Molōn labe
Posted on 09/30/2010 9:55:14 AM PDT by xzins
COLLEGE PARK, Md., Sept. 28 (UPI) -- Gold is approaching $1,300 an ounce for good reason. The Obama administration has flooded the world with greenbacks and Treasuries, global investors have little confidence in the management of the U.S. economy and investors have taken refuge in gold.
Since U.S. President Barack Obama took the helm, the U.S. trade deficit increased 60 percent. At more than 3 percent of gross domestic product, the trade deficit drains off more demand for U.S. made goods and services than the president's stimulus spending has added.
America's chronic trade imbalances stem from dysfunctional energy policies imposed by Democrats in Congress and continuing tolerance for Chinese mercantilism.
As the U.S. economy recovers, oil and Chinese consumer imports rise, choking the expansion -- that's why demand and economic recovery are flagging, stocks can't sustain momentum and industry won't invest or add jobs.
Democrats in Congress insist on energy policies that limit domestic oil and gas production and rely on higher prices that instigate conservation. Those have failed to stem dependence on imported oil, the outflow of dollars and the choke hold Middle East investors, and now China, have attained in global capital markets and on U.S. government finances.
Cheap imports from China have chased millions of Americans from manufacturing jobs, as the U.S. purchases from the Middle Kingdom exceed sales there by more than four to one. The trade deficit with China is about $300 billion and continues growing year after year.
China has engineered this competitive conquest by keeping its yuan artificially inexpensive against the dollar and euro. Annually, it sells at deep discount about $450 billion worth of yuan for dollars, euro and other currencies in foreign exchange markets. That provides a 35 percent subsidy on Chinese exports and keeps Chinese goods deceptively cheap on U.S. store shelves.
The Bush and Obama administrations have sought changes in China's currency policies through diplomacy but have failed -- and will continue failing as long as the rhetoric of appeasement and restraint from self help are the cornerstones of American policy.
Instead of advocating strong U.S. action against Chinese mercantilism, the U.S. Treasury has tarred as protectionist those who propose substantive American responses.
The huge trade deficit must be financed by attracting foreign investment in new productive assets in the United States or by printing IOUs. Investments have only provided a small portion of the necessary cash, so each year the United States sells currency, bank deposits, Treasury securities, bonds and the like to foreigners. Those claims on the U.S. economy now are about $7 trillion.
That floods world financial markets with U.S. dollars and paper assets that function much like U.S. dollars -- what economists call liquidity. All that evokes an iron law of the universe: if a government prints too much money, it won't have any value.
Add federal budget deficits exceeding $1 trillion a year for several years to come and an economy that can't produce enough to sustain Obama's appetite to tax and spend, and investors are simply smart to short the dollar by loading up on gold.
That's why gold is $1,300 an ounce.
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(Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.)
Makes sense to me.
NOBODY TRUSTS THE GOVERNMENT! GO FIGURE!
This is the problem I see with stockpiling gold: If gold is $4000/oz and bread is $4000/loaf, it will still cost an ounce of gold for a loaf of bread. Not that investing in it is a poor idea, I have some metals myself, but I’m more comfortable with stockpiling water and nonperishables.
I buy this analysis. We have a major structural issue that can only be resolved if the CHinese revalue and we dramatically shift our energy policy. The question is how does a small investor protect themselves apart from joining the herd into gold - only to find that that market is readily manipulated by the likes of the Hunt Brothers. Retreating into non-productive assets makes little sense to me.
Apparently everyone is overlooking the “small” insert into the ObamaCare Law.
You can find the details on Fox Business.
But, ALL gold transaction over $600.00 must file a 1099 with the IRS. Zero wants to know where your gold is and how much you have, wonder why?
The only real answer to your question that I can think of is for me to invest in myself, my abilities, and my property.
It only going to be fixed when Americans start buying more American made products, most Chinese products are made like sh!t anyway and alwys need to be replaced.
It is up to us - start reading label and comparing when things are made - the job you save may be your own.
Acquire equities in businesses that have pricing power.
Utilities, Oil Companies, they can raise prices and the market has little choice but to pay.
I believe energy policy is huge.
If we would simply tap our natural gas reserves and then our coal reserves, we would reverse our trade imbalance.
PMAS is right about “American Made.”
Say whatever you want about the value of foreign trade, but at the micro level, I’d prefer the Ford plant down the road stay in my state rather than go to another state.
They can bring in all the salespeople in the world to sell Fords here, and yes that will be jobs. But they’d be here even if the Ford plant stayed.
It’s better we have the Ford plant that someone else does.
That’s no different country to country as it is state to state.
That’s what happens when you have a flake government running a flake economy with a flake currency in a flake jurisdiction with flake political parties that don’t properly vet candidates for high office resulting in a flake political system.........and from where I sit, it’s only going to get worse. In a country where you can’t get a job as a plumber without a lengthy resume, a credit check and a criminal background check, you can become a Senator without any of the above or even so much as a “proper” college education. And remember.......the Federal Reserve board has never, come to the rescue of the Dollar; all they do is fight Deflation......pumping more worthless script into the economy because all they know is Deflation Figthing. (there’s a song it that).
that’s a good thought, p35. thanks.
Humans will always require an exchange medium—bartering not withstanding. The most stable of mediums is precious metals and gems. Rare is rare and it has value. Creating valueless (wampum and today’s dollar), artificial (wampum and today’s dollar or a country’s GNP accomplishes about as much as masturbation. Oh sure, there’s lots of shaking, huffing and puffing and there may even be an orgasm. But the relief is temporary. It does not address man’s deeper need for a longer term reciprocally loving life partner.
I would posit, as an alternative view, that many don't view gold as a non-productive asset, but rather as the only real global currency accepted by all and backed by 4-5,000 years of history, which is contrary to the majority's current thinking that the U.S. dollar is the dominant global currency which is nothing more than another fiat currency like all the others, backed by nothing but a thin veil of perceived "confidence" that once lost, will become as worthless as the Weimar Mark, Zimbabwe dollar, and the Hungarian pengo. But, that's JMO.
Mainly because our “Federal Reserve Note” dollars are worth about $0.001 when compared to Silver certificate dollars and $0.0001 when compared to the gold backed dollars.
See economics ain't that hard. Well, not hard for us out here in flyover country.
But for that bunch in Washington District of Corruption?
ever try to sell a diamond? as for other gems, there are rapidly developing processes for artificial creation of them. It will not be too much longer and those mines will not be worth the effort.
If a loaf of bread is 4000 Dollars,,, an ounce of gold will cost exponentially more than $4000. Thats the entire point.
It preserves your buying power. That ounce of gold would buy you the amout of bread then, that 1300 dollars would today.
Short of the utter apocalytic end of civilization, Gold is it. Always has been.
“We have a major structural issue that can only be resolved if the CHinese revalue”
And why would any sane Chinese government do that? The Chinese are buying gold as fast as they can, and talking to the Russians and Saudis about creating a gold-backed currency. They want to be PROTECTED from holding worthless dollars, not save the dollar.
Molōn labe
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