Tony Deden on inflation, the credit and banking crisis, and moral decline

As day after day brings to light the damage caused by the credit and banking crisis of our times, man's natural reaction focuses on solving such real problems. Yet, most investors cling to their misplaced optimism in the ability of government employees to provide solutions, despite ample evidence that points to the opposite, and despite the fact that these same persons and institutions are responsible for creating this crisis in the first place.

The crisis we face is not merely one of a bankrupt monetary system, but also a crisis of ideas that contributed to the relativism of our times and the collective arrogance of those unable to distinguish between money, credit and capital or those wishing to suspend the laws of scarcity via sophisticated finance. In the process, a few have enriched themselves beyond description while the fate of most is one of continuing impoverishment. This is not a failure of capitalism but a result of the intellectual and moral poverty that grips our world. In the end, the medicine being administered, whether via inflationism, further regulation or direct and indirect nationalization of banking, is likely to contribute to further malaise - for we have focused on solving a problem without either understanding its nature or identifying its genesis.

Financial history will someday record this year in the same manner in which past financial disasters are embedded in the memory of our parents and grandparents. As it was then, the genesis of the problems started years earlier, yet very few recognized it at the time. As it always happens, even the "experts" are surprised by the severity of the ongoing pain necessary to correct the imbalances built over many years. Recoveries from economic disasters demand a period of cleansing that last many years. More often than not, the ensuing problems are aggravated even further by the invariable financial and regulatory meddling by well-intentioned bureaucrats.

Today's deliberate destruction of money and savings, via inflationism, is an attack on private property and an attack on freedom as we know it. We stand at the vanguard of what could be a violent period of upheaval - one of many that history has witnessed.

~ Anthony Deden, Sage Capital Zurich AG, Edelweiss Fund 2007 Annual Report, March, 2008