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Hearing my father

He was part of a generation that endured four devastations.
Following times of great upheaval, expectations tend to be low and aspirations high; factors the author attributes the post-war economic recovery of Germany and Japan to. Image: Fotosearch/Getty Images

My father was born in an age of severe deprivation. He was an infant at the outbreak of World War I, a teenager during the Spanish flu pandemic, lived through the Great Depression as a young adult, and served as a soldier during WWII.

The early part of that period was that of the so-called Lost Generation. At the end of WWII it had merged with the Greatest Generation. (Then came the Silent Generation, followed by the Baby Boomers, Generation X, Millenials, Generation Z and now Generation Alpha; the latter being the first to be exposed to technology their entire lives.)

At this time of living in the Covid-19 pandemic, it is the lessons of those early times that one reflects on.

What awaits humanity?

Data and statistics tell only a small part of the story. Mood and emotion are not so easily transferable. But they are the essence of being able to capture the behaviour and societal response to events to get some idea of how we should respond and what awaits humanity after this time passes.

There are many different scenarios sketched by a variety of sources of a different world that we could be facing. I’m not a futurist and would be loath to go down that path. Of course it is already a very different world from that of the Greatest Generation, an age group known for its integrity, humility, sense of responsibility, work ethic and financial prudence.

For one thing there is the massive accumulation of debt used to prop up markets and act as an economic stimulus when we should have allowed natural cycles to do their work.

Distortions

Severe distortions remain – especially in the bond markets – where there has been a flood away from ‘risky’ emerging economy bonds such as South Africa’s to ‘blue chip’ assets such as US long-term Treasury bonds.

Now massive amounts in more debt have been created, compounded by substantial amounts in government debt in combating the virus and declines in revenue from shrinking economic activity.

This has left a stark disequilibrium between the needs of the ‘have and have-not’ nations as the world enters recession.

There is no doubt that the world monetary system is being shaken to its core and will emerge very different from what it is now.

Resetting, reshaping

What it will look like is anyone’s guess but it could see a run on the dollar, which at this time is still the blue-chip global investment. Fiat currencies then lose their primary anchor, setting the stage for a Bretton Woods type redefinition of the monetary system.

And there can be little doubt that the International Monetary Fund (IMF) and the World Bank are going to be reshaped in the aftermath of the pandemic.

The other, positive difference is technology and communication. These played a small role in previous pandemics and their ability to keep a large part of the economy going, as well as keeping people informed, is a definite game-changer.

Ultimately, however, individual behaviour will determine the outcome.

All things are relative

In this I am reminded of a news headline that confronted delegates at an IMF and World Bank meeting in the late 1970s.

It read: “The victors beg from the vanquished” and referred to the US and Britain, the victors of WWII, urging the vanquished Germany and Japan to adjust their policies to correct their massive trade surpluses.

Many factors helped make these economies highly successful after WWII, but what is often forgotten is the role played by individual behaviour and societal response.

Surrounded by rubble and devastation, expectations were at their lowest. Aspirations, or cohesive self-help determination, was all the average citizen could fall back on. That played powerfully into the axiom that when people by and large are contributing more than they are taking, they create surpluses and prosperity. When taking more than they give, they create deficits and poverty.

I would argue that it is this that played the most important role in the economic recovery of these two nations.

My life partner passed away two days before the national lockdown. It has plunged me into deep nostalgia and reflection, part of which involved going back over the articles I have written these past number of years. Many of them reflect on the momentous times we are living in – and that this era will see a redefinition of economics as we know it.

I have also argued for a shift of our understanding of social interaction and the economic construct from a self-gain perspective to a contribution perspective; from an instinctive survival mode to an empathy mode. I have argued too that human empathy has made us the majestic species we are.

This is the opportunity presented by the pandemic. It demonstrates powerfully that survival and empathy are the same thing.

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Dear Jerry – So sorry to hear about your wife. May she rest in peace and her soul live on in you !!

Indeed reading this I reflected upon my Mother. She was born in Tanyanika and her family were forcefully evicted from their farm deported from that country when she was 13 years old.

]They came to SA during the great depression and queued for hours in front of a small bakery in Johannesburg for a loaf of bread with her food stamps.

She never went to school but taught herself how to read, write and cook. She made a living selling wedding and birthday cakes baked on a coal stove and oven.

Low expectations, hard work and a indomitable spirit was all they knew and no obstacle was too hard to overcome.

These are all traits that this new generation have not learnt and unless the adapt quickly they will die.

As we go into this recession there are only one of 2 outcomes for SA. Become another fallen and failed state of Africa or adapt and change the policies that have brought us here and prosper.

I do fear that the ANC will prefer the former option !!

Please accept my condolences, Jerry.

Victor Frankl was a holocaust survivor, and as you know, he tried to explain why some survived, while most died. He found that those individuals who shared their meagre rations with others, those who offered their blankets to keep others warm, had a purpose in life, and that purpose kept them alive. He found that those individuals who focussed on what they have lost also lost hope, and therefore lost their lives, while those who focussed on helping others gained hope and survived.

This concept is an interesting one because we can say that this is exactly the communalist attitude. The value of the individual is measured by what he contributes to the group. Many of us belong to charity organisations and church communities where we do our utmost to help the less fortunate. When we help others we gain salvation from ourselves. For these acts of kindness to have a positive effect, it has to be voluntary though.

When, as in a socialist or communist dispensation, the beneficiaries of charity use the power of their vote to change the law to enforce charity, then they change kindness into plunder. Then, the advantages of kindness disappear for both parties. As long as charity and kindness are voluntary, it has great benefits for both parties. When the law forces some individuals to make charitable donations at an ever-increasing rate, then both parties lose, because the state has changed brotherhood into hostility and plunder. When the state legalises theft as part of their effort to enforce brotherhood, they destroy the social cohesion, as well as the financial foundation that supports the charitable donations. We should remember that it was National Socialism (NAZI) that caused the Holocaust. It was socialism that put Victor Frankl in the concentration camps, to begin with.

“When we are no longer able to change a situation, we are challenged to change ourselves.
Everything can be taken from a man but one thing: the last of the human freedoms—to choose one’s attitude in any given set of circumstances, to choose one’s own way.
Between stimulus and response, there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”- Viktor Frankl

Brilliant response to a brilliant piece of journalism. A pity more people do not respond to life in the same way. Thanks for the Frankl quote it’s going into my collection of worthy sayings. Thanks to all of you for something positive, something honourable in the midst of fear and anxiety.

With your comment in mind, am I being unnecessarily cynical when i remember the recent past when all the unions demand is more for them and to hell with the rest of us?

I hope they realise their just reward!

It’s interesting how you conflate a variety of historical events, global politics and some vague economics into a stew that suits your palette and finally your vitriol against the EFF.

If you can’t stand the heat, don’t work in a kitchen. isn’t it time you left the country?

beachcomber, you commented on Pickler’s post and advised him to emigrate. This is a democratic country and he got more votes than you did. You got none actually. So according to our constitution, you are the one who has to “get out of the kitchen”. There is a place for your type in Zimbabwe and Venezuela. Goodbye and good luck. Please keep on commenting from there. Tell us what it is like under EFF-kind of regimes.

“It was socialism that put Victor Frankl in the concentration camps, to begin with.”

No, it wasn’t: it was a mix of unsatisfied nationalistic pride, fuelled by a superb orator and demagogue who played to the sense of worthlessness of the German nation after their defeat in WW! and their inherent trait of respect for authority and organisation.

The concentration camps and the persecution of the Jews, homosexuals, Gypsies and other sects like the Jehovah’s Witnesses were a convenient tool to further the intense spirit of nationalism.

“The fact that German anti-Semitism and anticapitalism spring from the same root is of great importance for the understanding of what has happened there, but this is rarely grasped by foreign observers.” – FA Hayek “The Road to Serfdom”

FA Hayek lived in Germany during the time of the Second World War and he received the Nobel Prize for Economics. He described all the collectivist policies like socialism, National Socialism, Communism and Fascism as anti-capitalist. I am inclined to take his word for it.

The facts you mention are the symptoms of the disease, not the cause. It is like stating that a dry cough causes COVID disease.

We would have learned absolutely nothing from that terrible episode in human history if we do not realise that the atrocities that were perpetrated by the NAZIs is not inherent to Germans, nor is it the result of the German character, attitude or belief system.

The Holocaust was perpetrated by Germans during that specific period, but the ability to act in such a destructive and uncivilized manner in not confined to the German people. In fact, the German people should not feel particularly guilty about what has happened there because people of all races and belief systems have committed similar atrocities under similar circumstances. We as humans “as a collective” should take ownership of the issue. As humanity, we should guard against the factors that enable the most unscrupulous individuals among us, to rule us, and to motivate us to commit atrocities.

For socialism, communism and fascism to be sold to a group of people, an enemy, a capitalist, an oppressor has to be identified. First, the mindset of the people has to enable, motivate and reward the most unscrupulous individuals in that group to rise to leadership positions. Only the scum of that society will be willing to implement what is to follow. Then, a minority group is blamed for the lack of money, the lack of rainfall, the lack of land, the crop failures or the flood. Then, after the minority group among us is identified and painted as the enemy, his property can be appropriated and he can be killed because he is the focus of all the hatred in that community. Locally we experience WMC, expropriation of land and xenophobia as manifestations of this phenomenon.

If we understand this and realise that the traits that drive a holocaust lie within all of us, then we have learned something from the NAZI atrocities during the Second World War. Then we will realise that there is no difference between the EFF and the NAZIs and that there is no difference between Hitler and Malema. Then we will also understand why there is no difference between the way we react now, and how the Germans reacted then. We have to guard against the slow creep of socialism that leads towards self-annihilation.

I hope we do have a more caring society in the future. Rotary International here in South Africa battles for membership? Why? I do hope that this will change when this ends. My condolences Jerry.

“Fiat currencies then lose their primary anchor, setting the stage for a Bretton Woods type redefinition of the monetary system.”

With all due respect sir, fractional reserve banking is indeed a terrible thing, but the Gold standard is far, far worse and have demonstrably been a key factor as to why the depression lasted as long as it did.

Economies require surpluses to recycle, which becomes a long-term impossibility with a gold standard that, in effect, forces the insanity of every nation to run a trade surplus. Some nations are surplus nations, and some aren’t.

Which means that, as your deficit grows, the economy deflates, wages plummet due to a currency shortage and social unrest ramps up.

If you want a modern-day example of what the gold standard does to nations, look no further than the Southern-European countries on the Euro. There is a net flow of resources from the South to the North, with no mechanism to recycle surpluses. Countries no longer have control over their monetary policy and cannot devaluate their currencies – something that Greece, Italy, Spain and Portugal would have done ages ago to prime the economic pump.

appreciate and respect your opinion.
Every right-minded person knows that Central Planning of the economy and social matters is bound to fail. We know that no Central Planner can ever have all the information and knowledge to direct the resources where it is needed most. The USSR showed us that there are huge surpluses of coal, while there are huge shortages of wheat.

The same individuals who are strongly opposed central planning of the economy, are strong supporters of Central Planning of all economic matters through the Central Bank. Central Planning of the availability of money, through the interest rate, and the supply of money, through QE, leads to enormous surpluses in some corners of the economy, and to shortages in other spheres of the economy. The availability of cheap credit enabled the fracking industry and transformed the USA from a nett importer to the largest exporter of oil. We have an oil glut that threatens the economies of entire countries.

On the other side, we have an Emerging Markets crisis as a shortage of dollars drives the dollar stronger. Entire populations in Emerging Markets experience economic hardships, bankruptcies and rising unemployment because of the dollar short squeeze. They are under the threat of default, currency devaluation and even hyperinflation.

We already have all the negatives you described. These negatives were caused by the fiat currency system with Central Banks and the fractional reserve banking system.

The solution is a free market in currencies and banking. Just as individuals are free to decide whether they prefer tomatoes or carrots, they should be free to decide their preferred means of exchange, store of value en unit of account. The size of the army and the police force(coercion) determines the value of fiat currency because it is money by decree. When any state stops to enforce legal tender laws, the citizens will naturally revert to gold as money. They will do this because gold is the ultimate store of value, an incorruptible unit of account and a trusted means of exchange. It is because of these valuable properties that gold was confiscated and banned as a means of payment. Its use was banned simply because governments have defaulted on their debts as measured in terms of gold. Now governments are defaulting once again, but this time it is in a fiat currency regime, that allowed much larger levels of debt.

The size of the population will have to shrink to compensate for the eventual implosion of the fiat currency system, as described by the Malthusian Trap. Central Planning of the economy proved a disaster, once again.

Who ultimately collects on the debt that is created by fractional banking? The country with the deficit? Reserve Banks? The World Bank? No? Perhaps one should look at where the money ends up. Those are the only people who benefit from the system we currently have… and I can promise you it’s not the man in the street. It is a system that was designed to allow the parasites (with the capital means), to attach to the side of the real economy and suck for all they’re worth. The problem is that when too much blood is sucked from a body, you have all sorts of problems (boom/bust, eventually killing off the host). Unless we find a way of controlling the parasites and their greed, fractional banking will remain a problem.
Also, my condolences Jerry.

No that’s not true, rindepes. When the government is free to debase the currency, as is happening now in South Africa, it is in essence stealing the value of your money. Those who benefit are those close to fiat creation who get to spend debased currency at the old value. The reason the depression lasted so long was not the gold standard but outlawing the ownership of gold by individuals. Specie (gold coin) competes with government bonds as an investment. When interest rate go too low, bonds get exchanged for specie thus preventing further falls in interest rates. This is the first wonder of the gold standard: it controls interest rates. There is no bond speculation under the gold standard as interest rates are stable. Bond speculators (vampires) have to earn money honestly. During the depression there was no competition for government bonds. Bond prices were bid into the stratosphere and interest rates collapsed. Falling interest rates destroy industrial capital by raising the liability of bonds. Imagine a company financed by bonds at 10%. If interest rates fall to 1%, the value of these bonds rockets. This value is transferred from the capital account of the corporation to the pocket of the bond speculators yet no accounting principle recognises this. Even un leveraged companies are not immune as their cost of capital is much higher than new entrants. Under a pure fiat regime there is no extinguisher of debt. New money is created by an act of borrowing but the interest is not, thus net debt can only increase until the system collapses. Debt grows exponentially. It is irredeemable- it can never be repaid as the money to do so does not exist. First comes the deflation then the inflation. The cause is falling interest rates, the effect falling prices as companies cut margins to maintain share before they go under. Gold, when monetised, is the only form of money that does not have a contingent liability. one can thus increase the money supply and at the same time reduce debt.

The Southern European countries ran into trouble because their governments could not control spending. They traditionally spend more than they take in tax and end up in a cycle of currency debasement, inflation and burgeoning debt. One could argue that this is a failing of democracy as the elected representatives embrace populist polices. Populist policies are not sustainable and invariably lead to misery and poverty, and are therefore not recommended.

The problem in SA is that the largest part of the population has an entitlement attitude which is reinforced by the ANC government. They are keen on taking more than they give. As John F Kennedy said, “ask not what your country can do for you — ask what you can do for your country.” Unfortunately the ANC follow the opposite path, asking what the country can do for them and their cronies. They despise the West to whom they constantly are seeking assistance because of their failed communist policies they try to implement here.

Hi Jerry, my condolences on your loss.

Yes, I too have thought back to what our predecessors had to cope with, as I did with some intensity when we were preparing to emigrate to Oz in the midst of our apartheid madness in 1986. A few days ago I wrote an email to my family informing them that this year is the 200th anniversary of the arrival of the 1820 settlers among whom were our ancestors. I shared with them some of the Settlers incredible experiences and hardships.

The Afrikaners too had their hardships. Those of us living today are the survivors of all those tough people. Every generation had their times of crisis. However, since WWII we have had a golden period of prosperity and progress with no real crises on a level of WWI, WWII and the Great Depression – until now. We, like them, are just going to have to dig deep, adapt and survive. In the midst of chaos and crisis are always hidden opportunities. We are going to have to search for those and in 5 years from now many of us will look back and realise that what broke our comfort zones changed our lives for the better.

Excellent response Sensei. I will utilise these writings when explaining these times to the next generation.

Jerry firstly my condolences of the passing of your wife. Tough times made tougher.
Talking about the past, my father left school at the age of 12, worked as a boot cleaner, then a steward on the railways and on Union Castles ships. Fought in East an North Africa, was captured and spent 4 years in POW camps. Returned to SA and made a decent life for us, particularly making sure we had a good schooling.
As far as the current RSA is concerned we have largely, in my opinion, adopted the worst of Socialism, lazy, unproductive, unionised, corruption and looking for free everything. The few are carrying the many and as The Iron Lady said, “the problem with socialists is that they eventually run out of other people’s mopney”
The Covid-19 has in my view provided SA with an opportunity to remove the socialist anchors on our business and set it free. Entepreneurship and business will solve a great deal of the unemployment and restore our economic strength Then you can adopt Social Capitalism, which I define briefly, as Capitalism that rewards well but not obscenely and any action taken by it must not adversly affect others and/or the environment.

Opportunity to make changes, yes. But it won’t happen. Cyril needs to step up and act. Get rid of the deadwood -90 % of the ANC. Unfortunately he has to ask for permission to go to the toilet.

Sorry to hear about your loss.
Please keep on writing as I enjoy your articles.

End of comments.

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