures in the EU.... hmmmm.

Wasn't the POTUS some kind of Community Organizer in a previous life?...... Hmmm.

Seems we have far too many 'ex-organizers'......Hmmm.

Nov 1, 2013 - 7:27am

drifting into sarcasm..............

I confess;

I did not read the two books or watch the two videos, but otherwise, WTH are you people doing up at this hour?

Boy that USD looks good today , huh?
Just another day in Wonderland here, Alice.

Nov 1, 2013 - 7:27am
Nov 1, 2013 - 7:47am

Complexity and energy

It happened to Rome, the Soviets, multiple Chinese dynasties, I guess you could say ancient Egypt (the original complex society based on agriculture), and it will happen to the West someday, this being the inability to find the energy to run the ultra-complex economy/society.

The big bills out of congress (ACA, Dodd-Frank) for instance. Either of these bills could have been 2 pages long, but they aren't, and it took 3 years to write 100,000 pages of ACA rules. I pose that it is impossible to hire enough competent people to implement a system that complex, even given a decade to do it.

I'm hearing of doctors leaving the system and working for cash or barter, like the fringes of the Roman Empire welcoming the "barbarians" (who weren't as barbaric it seems) as a way out of Roman taxes and control.

A complex system can change it's state at startling speed. Maybe another few weeks of water-cooler discussions and a few libs voicing their disappointment with Obama, and suddenly millions of libs decide it's OK (or even fashionable) to not love Obama anymore, then, with approval ratings in the low teens he's thrown under the bus along with ACA.

We can always hope.

My wish. A constitutional amendment that says any legislation that a majority of both chambers can't sit still and hear read aloud can not be voted on. You'll see some clearly written 2 page bills after that.

Nov 1, 2013 - 8:22am

This fits here

I think JY mentioned this site in his last writing. It is quite outstanding. I haven't got through this one yet but especially check out from the 43 minute mark.

What is sought in the 3rd World..... Imposing authoritative measures to opposing unions, welfare programs and not using resources of their government for its people but rather foreign investment/investors.

The more favorable the investment climate, the more human rights violations rose, and foreign aid was increased.

Mr. Fix
Nov 1, 2013 - 8:32am

Good morning comrades:

I think the “shock doctrine” will be introduced soon, but it will have nothing to do with free markets.

The “shock” will be the realization that there has been no free markets for quite some time,

and unless we are willing to fight and die for them, there never will be again.

I don't think central planning is about to collapse, only the dollar will, what will be left is a global totalitarian regime, and there won't be any good guys coming to the rescue,

we ARE the good guys, and humanity is going to need us.

Nov 1, 2013 - 8:41am

Lou Reed was never more apt

Lou Reed was never more apt here (with lyrics)

Video unavailable
Nov 1, 2013 - 8:52am

Mike Kreiger question

Even though this is not the A2A Thread I think is fits here too. We all know that the problems the world faces are multifaceted. You left the finance business to talk and write about them. To address the issues and supply some solutions. There are many others that are like minded. Jim Quinn, Grant Williams, Andy McGuire, Jessie, Mike Snyder, Jim Sinclair, Jim Grant, Roberts, Schiff, Sprott, Rickards and the Tylers to name a few. Maybe even the likes of Dalio, Druckenmiller, McAlvany, Stockman, Nenner, Bass and Taibbi. Speaking from a US centric point, one of the simple solutions is to vote all the incumbents out. The problem is that the ones that take their place are still co-opted by the system and lobbyists. There is always talk about a grass roots movement but it dies on the vine because it it too fragmented and they try to compete using the same methods that those in control already own much more of. Would you consider trying to form an organization of all those that are like you? Form a cooperative entity. By combining all of your viewers maybe the "Internet Party" will be born. A succinct message, spread by like minded people. Not through expensive media buys. Spread by intelligent writings for free on the internet, under one roof. Start with a simple slate. Run on the platform of the original Constitution of the United States. Free speech, free enterprise and constitutional money. Use the K.I.S.S principle. Let the republocrats argue against the US Constitution.

Invite like minded people who are interested to join, Endorse those who subscribe to the new platform. Elect those to office who stand up for the original Constitution.

sierra skier
Nov 1, 2013 - 8:58am
procog murphy
Nov 1, 2013 - 8:59am


..... to Murphy. Let it Begin!

Nov 1, 2013 - 9:05am

PBOC Governor Zhou Xiaochuan On Gold

- the Chinese must be bargain hunting today, and their currency's rise only makes the price look better for a buy in....

gold slut
Nov 1, 2013 - 9:31am

Mugged by the tax man.

It has to be said, reading all the other Turdites grabbing their bargain-basement shiny, has been very hard for me.

I had to pay the taxes on my car etc this month, so have no spare ponzi coupons! Handing over my hard-earned to the tax man instead of getting a bargain was hard. This is killing me!

The only good thing about it is that as I will have some dry powder again next month, I can confidently predict that the metals prices are going up for the next month, knowing my luck

Nov 1, 2013 - 9:39am

JP Morgan spin

Benmosche on Bloomberg says "JPMorgan not the bad guy, we all are the bad guys". Get it?

Nov 1, 2013 - 9:43am
Nov 1, 2013 - 10:12am

Potential Silver Supply Shortage Upcoming -> Advanced Alert

Potential Silver Supply Shortage Upcoming -> Advanced Alert

Hello GoldSilver Subscriber,

The following communication was made yesterday at 7:35 AM Pacific by the United States Mint Program Manager of the Precious Metals Group regarding their American Eagle Silver Bullion coin allocation policy:

"The United States Mint will issue its last weekly allocation of 2013 dated American Eagle Silver Bullion coins on Monday, December 9, 2013. We will begin accepting orders for 2014 dated American Eagle Silver Bullion coins on Monday, January 13, 2014."

What does this mean?

In short...

Silver supplies will tighten and silver premiums will rise industry wide.

Here is why...

Throughout 2013, the U.S. Mint has been narrowly meeting the public's silver eagle coin demand.

As a matter of fact, the U.S. Mint is about to break its 2011 all time record of 39,868,500 American Eagle Silver Bullion coins sold.

Being that today is November 1, 2013... we are only 83% of the way through 2013's calendar year.

Officially 39,175,000 silver eagle coins have sold thus far in 2013.

The 2011 sales record will officially fall some time next week.

Silver Eagle Coin cupboards are currently low.

As it stands now, the vast majority of high volume silver dealers are not sitting on hoards of fresh 2013 U.S. Mint Silver Eagle coins.

The upcoming 35 day silver eagle coin hiatus will most likely produce a shortage of the world's most popular silver bullion investment vehicle and thus... produce a growing shortage of other silver bullion products as a consequence.

Nov 1, 2013 - 10:29am
gold slut
Nov 1, 2013 - 11:07am


Given your recent "taxing" experience, you seem the perfect beneficiary.

A kind and generous Turdite donated yesterday a 6-month subscription to The Vault. In the memo, he asked me to pick a worthy and deserving non-Vault Turdite to upgrade. YOU WON!

Congratulations!....I guess, if you can say that, given that you now have 6 months of access to all of my hyperbole and ranting...

Nov 1, 2013 - 11:23am

JPMorgan And Citigroup Put Currency Dealers On Leave As Foreign

JPMorgan And Citigroup Put Currency Dealers On Leave As Foreign Exchange Scandal Widens

* see euro $ today and the GBP and USD - it's all gamed, like Libor by a few Banks!

Nov 1, 2013 - 12:10pm

after USSR collapsed, 20 million russians

died of unnatural causes in ten years.

i'm wondering how many will die when USSA collapses.

Nov 1, 2013 - 12:17pm


"In Communist economies and societies, there was once a widely known doctrine that ALL activities could be divided into three categories: Supported, Tolerated, Forbidden"

True story from my county: Two dairy farmers living across the road from each other. The first is a pacifist Amishman who grazes his cows on his pasture land, keeping only as many cows as the land itself will support naturally without overgrazing, and offers completely organic, chemical and anti-biotic free grass-fed raw milk to his customers. People line up to get his healthy, completely natural, and very fresh milk (milking to market is usually just two days), so he can charge twice as much as regular milk and still sell out his stock each week.

The second farmer across the road keeps five times the number of cows his acreage could actually support, keeps his cows in huge milking factory barns, and has them so overcrowded they are being fed on imported feed corn (which their stomachs don't tolerate well when that is all they are fed) and thus due to diet and overcrowding he also has to feed them antibiotics all the time. He raises Monsanto corn on his lands, spraying round-up and chemical fertilizers everywhere, multiple times a year. The stench from his overcrowded barns is a neighborhood blight. His round-up and antibiotic laden milk sits in tanks for a week at a time before being delivered for pastuerization, time to market 10-14 days.

Whose operation gets raided by USDA agents, in full body armor and toting M16's? The pacifist Amishman. Because he sold some of his raw milk across the state line 7 miles to the south. Because HIS all natural, chemical free, organic grass-fed operation (outside of the USDA/milk industry power structure) is clearly a menace to public health and cannot be allowed. You know, for the children.

Supported, tolerated, forbidden. Got it.

Nov 1, 2013 - 12:35pm


The war on real milk is real and documented quite thoroughly on these interwebs. Anyone wishing to see how the government assaults our health need only reasearch the war on milk. Perhaps you should write an article about this Pining?

Only real, raw milk for ag1969 and family. The thing I like the most about raw milk: It actually tastes like milk!

Pateurized, homgenized milk from antibiotic and BGH infested cows is not milk, it is milk flavored toxic junk that I will never put in my kid's little bodies.

Thankfully, here in NH, they allow the very dangerous practice of buying real, raw, organic milk, as nature, not the USDA, intended it.

Nov 1, 2013 - 12:47pm

Amish milk raid

Sounds more like the DEA raiding Walt & Jesse's meth lab. Sure seems to me that a skinny guy with a bow tie could have stopped by for tea and resolved the issue.

I wonder what an armed raid costs a government agency? Planning, preparation, manpower, back-up team on standby, processing the culprit--all for a fine of a few hundred dollars? Pining--please tell us you live in North Korea and not the US!

We have a friend who milks her goats and sells milk and cheese to the locals--all natural, organic and professional. But she always says "This is for animal feed only!" and even writes that on her containers. It sure tastes good. I should try more varieties of pet foods. Who knows what I have been missing.

Nov 1, 2013 - 12:50pm

More central planning

Everybody in the financial world knows what's about to happen...and they are openly preparing for the MOTHER of all CRASHES! Central banks Make Swaps Permanent As Crisis Backstop "Central banks in advanced economies from the U.S. to Europe and Japan said emergency currency-swap lines established during the global financial crisis will be made permanent, providing safeguards against future turbulence. " This "swap window" will allow the fire hoses of money to flow freely very soon with every nation in the world trying to put out the FLAMES of the Global Monetary Implosion. If this flow of free money works to save the system you will see $10,000 gold and $1,000+ silver almost instantly. If it doesn't... I doubt gold and silver will even be traded on any "exchange" anytime soon as EVERYTHING in the electronic financial system will have been destroyed. Should be a very interesting time for mankind. I have laid out my Timeline for the events to unfold in the Friday Road Trip here:

Timeline on the Road to RootA Watch for some more bank closure announcements very soon...maybe tonight? May the Road you choose be the Right Road Bix Weir
Spartacus Rex
Nov 1, 2013 - 12:52pm

Finland’s Gold by Alasdair MacLeod

On Wednesday Finland gave in to public pressure and revealed where she stores her gold reserves. The statement followed a press release by the Bank of Sweden on similar lines released on Monday.

The totals (in tonnes) for these two Scandinavian countries are as follows:

Location Sweden Finland
Bank of England 61.4 25.0
Swedish Riksbank 15.1 9.8
New York Fed 13.2 8.8
Swiss National Bank 2.8 3.4
Bank of Finland - 2.0
Bank of Canada 33.2 -
Total 125.7 49.0

So far, so good. But then the Head of Communications for the Bank of Finland added some more information in Finnish in a blog run on the Bank's website. It is not available in English, so I asked her for a translation, but I am still waiting.

Instead, a Finnish reader of my own blog and a Finnish journalist who has been following this topic have independently given me an English translation of a highly relevant and interesting paragraph, three from the end. This is the journalist's:

"Maximum half of the gold has been within investment activity over the years. Gold has been invested among other things in deposits similar to money market deposits and using gold interest rate swaps. Gold investment activity is common for central banks. The risks associated with gold investments are controlled using limits, investment diversification and limitations concerning duration."

And my reader's translation:

"Throughout these years no more than half of the gold has been invested. Gold has been invested in for example deposits similar to money market deposits and gold interest rate swap agreements. Gold investment activities are common for central banks. Risks related to gold investments are controlled with limits, decentralising investments and limits regarding run times."

Half Finland's gold is stored at the Bank of England, and "no more than half" is "invested". If any "investment" is to take place it would be in London. It is not immediately clear what is meant by invested, but presumably this is a result of translation of what has happened from English into Finnish plus explanation for a non-specialist readership. However if it has been invested, then by definition it is no longer in the possession of the Bank of Finland, and will most probably have been sold into the market in return for a promise to redeliver at a later date. This follows the Austrian National Bank's admission to a parliamentary committee a year ago that it had earned EUR300m by leasing its gold through London.

The evidence is mounting that Western central banks through the Bank of England have been feeding monetary gold into the market through leasing operations. Indeed, the Finnish blog says as much: "Gold investment activities are common for central banks".

This explains in part how the voracious appetite for gold by China, India and South-East Asia is being satisfied, without the gold price rising to reflect this demand. It is also consistent with my disclosure earlier this year of the discrepancy of up to 1,300 tonnes between the gold in custody as recorded in the Bank of England's Annual Report, dated 28th February 2013 and the amount recorded on the virtual tour on the Bank's website the following June.

ancientmoney Spartacus Rex
Nov 1, 2013 - 1:11pm

@Spartacus Rex re: Finnish gold . . .

"This explains in part how the voracious appetite for gold by China, India and South-East Asia is being satisfied, without the gold price rising to reflect this demand."


Yes, it does.

I have mentioned here before that just a few years ago, China had almost no gold reserves. They had bought into western-style finance hook, line and sinker.

However, China started getting quite nervous when the system almost died of sudden heart attack in 2007-08, knowing their reserves were all USTs and other fiat paper intrinsically worth zippo.

Tim (TurboTax) Geithner, who was Treasury Secretary at the time, went to China twicew, in early 2010 and again in 2012. Ever since then, China has been gorging on western (CB?) gold, at bargain-basement prices.

So, was this gold giveaway a quid pro quo for China not destroying the UST market?

Or, was it a way to level the "gold reserve playing field" in preparation for the New World Order Financial System To Come (NWOFSTC)?

Or a bit of both? I think so.

Nov 1, 2013 - 1:22pm


Because of multiple attempts to set up Luke in his career we think its best to make this situation public.

This situation is extremely weird surrounding the circumstances and that's why we decided to go public with it.

Spartacus Rex
Nov 1, 2013 - 1:54pm

Uh, You Need To Let Someone Know B4 U Die! (Nice Video)

(Hmm: He who gives while he lives, also knows where it goes!)

Old Safe Given Away for Scrap Filled With Gold Coins


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Key Economic Events Week of 5/13

TWELVE Goon speeches through the week
5/14 8:30 ET Import Price Index
5/15 8:30 ET Retail Sales and Empire State Manu. Idx.
5/15 9:15 ET Cap. Ute. and Ind. Prod.
5/15 10:00 ET Business Inventories
5/16 10:00 ET Housing Starts and Philly Fed
5/17 10:00 ET Consumer Sentiment

Key Economic Events Week of 5/6

5/9 8:30 ET US Trade Deficit
5/9 8:30 ET Producer Price Index (PPI)
5/9 10:00 ET Wholesale Inventories
5/10 8:30 ET Consumer Price Index (CPI)

Key Economic Events Week of 4/29

4/29 8:30 ET Pers Inc, Cons Spend, Core Infl
4/30 8:30 ET Employment Costs
4/30 9:45 ET Chicago PMI
5/1 8:15 ET ADP jobs report
5/1 9:45 & 10:00 ET Markit and ISM Manu PMIs
5/1 10:00 ET Construction Spending
5/1 2:00 ET FOMC Fedlines
5/1 2:30 ET CGP presser
5/2 8:30 ET Productivity and Unit Labor Costs
5/2 10:00 ET Factory Orders
5/3 8:30 ET BLSBS
5/3 9:45 & 10:00 ET Markit and ISMServices PMIs