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Sol Sanders | Follow the money No. 84 If …
Latest from Uncle Sol. A version of this column is scheduled to be published in The Washington Times, Monday, Sept. 19, 2011 -- Chris
Follow the money No. 84 If …
By Sol Sanders <solsanders@cox.net>
It’s U.S. politicking season, a European financial crisis blossoms, Chinese domestic turmoil escalates, Japan is lapsing into catatonia, India is returning to torpidity – not an easy time to call on common sense. But nothing is more necessary when examining the roller coaster markets and, even more, the pronunciamiento of talking heads who have burned out their synapses.
No, it is not by any means the first nor the most notorious time when American politicians have called each other nearly unprintable names, contradicted themselves, misquoted their opponents and played “dirty tricks”. [How about Thomas Jefferson’s lieutenants “leaking” details of Secretary of the Treasury Alexander Hamilton’s 1792 adulterous affair with the wife of a United States Treasury employee, a blow in the contest between two Founders.]
Nor is the debate over current issues [and they are indeed arguments over fundamentals, not just partisan squabbling as President Barack Obama sanctimoniously pretends] any clearer or less critical to The Republic than similar arguments over the last 200 years. [Although debate had begun during the Civil War and the financial panic of the 1890s, the four-year fight over the income tax brought out every rampaging political, economic and regional complaint and spokesman before the constitutional amendment was shakily ratified in 1913.]
Cutting to that other but unfortunately linked chase, we find the Euro crisis is about fundamental European politics not just economics. The European Union, and therefore, the Euro, was concocted top-down by visionary politicians and consummate bureaucrats. They did not arise from studied compromises among Europe’s incredibly diverse societies as did the American union in the 1787 Philadelphia Convention. Now those differences have reasserted themselves because nanny governments chose burdens even their remarkable economies could not afford.
European opinion is divided mainly among those who want further economic integration and that majority who want to continue band-aid approaches. The latest flavor is moving national indebtedness into Eurobonds, which in effect, is a sugar-coated way of creating a “commonwealth” in which the reluctant northern Europeans, personified by the Germans with their disproportionately large economy, would pick up the tab for their lesser endowed neighbors.
A third position, abandoning the Euro, at least for bankrupt southern members of the common currency, is still largely seen as “unthinkable”. But it grows closer -- if for no other reason than fierce austerity now forced on the Greeks from Brussels is not sustainable by any Athens government for the time needed to solve the basic problem of a 15-20% gap between consumption including public services and Greek workers’ productivity. So coming down the road could well be a choice between abandoning the Euro – with growing implications for the grander European Union structure as the crisis perpetuates -- or watching social tension in the Mediterranean countries, as in the 1930s, lead to authoritarianism.
The latest fairy tale, of course, is that the Chinese with their over $3 trillion in foreign reserves are going to bankroll Europe. [It’s good to remember that this, too, is a pot of accumulated American debt.] Yes, it is true Beijing looks for an alternative world reserve currency. Yes, the Chinese would like to get away from a dollar losing purchasing power in no small part because of “quantitative easing” by Federal Reserve Chairman Ben S. Bernanke and an Obama Adminsitration restrained in “stimulus” spending only by a Republican House of Representatives.
However, the just announced joint central banks emergency three-month dollar loans to rescue European banks, hoping to calm the markets faced with a possible Greek default, confirms Beijing doesn’t really have a choice. If you were running the Chinese dollar hoard, would you now see the Euro as an alternative, even were its coffers large enough to hand such a “dump”? Picking up equity bargains among old if threatened European luxury brands [Club Med appeals to the new Chinese kleptocrats] is great fun if sometimes risky. But U.S. Treasuries bringing their lowest return in 70 years tells you what the Chinese and the rest of the world know: even with the circus in Washington: the U.S. and its dollar still remain the last, faint hope of the international investor.
So, as old Rudyard said:
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too…
sws-09-16-11
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It is weird that the Pubs want to return to the good ole days of Bush. Sometimes ZeroHedge is the most disconnected group since Ron Paul's offspring. Probably the largest group on earth who will be cheering the earth's demise. Must be the left overs from Easter Island.
You must be leftover Neanderthal.
what happens when there is a revolution in gold mining technology and it becomes as cheap to mine as it is to print paper.
what then? do the miners then become the bankers?
Or a large solid gold meteor shower suddenly hits the earth or what ever other 'what ifs' of the science fiction realm?
My contention has always been that, if you are holding physical gold, you are a bank. a repository of wealth. You can demand as much of that worthless paper for YOUR gold, as you want. You, as a de facto bank, should never be in a position of having to sell YOUR gold. If the prospective purchaser balks at paying YOUR price for YOUR gold, he just doesn't want Your gold, badly enough. The other alternative is that the buyer just kills you and takes YOUR gold. How many wars started this way? The emphasis on rightful possession is mine. I say "YOUR" because people just do not understand ownership.
This is the area in which "The Four Money Questions" sort things out and eliminate confusion. Money and motive combine to produce the most fascinating stories in history.
http://georgesblogforum.wordpress.com/
2011/09/16/the-four-money-questions-update-09-162011/
I don't expect everyone to agree with me. In fact, I'm very uncomfortable when too many people agree with me. I have a standard answer for disagreement. You'll understand it when you get harvested. Just stay right in line to the internment camp and be a fine specimen of a sheep. The world is ready for lamb chops.
http://georgesblogforum.wordpress.com
You make a few interesting points. Wish I had the time to click those links.
Have you read The Power Of Gold by Bernstein? In addition to being researched and written well, it’s quite an informative and entertaining narrative of gold’s effects on man, leaders, and governments throughout history. And as we all should know, history may not actually repeat, but it does rhyme.
The production value of gold is constant, equal to the energy and costs it takes to get it out of the ground. The market value is the perceived scarcity of it in relationship to fiat currency. The explosion in fiat currency is a parallel to a company diluting its stock via endless share offerings.
Since physical gold can't be diluted (tungsten excepted), owning gold is "Real Estate" funding. You auto buy now!
1. Kick the can
2. Buy gold
3. Hold the public's attention with puppets hitting each other over the head with sticks while screaming about Greece, the market rallies, whatever
4. Flush the toilet on every saver in the world and restart the system, using a new measuring stick of wealth that you just happen to have a large stack of in your vaults (see #2).
5. Ramp gold prices to the moon
6. Spend some of your gold so you don't completely default, thereby showing how responsible your country and central bank is.
no commodity escapes the laws of business cycles. That's true for gold. The current frenzy of fiat distrust, however justified, cannot lead to a one commodity hegemony that is overvalued relative to all others; like cotton, wheat etc. Gold as fear factor damper (brake) can never replace gold as exchange factor ramper (accelerator); we need the accelerator in new paradigm growths, to replace pure consumerist growth in Dcs. Also, fear is never a good counsellor in real world over time.
Gold is a means to an end not the end. The dollar value of Gold is irrelevent. The preservation of purchasing power however is not.
Purchasing power is the measure by which gold calls paper into judgment. Violating the Biblical standard of just weights and measures invites destruction. I wrote about the consequences in "Purchasing Power Limits".
http://georgesblogforum.wordpress.com/2011/06/19/purchasing-power-limits/
so buy diamonds...a girl's best friend!