Vivid Voices

It never ceases to amaze me how, in an advanced society like ours, each new generation of economic policymakers fails to learn the hard lessons of their predecessors.

They spend like drunken sailors … and then they wonder why the federal budget is gushing red ink.

They dish out easy credit so Americans can shop till they drop … and then they wonder why we are buying too many imports, or why our trade deficit is ballooning.

They let these deficits run amuck … and then they seem surprised when our dollar falls.

They do ALL of these things … and yet they remain unprepared for the natural, almost inevitable, consequences.

If these disasters were small, they would not be a serious threat. Or if they were contained to certain sectors or regions, they might at least be manageable.

But the latest facts testify to the historic magnitude of each:

Budget deficit: $521 billion according to the White House’s optimistic estimates; at least $600 billion in light of the White House’s latest admission that its earlier job forecasts were too rosy; and far more when you add so-called “off-budget” spending and borrowing.

Inflation: Still low but creeping up steadily. Petroleum-based products in the CPI up an annualized rate of 96% in January. Consumer prices up an annualized rate of 6%.

Trade deficit: $479.4 billion, the worst in history.

No one can foresee the true consequences of these numbers. But whatever they may be, we will never be able to understand or deal with them unless we heed the vivid voices of the past.

DAD’S BOXES

The cardboard boxes with all of Dad’s memoirs and personal documents were delivered from our warehouse on Wednesday the 11th.

Then, for ten long days, the boxes sat in the empty office next to mine, beckoning to me through the glass walls.

I told everyone, including myself, that I was too busy with my Safe Money Report and important meetings to dig through them. It wasn’t until this past Friday, when my staff had gone home and the office was quiet, that I became aware of the true cause of my procrastination.

The sun was down but Florida’s evening brightness flooded the room, much of it reflected from the lake below.

I picked one box to open at random, and a surge of grief rolled up my chest. I suddenly realized it was the first time I’d looked through any of Dad’s papers since he died. I have yet to fully accept his absence.

In the box, personal letters are mixed with public statements — some loose, some in folders or envelopes, some neatly joined with rusting paper clips.

Most date back to the 1940s and ‘50s, and from each, I could hear voices speaking to me almost as if they were here today …

BERNARD BARUCH

One letter to Dad, yellowed by four and a half decades, is from Bernard Baruch, the famous advisor to many presidents, and is dated April 6, 1959.

Baruch’s bold-faced, Madison Avenue letterhead competes with his Kingstree, South Carolina address typed lightly in the upper right corner. The word “Private” is handwritten across the top.

Weeks earlier, Dad had founded the Sound Dollar Committee, a non-partisan, non-profit organization to fight for a balanced budget and prevent a decline in the dollar.

And in the early days of the Committee’s formation, Dad had spoken and written to Baruch several times, seeking to enlist him as the Democratic co-chairman of the Committee.

Former President Herbert Hoover would have been the Republican co-chairman. But Baruch was reluctant to be his counterpart.

“Inflation,” he wrote, “flows from the selfish struggle for special advantage among pressure groups. Each seeks tax cuts or price increases or wage raises for itself while urging the others to make the sacrifice, and with little regard for the national interest. …

“Ever since the end of World War I, I have tried to show what the results would be — giving all of my time and resources to this. But alas, my efforts have not succeeded. …

“I hope that you and those associated with you will be more successful because it is just and should win.”

LEONARD PAUL SPACEK

The box also contains four sheets of the original Sound Dollar Committee stationery. The names of 17 members, printed in dark blue ink, line up neatly along the upper left margin.

Some of the names I know; some I do not. But my research reveals that each man on the list has his own urgent message for us today — words that we can choose to heed with respect, or ignore at our own peril.

One of the messages comes from Leonard Spacek, who, not coincidentally, had a lot in common with Dad.

Back in 1928, around the same time as Dad was meeting his first important boss on Wall Street, Spacek met his as well — a man whose name you will surely recognize: Arthur E. Andersen, the founder of the accounting firm that would become the largest and most prestigious in the world.

After Andersen’s death, Spacek took the helm as the second managing partner in the firm’s history, emerging as a fiercely outspoken champion of shareholders’ rights.

He advocated strengthening audit procedures.

He fought for standardizing accounting rules so that financial statements could be fairly compared.

And in 1958, one year before joining Dad in the Sound Dollar Committee, he declared that “the man on the street … has the right to assume that he can accept as accurate the fundamental end results shown by the financial statements in annual reports.”

This approach may not seem radical to you today. But it was then. And with it, Spacek made history. But he also made some enemies, a foreshadowing of greater troubles yet to come.

If he were alive today, I can just imagine some of the feelings he’d have about those who followed in his shoes.

He dedicated his life to sound accounting. He’d be horrified by those who led his own great firm down the path of accounting hocus-pocus. He’d be mortified by their role in the demise of Andersen’s big clients like Enron and Global Crossing. And he would have no pity for those who allowed Andersen to become the first accounting firm in history ever to be convicted of fraud.

As former SEC Chairman Arthur Levitt said in a eulogy, “there aren’t any Leonard Spacek’s in the industry any more.”

What about his ideas, so relevant to our troubles today? Let’s pray they never die.

GENERAL LESLIE R. GROVES

Also on the list of members of Dad’s Sound Dollar Committee are a couple of retired generals.

Why did they join? Dad told me that it was because they saw the connection between fiscal prudence and national security; financial soundness and physical safety.

Both goals, they believed, were threatened by the same human weaknesses — lack of discipline and outright greed. Neither, they insisted, could be achieved without the other for very long.

Leslie R. Groves was one of them, and he played an entirely different role in America’s history from any of the other Committee members.

Groves was a major force in the construction of the Pentagon. And he was the de facto leader of a secret weapons project based in the New York District of the Army Corps of Engineers: The Manhattan Project, where the first atom bomb was made.

As one reviewer of his biography explains, “to the uninformed, Groves’ contribution to the production of the atomic bomb was as scoutmaster for a collection of scientific mad monk geniuses in the desert of New Mexico.

“In fact … Groves was more of an absentee landlord at Los Alamos. The real action was going on elsewhere, primarily in massive industrial complexes at Hanford, Washington, and Oak Ridge, Tennessee. In some respects the building of these two industrial facilities was as impressive as the making of the bomb. That Groves was able to build, not one, but two, mammoth atomic factories in roughly eighteen months is staggering.”

Here’s why I think this is so important and relevant to the sorry state of the world we live in today:

Groves advocated no sharing of nuclear technology with allies. Even within the U.S. government, he zealously embargoed information from most agencies and departments, including the White House itself.

Fast forward to 2004. Like the Leonard Spaceks of the accounting world, the Lester Groves of the world are also mostly gone; and in their place, arms merchants and nuclear proliferators seem to have gained the upper hand.

Last month, the Pakistani nuclear scientist Abdul Qadeer Khan confessed that he ran a worldwide sales network, disseminating nuclear technology to North Korea, Libya and Iran. He was promptly pardoned.

And just this past Friday, Malaysian investigators revealed that businessmen and engineers in Turkey, Germany, Switzerland, Britain, United Arab Emirates, and Malaysia were closely involved in his schemes to ship nuclear fuel to Libya.

If Leslie Groves were here today, I think he’d be the last to say “I told you so.” Instead, he’d be insisting on a sound dollar and a balanced budget. At the same time, he would take charge and lead the battle to end nuclear proliferation peacefully; no matter how impossible that mission might seem at first.

DEAN ALFANGE

As the legal counsel to the Sound Dollar Committee, Dean’s is the last name to appear on its stationery.

When I was a young boy, I used to like seeing him at the Committee’s headquarters at 500 Fifth Avenue. He was like an uncle, always welcoming me with open arms.

Dad once told me Dean had run for governor. And just this morning, I discovered from my research that he was a founder of the liberal party of New York — more evidence of the broad, eclectic membership of the Sound Dollar Committee.

Interestingly, though, many of Dean Alfange’s beliefs seemed to have been more Ayn Rand libertarian than New York liberal, as evidenced by his credo:

“I do not choose to be a common man.

“It is my right to be uncommon if I can.

“I seek opportunity not security.

“I do not wish to be a kept citizen, humbled and dulled by having the state look after me.

“I want to take the calculated risk; to dream and to build, to fail and to succeed.

“I refuse to barter incentive for a dole. I prefer the challenges of life to the guaranteed existence; the thrill of fulfillment to the stale calm of utopia.

“I will not trade freedom for beneficence nor my dignity for a handout.

“I will never cower before any master nor bend to any threat.

“It is my heritage to stand erect, proud and unafraid; to think and act for myself, enjoy the benefit of my creations, and to face the world boldly and say, this I have done.

“All this is what it means to be an American.”

He equated this model for self-reliance with the ideal of small government and the discipline of a balanced budget. Perhaps others should do the same.

MORAL POWER

Each of these men brought to the Committee the force of moral rectitude, and it was this force that was truly behind the Committee’s incredible success.

From the various documents in the box, I have tried to identify what got the entire campaign started. I have little doubt it was the age-browned, ripped and crumbling piece of paper now sitting between my computer keyboard and monitor: A full-page ad that the Sound Dollar Committee placed in The Wall Street Journal on March 19, 1959.

Here are some highlights …

Within days after this ad appeared, the Sound Dollar Committee campaign was on fire. “Mr. Weiss and I have been so busy we haven’t had time to think in normal terms,” wrote James Selvage to the members.

But they were not alone.

The Reader’s Digest had also placed a series of full-page ads in newspapers around the country.

The Institute of Life Insurance, representing the largest life insurers in America — including New England Mutual Life, John Hancock Mutual, Metropolitan Life, Massachusetts Mutual, and Prudential — launched a parallel campaign, placing a series of ads in 575 newspapers, reaching 46 million readers each time.

Met Life sponsored its own campaign in the Saturday Evening Post, Life, Time, Newsweek, Forbes, Business Week, and U.S. News & World Report.

All spoke with one vivid voice. All demanded a balanced budget and a sound dollar.

Soon, they were directly or indirectly responsible for driving an estimated 11 million letters, phone calls and telegrams to Washington, swaying Members of Congress, and helping Eisenhower balance the budget.

WHAT NOW?

Can we now strive for a similar goal? Or are matters too far gone, too far out of control? Only time will tell.

In any event, please be patient with me. I’ve just begun to get the Sound Dollar Committee organized again.

I will be sure to let you know as soon as we’re ready to get rolling.

In the interim, stay safe. Don’t get lured into this market. And don’t give up on the idea of keeping the bulk of your money in liquid cash, regardless of low yields, no matter what else may be happening.

Good luck and God bless!

Martin