More good news on the economic front as American consumer spending dropped to 20 month lows. I believe the bulls on the economy are officially extinct. Perhaps it is time to listen to the bears who have been right about the economy?
What we face now is far more serious than a simple double dip recession. Think about it: if we run $1.6 trillion deficits in a “recovery”, how large will the deficits be in a recession? And if the average maturity of our debt is less than 5 years, what will happen when we can’t roll our debt over? Entitlements alone consume all of our revenue base. Military spending? That’s paid for by debt. Interest expenditures? Debt. Pensions for Veterans? Debt. Educational loans? Debt. Someone please wake up our clueless leaders before it’s too late.
It’s obvious we need to change the way we think about the economy. A simple change like a flat tax rate would go a long way in restoring American manufacturing. Tax-free bonds would also help to stimulate domestic purchases of debt. Why these changes aren’t being pushed harder by politicians is anyone’s guess. Instead we propose taxing the rich, which will undoubtedly make them take their capital abroad. Just listen to a billionaire like Steve Wynn talk about the horrendous economic policies of America; he is the type of mover and shaker who drives economic growth. Business-friendly policies explain why Singapore is poised to overtake Las Vegas as the #2 gambling site in the world by the end of the year. Macau is already #1. You better believe it: there is a monumental economic shift over to Asia occurring before your very eyes.
The Fed is going to continue to stimulate the economy and drive down the dollar, even if they don’t call it quantitative easing anymore. We are in a period of economic malaise that will only intensify as people’s skills become obsolete in a quickly changing economy. This is one of those times in history when technological changes occur very quickly. It used to be that the default option for graduates was to work in the public sector. That’s not the case anymore. People will need to adapt to new economic conditions, and in this adaption process, unemployment is going to be uncomfortably high for a long time.
I still believe it is wise to add to gold positions into this correction. The U.S. has to issue something like $8 trillion in new debt a year to keep this ship sailing. Sorry, but this is not sustainable. Social Security went into deficit in 2010 and you better believe we are just starting to feel the effects of the demographic shift in America. The unavoidable trends are starting to manifest very clearly for everyone to see. As far as I’m concerned, the fundamentals for gold are stronger than they were years ago. I remain long gold until we find a resolution to this debt crisis.Follow