Thursday , 25 April 2024

While the Economy Fizzles – Gold Sizzles!

Those that could not see the recent financial disaster coming, and grossly underestimated its magnitude once underway, have been loudly proclaiming an economic rebound is underway. Such proclamations spewing from establishment channels are so blatantly short on truth that it reveals a disturbing level of desperation to raise confidence.; By: Chris Blasi; Words: 846

Furthermore, the straight-faced dissemination of such transparently amateurish “official analysis” being served as a substitute for tangible economic growth clearly shows that the damage to the national economic infrastructure is so great that past practices employed by the Fed and Government to goose the economy to revival are now futile at best and most likely counterproductive.

No such thing as a jobless recovery
Only the generation of millions of private sector jobs producing a legitimately saleable product or service is a reliable indicator to herald real recovery. Unfortunately, the country foolishly embraced an economic model based on consumption over production. As such, there will be no healthy and sustainable growth until the populace somehow improves its personal cash flow, pays down previous consumption, builds some savings, and re-establishes a manageable line of credit. That said, parsing through all the official gibberish about the “V” shaped recovery, however, I can find no irrefutable data to confirm that such confidence-building job generation is, in fact, developing.

We are in a short intermission before act two
The economy may appear to have stabilized but this is a brief respite on a long journey down. The trillions of stimulus, nationalization of GM, etc. should have halted the slide and jump-started the economy but, instead, such action has just provided a short intermission – with a heavy price to be paid down the road. All that has really been accomplished is the official establishment of trillion plus dollar deficits going forward, with no end in sight. This recurring annual budget shortfall is actually modest in comparison to the multi-trillions needed for unfunded entitlements, Obama-care, debt servicing, and the legions of upcoming bailouts for state governments and union pensions.

Remedies are being politicized to our detriment
Of course, a crisis demands governmental action. True to form, those that thirst for power seized on the perverse opportunity they helped create and are grinding out legislation that does nothing to honestly curtail future abuses. Instead, it burdens the innocent and productive sectors of society with oppressive, intrusive and damaging regulation. Unfortunately, there has not been one iota of legislation by government – or dollar spent – in response to this crisis that has not been politicized. Consequently, the economic, regulatory and judicial distortions associated with heavy and far-reaching governmental intervention guarantees an ever diminishing standard of living.

One dim bulb and one bright spot for financial refuge
In a speech earlier this month Ben Bernanke treated us to a demonstration of his understanding of money as one beholden to the fiat monetary system. A couple of the pearls of ‘wisdom’ he uttered were:

– “Other commodity prices have fallen recently quite severely, including oil prices and food prices… So gold is out there doing something different from the rest of the commodity group.”
– “I don’t fully understand the movements in the gold price, but I do think that there’s a great deal of uncertainty and anxiety in financial markets right now.”

No Ben, gold is NOT so much a consumable commodity as it is a monetary metal and, yes Ben, there IS a lot of anxiety in the financial markets. Net, net, there is too much limitless paper and not enough finite gold, ergo the falling value of paper to gold.

That simple exercise in cause and effect could have saved the Pride of Princeton the embarrassment of appearing visibly perplexed about the basic tenets of money. What do they teach in Ivy League economics?

Contrary to Ben’s befuddlement, there is clear and unambiguous precedent for coping with the demise of a paper-based, and thoroughly abused, monetary system. The options for financial refuge in such an imploding economic and monetary environment are few. Historically, gold has served in this role and appears to be asserting itself for the position again. This can be witnessed playing out across the globe in all major currencies.

Don’t be waylaid by the clueless conformists. Talk of a gold bubble is coming from those who made the same assertions when gold broke $400 an ounce. Except for its justifiable 4X price rise over the previous decade, there is no evidence of the typical bubble characteristics attached to gold yet.

Unlike the behavior of “investors” in the and real estate manias, the masses are not running out to buy gold at any price. Indeed, if you talk about investing in physical gold bullion at a cocktail party, you can still count on being subject to ridicule. For contrarians, such an environment is ideal. It is setting the stage, aside from the occasional periodic normal price pullback, for gold to ascend to much greater heights.

Chris Blasi is President of Neptune Global Holdings LLC ( and a frequent contributor to both and He can be contacted at [email protected]