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.

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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.”

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About the Author


Nov 2, 2013 - 8:48am


obviously, i never asked for money. i'm not selling anything.

my posts sometimes contain data, sometimes observations, sometimes guesses.

but i really don't like anybody who try to sell their crap. mcguire et al. don't know anything else better than a regular gold/silver bug.

sprott knows something better, because he at least knows how to allocate his money to where the value is, sometimes miners,sometimes bullions. and he distribute his good stuff for free. and we know rough how much money he put where his mouth is through his investment disclosures.

but mcguire et al, we know nothing more than their regular doomsday predictions.

by now, we all know sprott's SPLV and tens of millions ounces of silver eagles failed to lift silver prices much. now what?

i know, just keep stacking.

Nov 2, 2013 - 7:30am

Interesting few posts here

Interesting few posts here recently.

Nov 2, 2013 - 7:13am


And to think, for a few posts at first I considered whether you could be for real, and possibly worth listening to despite my disagreement and distaste. My mistake. I AM, however, genuinely interested in how you would describe what YOU are selling.

gold slut
Nov 2, 2013 - 6:13am

Six month subscription to Turd's Vault!!

Wow, and a huge 'thank you' to you Turd, and also to whoever the donor was and a big wet kiss (for the donor, not you Turd)!

I can feel my tax-induced pain easing as I type. Shows what a fantastic community has been built up here at TF Metals.

Nov 2, 2013 - 6:07am

most of gold/silver community website has

become pain-killers when the wounded goldsilver bugs go to heal and lick wounds.

some of the website dole out the pain killers for free while some try to sell.

gold/silver bugs and doomsday preppers and fans for black swans suffer 99% of the time in order to get right for the end 1% of the time, which doesn't seem closer with each passing day.

that old buffett fellow is right with stocks, at least one can be happy 99% of the time.

willie and mcguire all claim big number of old moving to east from their sources. but none of them provide proofs.

with india complete off the gold market thru official channels, gold depletion is slowed down. GLD still has 860 tons, still 5 tons/week, it could last another 172 weeks, which is about 3 years!

not to mention, SLV has 10000 tons of silver, yet to be tapped.

patience is the dearest commodity.

to turd, the longer it last, the better, because he's in the business of selling painkillers.

Nov 2, 2013 - 5:43am

the ruling elites of west and east are uniting

and sleeping together.

this is my interpretation of the sale LBMA and 1 chase plaza to chinese entities. the western elites are using these as good-will gesture to assure the chinese elites that the elites should co-operate and help each other.

the ruling elites will unite and combine forces and usher in a new world order with power share on equal footings. the elites don't have own countries in mind, they only care about their own interest.

the middle classes worldwide will be greatly leveled and exploited in the NWO.

bail-in and capital controls of the west are desperate measures to avoid hyper inflation. but hyperinflation can't be avoided because the system is house of cards and need ever increasing amount of flow to keep it alive.

in the east, china still has some room for monetary expansion especially like pushing RMB into international trade/investment space. but china's structural problem and over-reliance on real-estate and infrastructure is not sustainable in the long run. china is building infrastructure not only in china but also in africa on RMB/USD loans.

fiat money expansion feels good for quite a while, but the addiction is hard to deal with in the end. china may have a little more time than USA, but is heading down towards the same destiny.

control can't prevent hyperinflation. control usher in hyperinflation and poverty. just look at latin america.

whatever the outcome, the ruling elites control the current and future system and control all resources and big corps. the middle-class and have-nots are on the defenseless. revolution may be unavoidable in the end.

Nov 2, 2013 - 1:18am

Big Head

Say what you will about "Big Head" Jim but I'm not so sure he is just passing gas.

When you balance what he says against what the treasury does it is obvious that somebody is full of sh!t but I am not so sure it is Jim Willie. Further, I don't think he is a liar although I will admit his timing sucks to high heaven.

IF a PM price reset to $7,000 / $250 does take place, you can bet your arse that many stackers will be fighting for a place in line to sell their stack. When they find out in another five or ten years after the reset, that the price has risen to $35,000 / $1350 in near worthless USD's and realize that they are fresh out of PM's, it will be a sad sight to see.

Make no mistake about it, I'll be in that sell line as well but only for enough fiat to pay off every cent I may still owe.

Nov 2, 2013 - 1:06am

On A Roll

Apologies to the bored, and sincere thanks to Turd for the public forum.

"American Woman..." do you think for a millisecond that you have any defense against this (for the record, there're millions of beautiful young ladies behind these)?

Video unavailable

Of course, this is a group of nine seasoned professionals, but, watch the hands, eyes, and precision. Does anyone really think that generic American women are of this same caliber?

Men, don't give in. REAL WOMEN exist, but perhaps not just here, in our USA. Be flexible. Be strong. Seek elsewhere.

Nov 2, 2013 - 12:56am


Turd put up a thread on the topic yesterday, the comments were dedicated in large part to how much each member bought. Generally, for each commenting user, there are 5-10 lurkers on any Internet forum. If you add the ounces in the thread and double the number, you should arrive at a reasonable estimate. I myself managed to fumble a roll of 20 buffalo rounds while crossing a bridge -- it fell over the railing before I could catch it, alas... Thanks for the inspiring effort, it is many little steps like this that can take us closer to our goal of fair valuation for the Grey Mare, if anything will. Just like propaganda was used to turn Valentine's day into a commercial event worth hundreds of millions each year (or pro sports paraphernalia, or Halloween decorations, etc.) if we can make gifting of silver the IT thing for weddings, baptisms, birthdays and Christmas, a) more of the population would hold real assets (as opposed to debt-financed boat anchors), and b) price of Ag would more rapidly approach a reasonable level. I've started with my friends & family a few years ago - but we really need a DeBeers-style campaign to do for silver what they did for diamonds.

Spartacus Rex
Nov 2, 2013 - 12:49am

From Jesse's...

02 NOVEMBER 2013

Comex Deliverable Gold Falls to 658,443 Ounces

There was a change in status of 48,652 ounces of gold bullion in the JPM warehouse which were withdrawn from the registered to the eligible category. Apparently someone had a change in heart.

Big change in heart. About one and half tonnes worth.

I will post the claims per ounce chart later when the irrepressible Aussie Nick Laird produces the latest update, but it should be around 55 claims per ounce.

It will take higher prices to move more of that gold out of the eligible to the deliverable category, the antics of JPM notwithstanding.

I find it quite interesting that there is a new scandal brewing in the FX markets involving price rigging. It is odd how the Banks have been caught rigging so many markets, but when it comes to precious metals, the apologists find all sorts of odd behaviour to be quite innocent and above reproach.

Why argue? We are approaching the time when those who have will throw down, and those who have not, will fade away. I do not see the future as inevitable. But I do believe that there will be a reckoning.

Weighed, and found wanting.

Stand and deliver.


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