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Back in the era of World War II, a goldbrick was a slacker in the military. He was the guy who always seemed to be able to find a reason not to pull his own weight, as the phrase went.
The low-level Army grunts who wore the boots that were on the ground had a saying: “Never volunteer for anything.” But you weren’t supposed to be a slacker. Somewhere in between unofficial status as a red hot and a goldbrick was where most people wanted to be.
The term “goldbricking” has been extended to life outside the military. We read this on Wikipedia.
Goldbricking, in today’s terms, generally refers to staff who use their work internet access for personal reasons while maintaining the appearance of working, which can lead to inefficiency. The term originates from the confidence trick of applying a gold coating to a brick of worthless metal.
Goldbricking is the creation of an illusion of value. The successful goldbrick keeps his employer in the dark about his productivity. He seems to be working. He isn’t. He seems to be producing value. He isn’t.
In business, people can hide in the shadows of the salary system. If you work 100% on commission, you can’t hide. The reality of your output is measurable and objective. But salaried positions are not equally clear. Goldbricks operate in the zones of guesswork.
THE PREMIER GOLDBRICK ECONOMIST
Four large formerly Third World nations are rapidly becoming competitive in world markets. They are Brazil, Russia, India, and China. Their acronym is BRIC.
It may seem strange that Russia is on the list. For two generations, from 1900 to 1930, economists told the world that the Soviet Union was a powerful competitor. The USSR proved that central planning was effective. In fact, it was a charade. The USSR was a basket case economically. It was a facade. It was, in fact, the greatest goldbrick nation in history. It was a giant illusion. It appeared to be productive, but it wasn’t. The government published fake statistics. Western academics believed these statistics.
A few economists issued warnings about the unreliability of the Soviet statistics, but their peers did not take these warnings seriously. It took a journalist, Richard Grenier, to correctly identify the reality of Soviet economy. He called the USSR “Bangladesh with missiles.”
Right up until the collapse of the USSR, Nobel Prize-winning economist Paul Samuelson wrote in his widely assigned textbook on economics that the USSR proved that central planning could achieve high output. Economist Thomas DiLorenzo has offered two choice quotations from Samuelson’s textbook.
“Every economy has its contradictions …. What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth.” – 1985 edition.
“Contrary to what many skeptics had earlier believed, the Soviet economy is proof that … a socialist command economy can function and even thrive.” – 1989 edition.
Yet by 1989, it was clear to everyone that the USSR was bankrupt. Soviet Premier Gorbachev was coming to Western governments and bankers, begging for more aid.
Two years earlier, the unknown economist Judy Shelton had sounded the warning: the USSR was about to collapse economically. She got a polite hearing, but there was no bandwagon effect. Samuelson tried to head off this loss of faith among economists.
Admittedly, Samuelson may not have written these words. Maybe co-author William Nordhaus wrote them. By that stage, Samuelson had long since retired. The book’s royalties had made him a multimillionaire. Intellectually speaking, he was by 1985 a very rich goldbrick. He appeared to be working, but he wasn’t.
But his view on the USSR had not changed. One critic has reminded us of this.
In the 1973 edition of his famous textbook Economics he predicted that though the Soviet Union then had a per capita income roughly half that of the United States, it would catch up to the United States in per capita income by 1990, and almost certainly would by 2015 because of its superior economic system.
Paul Samuelson was the premier goldbrick in the economics profession in the second half of the twentieth century. He appeared to be working hard, but his output was substandard. He got very rich teaching millions of freshmen how to have careers as goldbricks: how to give the illusion of valuable work, but never producing anything that could be applied profitably to the economy. Keynesianism is goldbrick economics.
MERCANTILISM AND ITS DISCONTENTS
In recent days, we have been fed news reports about a meeting of officials of the BRIC nations. They supposedly are about to abandon the U.S. dollar. They supposedly will establish trading agreements with each other based on a currency other than the dollar. An April 14 report published by Reuters is typical.
The BRICS group of emerging-market powers kept up the pressure on Thursday for a revamped global monetary system that relies less on the dollar and for a louder voice in international financial institutions.
This means precisely nothing. Whose louder voice? What is a loud voice? What is the exchange rate of loud voices?
Meeting on the southern Chinese island of Hainan, they said the recent financial crisis had exposed the inadequacies of the current monetary order, which has the dollar as its linchpin.
What was needed, they said in a statement, was “a broad-based international reserve currency system providing stability and certainty” – thinly veiled criticism of what the BRICS see as Washington’s neglect of its global monetary responsibilities.
I see: stability and certainty. Certainty. How do we get certainty in a changing world? The only certainties are death, taxes, and central bank currency manipulation.
There was a system that brought some stability and reduced uncertainty. That was the international gold standard. It ended in 1914, when World War I began. It had been a compromised system. It rested on fractional reserve banking and central banking. That is, it rested on IOUs from banks: “Yes, you can withdraw your gold coins at any time.” It was a fraud, and World War I exposed this fraud. The banks quit redeeming the IOUs for gold, and the central banks confiscated the gold from the commercial banks.
The BRICS are worried that America’s large trade and budget deficits will eventually debase the dollar. They also begrudge the financial and political privileges that come with being the leading reserve currency.
I see. But how, exactly, does the United States run these annual trade deficits? Because the central banks of the BRIC nations buy U.S. Treasury debt with newly created fiat money.
Why do they do this? To keep up the value of the dollar in relation to their currencies. Why do they do this? To subsidize their own export sectors.
The BRIC nations can bring down the American trade deficits at any time. They stop buying Treasury debt. Simple. But that will reduce exports to the United States, because it will make their currencies more expensive. The politicians in the BRIC nations do not want that.
So, they gripe. Something must be done – something that does not reduce exports, something that keeps the dollar high, and something that does not give an advantage to American consumers. What might that be?
In a word, nothing. There are no free lunches. There are no mercantilistic policies to subsidize exports that do not thereby subsidize the lifestyles of the customers in the other nations that buy the exports.
“The world economy is undergoing profound and complex changes,” Chinese President Hu Jintao said. “The era demands that the BRICS countries strengthen dialogue and cooperation.”
NEW SYNDICATES IN THE BLOC
Dialogue. Yes. Bureaucrats will talk to each other. I ask: What is the exchange value of talk among bureaucrats? How many flat-screen TVs will a week of dialogue purchase?
In another dig at the dollar, the development banks of the five BRICS nations agreed to establish mutual credit lines denominated in their local currencies, not the U.S. currency.
The head of China Development Bank (CDB), Chen Yuan, said he was prepared to lend up to 10 billion yuan to fellow BRICS, and his Russian counterpart said he was looking to borrow the yuan equivalent of at least $500 million via CDB.
Can you believe this? The banker is named Chen Yuan. That would be like an American banker named Dollar Bill.
Anyway, he will lend the Russians money. How does he think he will get this money back? The Russians are notorious for not repaying. The country is run by ex-Communist apparatchiks – Putin being #1 – and criminal syndicates. It has moved from being Bangladesh with missiles to Sicily with missiles.
“We think this will undoubtedly broaden the opportunities for Russian companies to diversify their loans,” Vladimir Dmitriev, the chairman of VEB, Russia’s state development bank, told reporters.
The Russians are about to make the Chinese an offer they can’t refuse.
These are criminal syndicates with printing presses.
The leaders reviewed the global role of the Special Drawing Right, the IMF’s accounting unit and reserve asset, which some experts believe could grow into a partial substitute for the dollar.
But they stepped around the issue of whether the yuan should join the SDR, saying only that they welcomed discussion of the composition of the SDR’s basket of currencies.
We are seeing the equivalent of a meeting among the gangs in “The Godfather.” They all came to China to talk over how they will divide up the territories. They all want a say in the matter.
THE IMF AS THE COSA NOSTRA
The IMF is supposed to be the cover. The problem is this: the IMF has no power. It is a clearing house for loans. Western nations, mainly the United States, have provided the cover. They guarantee loans made to the IMF. Investors in the West who want secure loans buy IMF bonds. Governments toss in extra money from time to time. There is no IMF currency. There are no futures exchanges in SDRs. The IMF is said to have gold. But this gold was contributed by Western governments long ago in order to bail out emerging nations.
A member-country official said the group was split on whether China’s currency, which cannot be freely exchanged except for trade and investment purposes, met the criteria for being part of the SDR.
We have China, which issues IOU nothings, looking to be a player. What does the IMF issue? Promises to lend IOU nothings issued by Western nations.
This has been going on for 60 years. “There is a need for a broad-basing of the international monetary system. The SDR is an instrument to do that, but we still have no unanimity on the inclusion of the Chinese currency in the SDR as of now,” said the official, who declined to be identified.
Right. Some gutless functionary tells the reporter that China’s IOU nothings that you cannot present at a bank for redemption may not qualify for entrance into the SDR world, where the IMF extends loans in various IOU nothings – loans that can be redeemed at Western banks.
China holds more IOU nothings from Western governments than any other nation, yet the other BRICs don’t think China’s IOU nothings qualify.
Though keen on a more diverse global monetary order, Beijing has given no indication that it is ready to make the yuan freely tradable or to dismantle capital controls as the price for the prestige of being part of the SDR.
This is Alice through the looking glass. This is Abbott and Costello doing “Who’s on first?” This is the world of international central banking.
The BRICS caucus is a work in progress. Thursday’s brief meeting, held under tight security at a beach-front hotel, was only its third summit and the first to include South Africa.
I’ll say it’s a work in progress. It’s a goldbrick work in progress. People are going through the motions of working. Nothing of value is being produced, but the exercise gets reported in the media.
“Our economic potential, political influence and our development prospects as an alliance are exceptional,” Russian President Dmitry Medvedev said.
This is sound and fury, signifying little. This is grist for journalistic mills. This is chaff, not wheat.
We live in a world of illusion. The goldbrick central banks with their paper gold and endless promises keep us dancing to their tunes. But there is not one tune. There are many. Cacophony rules.
Central bankers have only two policies, as gold coin dealer Franklin Sanders has pointed out: inflation and blarney. We are getting lots of both.