The Untouchables

A couple of days ago I watched the 1987 film The Untouchables for the first time. Disappointlingly, it presents a statist perspective on the issue of alcohol prohibition in the 1920s and early 1930s.

The opening scene shows Al Capone (Robert De Niro) being interviewed by a journalist as some of his servants simultaneously shave his face, file his fingernails, and shine his shoes. The journalist asks Capone facetiously what it's like to be the virtual mayor of Chicago. Capone responds:

Well, I tell you, you know, it's touching. Like a lot of things in life, we laugh because it's funny, and we laugh because it's true. Some people say, reformers here say, 'Put that man in jail, what does he think he is doing?' Well, what I hope I'm doing. . . is I'm responding to the will of the people. People are gonna drink. You know, I know, we all know that, and all I do is act on that. And all this talk of bootlegging. What is bootlegging? On the boat, it's bootlegging. On Lake Shore Drive, it's hospitality.

That short monologue is, in my opinion, one of the best scenes in the film. With wit and humor, De Niro gets right to the heart of the issue of the hypocrisy and arbitrariness of prohibition. Unfortunately, the rest of the film is spent discrediting in various ways the anti-prohibition (one might almost say libertarian) sentiment behind De Niro's opening monologue.

For example, the film's protagonist, Bureau of Prohibition agent Eliot Ness (Kevin Costner), is depicted as a veritable saint. During the press conference in which Mr. Ness announces the formation of a new partnership between the Bureau of Prohibition and the Chicago Police in order to crack down on bootleg alcohol, the following exchange takes place.

Journalist: "What do you think about prohibition, Mr. Ness?"
Mr. Ness: "I'll tell you exactly what I think about prohibition. It is the law of the land."


That exchange, although short, actually reveals everything we need to know about Mr. Ness's motives regarding prohibition throughout the rest of the film. What Mr. Ness is communicating with his short, matter-of-fact answer to the journalists is that his involvement in enforcing prohibition has nothing to do with his personal ethics--what he thinks is right and wrong, and why. It simply has to do with his unquestioned obedience to the state: "It is the law of the land." Period.

Throughout the film, Mr. Ness's saintly character is reinforced with scenes depicting him as a loving husband, caring father, protector of babies, and all-around swell guy. Meanwhile, Al Capone is depicted as a psychotic murderer whose henchmen blow people up with suitcase bombs merely for declining to purchase any of their bootleg liquor. Not exactly three-dimensional characters.

The most laughably absurd and hypocritical part of the film, though, is the last scene, which takes place as Mr. Ness exits the Chicago courthouse victorious after Al Capone has been convicted on tax-evasion charges. A journalist approaches Mr. Ness excitedly, and the following exchange takes place.

Journalist: "Mr. Ness! Mr. Ness! Any comment for the record? 'The man who put Al Capone on the spot.'"
Mr. Ness: "I just happened to be there when the wheel went round."
Journalist: "They say they're going to repeal prohibition. What will you do then?"
Mr. Ness: (With a wry grin) "I think I'll have a drink."

This, coming from the same man who declared war against bootleg alcohol? If it was not already painfully obvious to the audience that Mr. Ness's personal ethics had absolutely nothing to do with his crusade against illegal liquor, this scene removes any shadow of a doubt. The protagonist's sole motivation to support prohibition is his unfailing devotion to the state, nothing more. If the state says alcohol is illegal, Mr. Ness wages an all-out war on bootleg liquor and risks himself and his family in the process. But if the state says it's okay to drink, well then, by Golly, Mr. Ness will have a drink!

Although The Untouchables is an entertaining film showcasing excellent performances by some top-notch actors, the perspective of its story did not sit well with my libertarian nature. Rather than point out the hypocrisy and absurdity of prohibition, or at least depict some real ethical exploration of the subject, the film panders to the inherently circular statist mentality that the law is the law because... well... it's the law.

Has the Gold Rush Even Started?

Today I came across this article on Businessweek that claims we may be in the midst of a "modern day gold rush."

As evidence of this supposed gold rush, the article mentions various people that have taken up the hobby of gold prospecting, or "recreational mining," and have joined groups centered around the activity. The piece also mentions a few companies that are rolling out plans to sell gold-for-cash and cash-for-gold vending machines in locations such as upscale hotels, airports, and casinos. Yet more evidence offered in the article to support the idea of a sizzling-hot gold market is the recent business growth experienced by companies that insure physical precious metal holdings (e.g., in safe deposit boxes or home safes), as well as recently rising sales by safe makers.

Admittedly, those are all good signs that the gold market and its related businesses are indeed doing quite well. From a certain myopic perspective, I can even understand why some people would think the gold market is in the midst of a bubble. After all, everyday people taking up "recreational mining" as a hobby sounds disturbingly reminiscent of the everyday people who became day-traders during the dot-com bubble and the everyday people who became part-time or even full-time real estate agents during the housing bubble. To paraphrase Doug French, president of the Ludwig von Mises Institute, from his April 2009 lecture "Bubble Economics": A speculative bubble has officially peaked when strippers start giving investment tips.

But the fact that some people happen to be prospecting for gold in their spare time doesn't mean much by itself. The real question is how many people are prospecting for gold in their spare time. To give you some perspective, at the peak of the housing boom several years ago, close to one out of every 100 people in Las Vegas was working as a real estate agent. With that many people participating in the speculative mania, it was virtually impossible not to have at least a couple of friends or family members who were working in real estate. It was a similar story during the dot-com bubble, when just about everybody seemed to be dispensing stock tips and was planning to start their own Internet companies and make millions practically overnight by "going public." It was absolute insanity both times.

This supposed "gold rush" is nothing like that--not yet, anyways. Not even close. How do I know this? Because nobody owns gold yet. Sure, a lot of Austro-libertarians and gold bugs own some gold, and a lot of those people own quite a bit of gold, but that's a drop in the bucket. It's miniscule. To speak in terms of a speculative mania is to speak in terms of entire financial markets, entire economies, entire populations... millions of people.

The average investor does not own any gold. If you doubt this, just start taking a random sampling of the people you talk to on a day-to-day basis. Find a way to work the topic of investing into the conversation. Ask them where they buy their gold, and most of them will give you a strange look--because they don't own any. When you see the occasional TV or magazine ad relating to gold, note that they are usually informing you how to sell your gold to them (cash for gold jewelry and scrap gold, etc.). Those businesses aren't run by dummies. Their financial aim is to buy low and sell high. The reason they want you to sell your gold to them right now is because its price is cheap, and they want to buy it cheap. They know that soon the price is going to rise--and rise, and rise--and when it rises high enough, the TV and magazine ads you see will be informing you how to buy gold from the same businesses that bought it from you on the cheap. But at that point, you'll have to pay top dollar for it.

When will we know a gold bubble has actually formed and is ready to burst? I'm not exactly sure, but I suspect we'll know it when our doctors, dentists, hairdressers, and Starbucks baristas are all offering gold stock tips and starting to quit their jobs to become full-time gold prospectors. Until then, I'm going to keep buying gold and silver. It's dirt cheap.