The Idea of American
“Elizabeth,” I asked this morning, as my wife climbed out of the pool. “How would you describe that sea turtle we saw on the beach?”
Pausing for a moment, she replied:
“Rotating its slow and majestic flippers, it ground its way slowly and inexorably towards China…”
The sea turtle was headed east. Whether China was its destination or not, I don’t know. I only know that it was about to leave the Latin America isthmus, from the west coast of Nicaragua, and put out to sea when a muscular, brown young man picked it up and carried it back up on the beach. He and his friends had dug a big hole in the sand where the turtle was placed.
At night we often see the dim light of flashlights along the beach. “It’s the locals looking for turtle eggs,” Manuel explained. “It’s illegal to take them, but…” Manuel shrugged his shoulders.
Sea turtles are protected by international convention. But here in the wilds of Nicaragua they still end up in the soup from time to time.
America’s Identity: Not the Same America
This is America too…but it is not the same America. It is the New World…but not as new as the world north of the Rio Grande. Here, the Old World has not yet been snuffed out. It survives in a semi-tropical paradise.
But the object of our attention in today’s Daily Reckoning is neither the Old World nor the New one – but the ever- changing, never-fully-explored idea of America.
“Proud to be an American” says one bumper sticker. “One nation – indivisible,” says another. America was, of course, founded on the opposite principle…the idea that people were free to separate themselves from a parent government whenever they felt they had come of age. But no fraud, no matter how stupendous, is so obvious as to be detected by the average American. That is America’s great strength…or its most serious weakness.
After September 11, so many people bought flags that the shops ran short. Old Glory festooned nearly every porch and bridge. Patriotism swelled every heart.
Europeans, coming back to the Old Country, reported that they had never seen anything like it. A Frenchman takes his country for granted. He is born into it, just as he is born into his religion. He may be proud of La Belle France the way he is proud of his cheese. But he is not fool enough to claim credit for either one. He just feels lucky to have them for his own.
America’s Identity: What Makes America Different?
America, by contrast, is a nation of people who chose to become Americans. Even the oldest family tree in the New World has immigrants at its root. And where did its government, its courts, its businesses and saloons come from? They were all invented by us. Having chosen the country…and made it what it is…Americans feel more responsibility for what it has become than the citizens of most other nations. And they take more pride in it, too.
But what is it? What has it become? What makes America different from any other nation? Why should we care more about it than about, say, Lithuania or Chad?
Pressed for an answer, most Americans would reply, “Because America is a free country.” What else can be said of the place? Its land mass is as varied as the earth itself. Inhabiting the sands of Tucson as well as the steppes of Alaska, Americans could as well be called a desert race as an arctic one. Its religions are equally diverse – from moss-backed Episcopalians of the Virginia tidewater to the holy rollers of East Texas to the Muslims of East Harlem. Nor does blood itself give the country any mark of distinction. The individual American has more in common genetically with the people his people come from than with his fellow Americans. In a DNA test, your correspondent is more likely to be mistaken for an IRA hitman than a Baltimore drug dealer.
America never was a nation in the usual sense of the word. Though there are plenty of exceptions – especially among the made-up nations of former European colonies – nations are usually composed of groups of people who share common blood, culture, and language.
Americans mostly speak English. But they might just as well speak Spanish. And at the debut of the republic, the founding fathers narrowly avoided declaring German the official language…at least, that is the legend. A Frenchman has to speak French. A German has to speak the language of the Vaterland. But an American could speak anything. And often does.
America’s Identity: Be What You Want to Be
Nor is there even a common history. The average immigrant didn’t arrive until the early 20th century. By then, America’s history was already 3 centuries old. The average citizen missed the whole thing.
Neither blood, history, religion, language – what else is left? Only an idea: that you could come to America and be whatever you wanted to be. You might have been a bog- trotter in Ireland or a baron in Silesia; in America you were free to become whatever you could make of yourself.
“Give me liberty or give me death,” said Patrick Henry, raising the rhetorical stakes and praying no one would call him on it. Yet, the average man at the time lived in near perfect freedom. There were few books and few laws on them. And fewer people to enforce them. Henry, if he wanted to do so, could have merely crossed the Blue Ridge west of Charlottesville and never seen another government agent again.
America’s Identity: Taxation with Representation
Thomas Jefferson complained, in the Declaration of Independence, that Britain had “erected a multitude of New Offices, and set hither swarms of Officers to harass our people, and eat out their substance.” Yet the swarms of officers sent by George III would have barely filled a mid- sized regional office of the IRS or city zoning department today.
Likewise, the Founding Fathers kvetched about taxation without representation. But history has shown that representation only makes taxation worse. Kings, emperors and tyrants must keep tax rates low…otherwise, the people rise in rebellion. It is democrats that really eat out the substance of the people: the illusion of self-government lets them get away with it. Tax rates were only an average of 3% under the tyranny of King George III. One of the blessings of democracy is average tax rates that are ten times as high.
“Americans today,” wrote Rose Wilder Lane in 1936, after the Lincoln administration had annihilated the principle of self-government…but before the Roosevelt team had finished its work, “are the most reckless and lawless of peoples…we are also the most imaginative, the most temperamental, the most infinitely varied.”
But by the end of the 20th century, Americans were required to wear seat belts and ate low-fat yogurt without a gun to their heads. The recklessness seems to have been bred out of them. And the variety too. North, south, east and west, people all wear the same clothes and cherish the same decrepit ideas as if they were religious relics.
And why not? It’s a free country.
May 22, 2003
The price of gold jumped up another $5.70 yesterday, bringing June contracts to $372. In 1999, for reference, the price of an ounce of gold was as low as $254. Investors have made nearly 50% on their money over the last 4 years.
Still, we can’t remember the last time someone called at home, during dinner, and asked if he could make a few recommendations for gold investments. We’ve heard a lot of absurd pitches from Wall Street’s cold callers, but none suggested he could make us rich in gold.
So far, only gold bugs have gotten excited. Most people think buying gold is as strange and subversive as reading the Constitution. They think investments are supposed to make them rich and they can’t imagine how an inert metal could do that. It has no ‘can do’ corporate managers with their mugs on the cover of BusinessWeek…and no CFO to rig the numbers. It has no new technology…in fact, it has no product at all. There is nothing to talk about, nothing new to admire…and no one to persuade you what a wonderful investment it is.
Half of American households are said to own stocks. How many own gold? How many would even know how to buy the stuff? As Eric describes below, you can’t call your broker and tell him to get you some gold. He wouldn’t know what to do. And the experience of going into a coin shop, for most people, is like going into a massage parlor. You don’t want to do it in your home town; someone might see you.
George Soros says he’s buying gold, as well as non-dollar currencies. Asked why, he remarked that he is only doing what U.S. Treasury Secretary Snow seemed to suggest. Soros is known as the “man who broke the bank of England.” That was 10 years ago, when he bet heavily against the pound, despite assurances from the British government that the pound was secure. Now it is the dollar that Soros is selling…and U.S. officials who try to soothe the markets.
And now it is the dollar that falls.
At the same time – as if to confound economists – the developed world inches towards deflation. Inflation rates, broadly speaking, have been coming down for the last 20 years. Japan, 10 years ahead of the rest of the world, has seen its consumer prices fall 7% since 1995.
How can it be that the dollar falls in value on international currency exchanges, while it seems to be gathering strength at home?
Eric Fry, reporting from the Deep South…
– Down here on the Georgia-Florida border, Wall Street seems like a very distant place. The Nasdaq ain’t nuthin’ compared to NASCAR. And Greenspan ain’t nobody compared to Gordon. (That’s Jeff Gordon, the stock car racer). Down here, life is a bit slower, except on the race track…so it’s a little tricky keeping tabs on the action up north where the Yankees are scurrying around buying and selling stocks…
– But rumor has it that the Dow Jones Industrial Average added 25 points yesterday to 8,516, while the Nasdaq slipped 1 point to 1,490. However, the hottest action of the day was taking place over in the gold market. So pour yourself an iced tea and set yourself down on the front porch while we chat a bit about gold…
– Over the last two years, Gold has gained about $100 an ounce, which isn’t too shabby. Even so, the yellow metal has failed to mount the sort of epic, millennial bull market that many long-suffering gold bulls anticipate. It has not breached the $400-level, much less the $1,000- level.
– Truth be told, most gold bulls, while wealthier than they were two years ago, are a little befuddled that they aren’t wealthier still. After all, soaring commodity prices and skyrocketing energy prices, in combination with an imploding U.S. dollar, could have – perhaps should have – produced a gold price north of $400 per ounce. But that hasn’t happened…yet.
– If the collapsing dollar can’t put the goad to gold prices, what can? The answer, perhaps, is “access”. A forthcoming NYSE-traded gold certificate will provide Americans with easy access to the gold market for the first time ever…No storage fees, no insurance, no muss, no fuss. At the same time, the Chinese government has announced plans to allow domestic individual investors to start trading spot gold on the Shanghai Gold Exchange sometime later this year. Both of these events could produce a surge of demand for physical gold.
– Here in the states, many notable gold bulls believe that American investors do not lack the will to buy gold, merely the way…or, at least, a convenient way. But soon they will…The Equity Gold Trust filed Tuesday with the Securities and Exchange Commission to issue a gold-backed security representing a tenth of an ounce of gold. The Equity Gold Trust will trade on the New York Stock Exchange like an ordinary stock.
– “The World Gold Council’s Equity Gold Trust marks the second commodity-linked security to grace the floors of a stock exchange,” says Thom Calandra of CBS Marketwatch. “The first, Gold Bullion Ltd.’s Australia-traded security is already meeting brisk demand for so-called ‘paper gold.’ The down-under gold fund…started with five 400-hundred ounce bars when it debuted earlier this spring. As of mid- May, the Gold Bullion trust shows 150 bars, or about 61,000 ounces worth $21.3 million in U.S. dollars.”
– Based on the Aussie’s experience, Andy Smith of Mitsui Global Precious Metals estimates the U.S.-traded vehicle could create fresh annual demand exceeding 6 million ounces. That’s a lot of gold. (For perspective, Newmont Mining produces a little less than 8 million ounces per year).
– “The real question,” says Calandra, “for those looking to the day when Equity Gold Trust begins trading on the NYSE under the ticker symbol GLD, is this: Can the creation of a product convince investors to go where they have not gone before? The answer is yes. The QQQs, which are the physical embodiment of Americans’ lingering fascination with technology stocks, attract $2.5 billion of turnover on a mediocre day. Not bad for an asset class whose net asset value has declined 75 percent since its year 2000 peak.
– “More than one gold mining executive has told me,” Calanadra winds up, “that they see the price of gold rising in the short term to $600 an ounce after the launch of the NYSE-traded ETF.”
– A gold bull can dream, can’t he?
Back on Amelia Island…
*** We went over to Cumberland Island for dinner last night. The boat trip to the island took us by a paper plant with an odd smell…and then up the Amelia River to the island where a Carnegie family house, Greyfields, has been converted into an inn. The setting was reminiscent of a grotesque southern novel. The plantation-style house had been built near the end of the 19th century. It was elegant, but simple…with the smell of old smoke in the woodwork and the stain of bourbon on the floor. On the porch, rocking chairs looked out over a park of ancient oaks with crooked branches. The old trees were covered with Spanish moss, and looked sturdy enough to hang a dozen fat democrats from each limb.
*** After dinner, we sat down on the porch with our New York correspondent. Each participant at this private conference had been asked to come with one long recommendation and one short. Earlier in the day, Eric had recommended the shares of a Swedish mutual fund, of all things, called Vostok Nafta. The fund has a large percentage of its assets in the shares of Russian energy company, Gasprom, which gives investors a way to buy it without paying a premium for the ADR shares traded in New York. In fact, Vostok Nafta often trades at a premium itself, but presently, the premium is near zero, making it an excellent time to buy. Gazprom itself is probably the world’s cheapest energy company, trading at only 6 to 7 times earnings.
“Eric, what are you thinking about?” began the conversation.
“I’m not thinkin’; I’m just rockin'” ended it.