Government shutdown: the Heisenberg uncertainty principle Gold apparently did not get the memo about the government shutdown. Gold prices have consequently been falling all day. Awkward. As Business Insider's Joe Weisenthal noted on Twitter earlier on Tuesday: But, of course, nothing is rational these days. "John Galt" has taken the US government hostage to demonstrate the worth of his productivity to the nation - whether it be today's ongoing productivity or that of days" gone by - something which he believes justifies his superior ranking to those who, unlike him, have been or threaten to become takers rather than makers in society. And yet, we daresay, the consequences of this particular Galtian strike may turn out to be very different to how Ayn Rand envisioned them. This is due to a fundamental misdiagnosis by the Tea Partyers of what is really the cause of the US economic problem. For the output gap tells us that the country is suffering not from the consequences of too little productivity and capacity, but rather from too much. It is insufficient demand which is the problem, not too little productivity. Too many Randian heroes, not too few. The Randian message is simply not applicable to today's economic reality. Indeed, in today's context, John Galt is really more like Walter White, the embittered anti-hero of the TV show Breaking Bad. In the show, Walter - a failed chemistry genius turned school teacher - is diagnosed with life-threatening cancer but refuses to accept healthcare handouts from benevolent rich friends due to an overly inflated sense of pride. Instead, in true John Galt style, Walt decides to follow the path of the Randian hero and earn his way out of his troubles by himself. He does this, unfortunately, by turning to the nefarious production of methamphetamin. The blockbuster drug he creates is superior to all others and is understandably quickly lapped up a market that only ever wants more. "Whatever it takes" quickly becomes Walt's mantra, irrespective of the lives he destroys along the way. The selfish and destructive criminality that follows - everything from the formation of monopolies and cartels, to intimidation and market capture - is not atypical to what any industrialist might be reduced to in a world threatened by oversupply, a lack of traditional demand and ever fewer natural growth prospects. Indeed, to an industrialist, the only options presented by a saturated market are bankruptcy, the creation of false scarcities that fuel cartels or the stimulation of demand through mental conditioning or addiction. Interestingly enough, much like John Galt, Walt - operating under the alias Heisenberg - also struggles with a lack of recognition for the value he believes he brings to the drug underworld. His predictable need for acknowledgement leads to to the dissemination of a calling card. Sadly for him, the whispers of "Who is Heisenberg?" don't really do him much good in the end (though we obviously shan't say more for spoiler reasons). Among Walt's most Galt-like proclamations is probably the following: Who are you talking to right now? Who is it you think you see? Do you know how much I make a year? I mean, even if I told you, you wouldn't believe it. Do you know what would happen if I suddenly decided to stop going into work? A business big enough that it could be listed on the NASDAQ goes belly up. Disappears! It ceases to exist without me. No, you clearly don't know who you're talking to, so let me clue you in. I am not in danger, Skyler. I am the danger. A guy opens his door and gets shot and you think that of me? I am the one who knocks! Though, of course, this is where the similarities end. It's clear from the above quotation that Walt at least knows that his reckless and egotistical quest "to do it alone" against the odds is ultimately dangerous for all connected to him. He does not think the world is a better place because of his socially destructive methamphetamin business. This is more than can be said of John Galt and the Tea Party movement who remain vitriolic and even hopeful that their actions will have damaging consequences. It's a "we'll show them" mentality. Why is gold falling in that context? Probably because it's the surest sign of all that the economy isn't actually what they think it to be. That the problem isn't so much debt or Obamacare but rather an abundance of overly hierarchical claims over the economy relative to the actual productive capital they represent. And on that basis, if the John Galts of America were to up and leave, who's to say they wouldn't be doing the US a favour? It's a bluff they simply cannot win, largely because default doesn't hurt those lower down the chain half as much as it hurts those at the top. Furthermore, if government payments were to be suspended, people wouldn't think "wow, we must buy all the gold we can." People would much more likely liquidate assets (for paper dollars) to buy the products they need until this fiasco is resolved. It might, consequently - shock, horror - even be marginally uplifting for the economy. As Paul Krugman notes on Tuesday: It's very important, I think, to realize that while right now the GOP seems to have been taken hostage by its radical wing, the general strategy of responding to a lost election by trying to gain through blackmail what the party couldn't gain at the polls was a consensus decision, arrived at way back in January. If the leadership is now dismayed by where it finds itself - leading a party of "lemmings with suicide vests" - it has only itself to blame. Coming back to the class warfare issue: my working theory is that wealthy individuals bought themselves a radical right party, believing - correctly - that it would cut their taxes and remove regulations, but failed to realize that eventually the craziness would take on a life of its own, and that the monster they created would turn on its creators as well as the little people. And nobody knows how it ends. Which possibly makes the GOP a helluva lot worse than Breaking Bad's Heisenberg. And we already know that that particular story didn't end too well for .... (Well, okay, some of us know. No spoilers here.) Related links: With debt ceiling, are "Obama bonds" the answer? - CNBC