The Tragedy of Contrarianism

Being a contrarian is never glamorous. Even the word itself seems to be ostracized by the various word processor dictionaries as I’m often used to seeing it underlined with red dots signifying a spelling error when I type it online.

Wikipedia defines a contrarian as “a person who takes up a position opposed to that of the majority, regardless of how unpopular it may be.”

Perhaps someday, as the western democratic welfare states are saddled with ever more rules and regulations, accompanied by increasing dilution of civil liberties; the word “contrarian” will be expunged from our vernacular completely. When that which is not expressly permitted is forbidden we may no longer have even a word to describe the concept of disagreeing with the herd.

Marc Faber’s Gloom Boom Doom report for March 2013 starts off with this wonderful (albeit tragic) parable, although people like me probably find it tragic for different reasons than most, hence, the Tragedy of Contrarianism:

“My friend Ahmed Ayob sent me the following wonderful story from a South African newspaper.

‘A group of children were playing near two railway tracks, one still in use while the other disused. Only one child played on the disused track, the rest on the operational track.
The train is coming, and you are just beside the track interchange. You can make the train change its course to the disused track and save most of the kids. However, that would also mean the lone child playing by the disused track would be sacrificed. Or would you rather let the train go its way?’

Let’s take a pause to think what kind of decision we could make…
Most people might choose to divert the course of the train, and sacrifice only one child. You might think the same way, I guess. Exactly, to save most of the children at the expense of only one child was rational decision most people would make, morally and emotionally.

But, have you ever thought that the child choosing to play on the disused track had in fact made the right decision to play at a safe place?

Nevertheless, he had to be sacrificed because of his ignorant friends who chose to play where the danger was. This kind of dilemma happens around us every day. In the office, community, in politics and especially in a democratic society, the minority is often sacrificed for the interest of the majority, no matter how foolish or ignorant the majority are, and how farsighted and knowledgeable the minority are.

The great critic Leo Velski Julian as well as Sourav who told the story said he would not try to change the course of the train because he believed that the kids playing on the operational track should have known very well that track was still in use, and that they should have run away if they heard the train’s sirens.. If the train was diverted, that lone child would definitely die because he never thought the train could come over to that track!

Moreover, that track was not in use probably because it was not safe. If the train was diverted to the track, we could put the lives of all passengers on board at stake! And in your attempt to save a few kids by sacrificing one child, you might end up sacrificing hundreds of people to save these few kids.

‘Remember that what’s right isn’t always popular… and what’s popular isn’t always right.’

I like the above story because in today’s western democracies it is most likely that voters would have decided to sacrifice the child, who was prudent in order to save the children who were [not]”

The moral of the story is that we live in a world where you get penalized for thinking things through.The financial paradigm sanctioned by central banks and the policies of the State are farcical, mathematically impossible and thus cannot be sustained. Contrarianism then, often weaves a lonely path through a gauntlet of ridicule and ostracism to independence, of thought and of finance.

As Faber goes on to observe:

The problems we are facing today are really, as someone observed, because the people who work for a living are now (in many cases) outnumbered by those who simply vote for a living. What this unfortunate situation leads to is the imposition of more and more taxes on the higher income recipients and on the owners of substantial assets.

When what passes for conventional financial policy includes incentives like ZIRP, nonsensical rationalizations like Modern Monetary Theory (MMT, MMR, et al) and competitive currency devaluations those lonely solitary children playing by themselves out of danger will typically end up not being up to their necks in debt, not relying on government entitlements, eschewing fiat currencies (ahead of the rush), and probably prefer owning businesses to holding jobs and protecting their purchasing power with precious metals.

In other words, the lonely contrarian children may seem like “rich people” to the mob of ragamuffins playing in front of the oncoming train.

These forlorn outcasts sadly, may not be rewarded for their foresight and sacrifice but rather be vilified, demonized or even sacrificed precisely because they stood apart from the madness.

We’ve seen a foretaste of this already in financial markets. In the run up to the global financial crisis, this video montage is a great example of the type of bile Cassandras must endure should they be reckless enough to speak up about what they see coming.

For these reasons I find it quaint, if not a bit nutty when I see some gold bugs gleefully awaiting the financial implosion that most people who own gold can see coming plain as day.

They seem to think that when the unsustainable finally stops sustaining, they will be vindicated, congratulated and exceedingly wealthy.

Don’t count on it. What will likely happen to gold investors, once the financial system implodes is that they will be denounced as the very cause of the crisis: “Economic chaos as gold hoarders drive paper currencies to zero!” the headlines will shriek.

Of course it goes without saying that private gold ownership will be banned and, as happened in the 30’s, all holdings confiscated at a fraction of their market values.

This is why if I were a goldbug I’d prefer to hold a sizable portion of my gold and silver holdings in various vaults outside of the US (and even Canada). (One reputable method to do that is via Goldmoney.com )

It’s also one of the reasons I invested in land outside of the country a long time ago.

If you see the inevitable outcome of today’s fiscal policies, the sheer unsustainable magnitude of the financial dystopia we live in, don’t plan on being vindicated for being right.

It’s better to simply plan on quietly getting out of the way,  and never, ever hold your breath for applause on that day of reckoning.  On that day, when everybody who thinks you’re an idiot for preparing now will not congratulate you then for being right, for doing the right thing, or for being prepared.

You will be hated, reviled, vilified, demonized, scorned and criminalized. It is quite possible, even likely, you will be deprived of everything you managed to preserve for the future in the name of those reckless, shortsighted kids playing in front of the oncoming train called “the greater good”.

Long before then, I will be long gone from here. For awhile I may be chidingly remembered as that nutty geek who was always on about gold, but before long I will be completely forgotten.

And that’s the way I want it.