We swoop down through the clouds to the Coliseum grounds. We see senators, centurions, aqueducts, Caesar, bloody-handed Brutus, Roman baths. So far, we might be watching a cheesy educational video about ancient Rome or a really bad movie preview.
After learning how Rome, “famous for its military prowess, rule of law…stable currency, generous welfare programs and the personal liberties of its citizens…. flourished for over 200 years,” giant fireballs consume Roman armies. Corrupt Roman tyrants are juxtaposed with Democrat politicians, a Roman orgy with a pulsating dance club, bread and circuses with food stamps. "War and entitlements forced the government to overpromise, overtax and over-regulate," we are told. "The public began to riot as inflation raged and the currency collapsed...The Roman Empire … was no more. Are we Rome?”
So ends the promo for FreedomFest, an annual conference founded in 2002 by libertarian economist Mark Skousen. The agenda for its 2013 meeting is organized around the question posed by the video -- whether the United States is destined to collapse a la ancient Rome. It bills itself as “the world’s largest gathering of free minds,” including those of Steve Forbes, Tea Party Patriots co-founder Jenny Beth Martin, Americans for Tax Reform president Grover Norquist and Senator Rand Paul of Kentucky.
For a conference on liberty, FreedomFest, which runs from July 10 to 13, has a pretty puritanical message: We are a spendthrift, debauched nation bent on destruction. (The idea of indebtedness actually being sinful was fundamental to Puritan and early Protestant belief.) The agenda is more than a little eccentric. Sessions range from economist Arthur Laffer's "Tax and Inflate, Spend and Regulate: The Four Horsemen of the Apocalypse" to “Is the United Nations Becoming Our Master?,” "The Universes of Robert A. Heinlein -- the Man Who Sold The Moon" and "Business Opportunities in the Emerging, Legal Marijuana Market."
The lollapalooza of "leave me alone" is being held in Las Vegas, at Planet Hollywood, after the original venue, Caesars Palace, double-booked its conference space, according to the FreedomFest website.
What does all of this have to do with your investment portfolio?
Well, a number of the sessions are about investing defensively, and money managers who believe in the conference's apocalyptic message have cost you money. As an alternative currency to the “doomed” U.S. dollar, many attendees at FreedomFest are big believers in gold, which has declined almost 22 percent in the past year.
Meanwhile, they are generally bearish on stocks, which are up 24.9 percent during the same period. Consider conference speaker Axel Merk’s flagship Hard Currency Fund, which held a 9.8 percent weighting in gold and the rest in foreign currencies as of May 31. It has delivered a 0.37 percent average annualized return over the last five years, compared to 8.22 percent for the S&P 500 and 4.93 percent for the Barclays U.S. Aggregate Bond Index.
Merk’s topic at FreedomFest is “The Dollar and the U.S. Empire: How to Protect and Profit from Currency Wars!” His premise: The U.S. and other developed nations are spending too much on war, easy monetary policy and the welfare state, and that will cause our currency, like Rome’s, to collapse. “It’s great to have a sophisticated society, but it gets expensive," says Merk. "In order to deal with those expenses, we debase the metals content of the coins or we use the printing press of the Fed.”
FreedomFest founder Skousen acknowledges that political bias has negatively affected his speakers’ investment performance. “A bias towards the bear market perspective is very typical among libertarians,” he says. “A lot of them, like Peter Schiff and Bert Dohmen, did predict in 2007 at our conference back then that there’d be a major crisis. That’s one reason we’ve been so successful. The problem is that a lot of them still remain bearish even when the market recovers.”
That isn’t completely accurate. Libertarian investment strategist Peter Schiff of Euro Pacific Capital did predict a financial crash in 2007-- as he did at least two years earlier, in 2005. (And by the way, the 2008 crisis "is not over yet," says Schiff. "The U.S. is on the verge of a major economic collapse far worse than the one we had in 2008.")
But some of his predictions about the nature of the crash were wrong. According to a 2009 Wall Street Journal article about Schiff, in 2008 he advised clients that the dollar would collapse and that foreign stocks would beat U.S. ones. Instead, the dollar surged and some of his clients lost as much as 50 percent that year, worse than the S&P 500’s 37 percent loss. While Schiff acknowledges that his performance in 2008 and the most recent two years was bad, if you measure performance from 1999 or 2000 to now "it's still great," he says.
And Schiff still expects disaster for the dollar. "I started advising people to get out of the dollar back in 2000, when the dollar index was at 120, and now the dollar index is at 84," he says. "But I did write that the dollar would really collapse. The fact that it hasn't happened yet doesn't invalidate what I'm saying."
Other employees at Euro Pacific Capital maintain the same doomsday mumpsimus. “Rome had a welfare state that was financed by currency debasement,” says Andrew Schiff, Peter Schiff’s brother and a FreedomFest speaker on currency this year. “If you read your Roman history, they made it possible for the Roman citizens not to have to work too hard. The U.S. parallels Rome in its dominant position in the world and assuming its infallibility while bankrupting itself with a welfare-warfare state.”
Peter Temin, MIT economics professor and author of "The Roman Market Economy," calls claims that currency debasement caused the fall of the Roman Empire “absolute nonsense.” There was moderate inflation throughout the era because of the currency, but it was not the cause, he says. “That’s a reductionist view owing more to political ideology than a knowledge of history.”
As for political corruption and tyrants, “there was always political corruption,” and the empire survived for hundreds of years with it, Temin says. Regulation of agriculture and industry were modest. Nor were bread and circuses (welfare, in FreedomFest's taxonomy) a financial burden.
So what did cause Rome’s downfall? The Vandals attacking, for one thing. But Temin has another theory that will be anathema to zero-government-loving FreedomFesters. “Rome didn’t have a good enough taxation system,” he says. “Rich people were exempted from taxes, mostly, so the government eventually ran out of money.”
War of Words
Such distortions of ancient history are perhaps forgivable sins. What has Yale University literary critic Harold Bloom seeing red is how FreedomFest is prominently using a quote from his 2011 book "The Anatomy of Influence" on the conference site. "They have completely misconstrued the quote and they must know it," said Bloom upon learning of the truncated quote.
Here is Bloom's quote as it appears on freedomfest.com:
“It is scary to reread the final volume of Gibbon these days because the fate of the Roman Empire seems to continue even now. We have approached bankruptcy, foreign wars we cannot pay for, and defrauded our urban and rural poor. We have no Emerson or Whitman among us.”
The full quotation includes sentiments at odds with libertarian and Tea Party views. Bloom is particularly angered by the exclusion of a mention of George W. Bush and his views on "plutocracy, oligarchy, and mounting theocracy" -- which is what he says libertarians are all about (italics ours to show excised text):
"It is scary to reread the final volume of Gibbon these days because the fate of the Roman Empire seems an outline that the imperial presidency of George W. Bush retraced and that continues even now. We have approached bankruptcy, fought wars we cannot pay for, and defrauded our urban and rural poor. Our troops include felons, and mercenaries of many nations are among our ‘contractors,’ fighting on their own rules or none at all. Dark influences from the American past congregate among us still. If we are a democracy, what are we to make of the palpable elements of plutocracy, oligarchy, and mounting theocracy that rule our state? How do we address the self-inflicted catastrophes that devastate our natural environment? So large is our malaise that no single writer can encompass it. We have no Emerson or Whitman among us.”
Those are not the words of a man who believes free markets, no taxes and deregulation can save us. Bloom says he is "absolutely outraged by what they've done with that quotation. I'm a lifelong liberal. These people in my view are liars, cultural illiterates and in fact fascists. The Tea Party is simply the American fascist party. I can't think of two people I despise more than Rand Paul and Grover Norquist."
FreedomFest's Skousen says they simply trimmed Bloom's quote for space. "Frankly, I agree with Harold Bloom's views on George W. Bush and his presidency," he says. "But we didn't want to have a long quote that would lose people's interest. We also don't want to sound too partisan. I'm sure Mr. Bloom has issues with Obama as well. We are economic and social libertarians and we don't want to sound like we are bashing just one political party."