A while back I caught a Peter Schiff interview on one of the mainstream financial channels where he was recommending gold. The interviewer commented that for every investment thesis there existed a scenario in which the thesis would fail. He asked, what was that scenario for gold? Mr. Schiff replied that it would require massive spending cuts out of Washington DC and a balanced budget.
A balanced budget? When was the last time we even had a budget, balanced or otherwise? Mr. Obama’s latest proposal was shot down 99-0 in the Senate and 414-0 in the House. So that means the government spending shuts down right? Nope. The profligate party just keeps on rolling with no limits whatsoever.
But ok you say, there’s a silver lining in all of this. It simply means that Americans will finally realize the need to elect Mr. Romney and implement some fiscal responsibility. And, just what is Mr. Romney’s plan to balance the budget? Bad news folks, there isn’t one. In fact, he recently went so far as to say that he would never cut the deficit by a trillion dollars in the first year like Ron Paul has proposed. When asked why not, he replied, “The reason is taking a trillion dollars out of a $15 trillion economy would cause our economy to shrink and would put a lot of people out of work.”
Well, you’re not taking a trillion dollars out of the economy by cutting government spending. You are simply allowing the private sector to retain that trillion dollars and use it as it sees fit. The real problem for politicians is that it means a trillion dollars less of stolen booty with which they can reward the special interest groups that helped get them elected.
To say that cutting government spending will cost Americans jobs is no different than to say that increasing government spending will create new jobs. Where have we heard that one before?
So between our two options of continued government largess and continued government largess, there doesn’t seem to be much likelihood of Mr. Schiff’s scenario for an end of the gold bull market to play out. The last four years have shown beyond any doubt that Mr. Obama likes the yellow metal, and now it appears that Mr. Romney intends to feed the gold bull as well.
Biased reporting is usually subtle as Mr. Carter adroitly shows us in this report. Mitt Romney, of course, told us he would not cut one trillion (one thousand billion) out of the budget because of the over-all negative effect it would have in the economic marketplace; instead he has consistently stated his annual budget will decrease spending by five hundred billion each year (instead of 100 billion) through the combining of duplicate programs, fewer government employees through natural attrition, and elimination of programs that hurt the overall economic picture such as Obamacare. His written 59 point economic proposal states that the goal of balancing the budget within 4 years after decreasing the debt $500 billion per year or two trillion dollars in four years.
Yes, it’s tongue in cheek and, yes, Romney officially says he will cut spending. But how surreal is it that he would choose to attack Ron Paul’s proposed cuts using Obama’s fallacious argument? It just doesn’t appear to me that the dollar has many friends in Washington DC, on either side of the aisle.
Even though the gold bull may get fed, and the result could be disastrous, let us look at a brighter side and how every one of us can be prepared. With hyperinflation, the commodity prices will soar as they did during the Great Depression only much higher now in this time than long ago because the amount of money has been exponentially made greater. So in short, why not own more commodities?
Even though gold and silver now have been on a very bumpy road, with their ups and downs and the recent down turn of both gold and silver have left some people wondering if there is a safer way to collect gold and silver without worrying about the timing of when to buy/sell in order to make profits off of it. However, what many people don’t realize is the smarter and safer alternative and that is Numismatic coins. Numismatic coins not only have the value of the gold and silver locked in, but they are collectibles which mean their value will go up even when gold and silver go down because they have the collectible value of the coin, which ordinary bullion does not. Don’t get me wrong, I love bullion, but I like Numismatic even better for these reasons.
Actually, it’s a myth that numismatic coins outperform bullion in bull markets. Presently, the commonly-promoted numismatic coins are carrying their lowest premiums in about two decades despite metals being at high prices. The major problem with numismatic coins is that as the prices of gold and silver go higher, numismatic coins fail to hold the same percentage premiums. Further, when gold/silver prices decline, investors shy away from any investments and the coins that naturally come into the market have few buyers, resulting in premium declines.
About 25 years or so ago, there was supposedly a study that showed that numismatic coins outperform bullion in rising markets, but the study was suspect and this bull market has certainly shown the study to be faulty. Stick with low premium bullion coins, such as Gold Eagles, Krugerands, pre-1965 US 90% silver coins and 100-oz silver bullion bars.
Gee! It sounds like your not a Romney supporter. Duh!
This site is not about Romney but gold, silver and developments that affect their prices. Carter’s point is that the Romney has stated that he will continue deficit spending for years to come, which will feed the gold bull.
While I recognize that Romney has said that he will cut spending, he has yet to say where he would cut spending. Ron Paul, on the other hand, would start cutting spending immediately by eliminating five federal agencies. As far as we know, Romney has no such plans.
I’d like to take issue with one paragraph that implies that “taxpayer money” is involved here:
“Well, you’re not taking a trillion dollars out of the economy by cutting government spending. You are simply allowing the private sector to retain that trillion dollars and use it as it sees fit. The real problem for politicians is that it means a trillion dollars less of stolen booty…”
Stolen booty? From whom? We’re running trillion-dollar-plus deficits, at the Federal level, every year now. The deficits are covered by the US Treasury/Federal Reserve counterfeiting operation as they always have been. The taxpayer is out of the picture when counterfeiting is the method used to cover deficits. So no, the taxpayer is not being stolen from in the direct sense as is implied in this article.
As things are going currently, cutting one trillion in Federal spending would eliminate the need to counterfeit one trillion dollars which would eliminate the theft of value in existing savings accounts. THAT is where the real thievery occurs.
Disagree. “Taxpayer money” is involved here.
While deficit spending via borrowing and printing does not lift greenbacks from the taxpayers’ pockets, both directly impact taxpayers. Borrowing legally commits taxpayers to pay the money at a later date, and the printing of additional dollars dilutes the value of the dollars for which taxpayers work.
I definitely agree on the position that the Fed’s counterfeiting is thievery, a process than not one man in a million can understand. (Now, that’s a little theft in itself.)
I ignored the “legal commitments” of the bond issuances because the level of debt we have already incurred will never be paid off. You know it, I know it and anybody with two active brain cells and a modicum of common sense about money knows it. And we keep piling more debt on top of what we already can’t pay. Manufacturing is the wealth (income) generator of a nation and we have essentially thrown or given the vast majority of what we had away. How are we going to pay the debt down? The legal commitments are irrelevant – in the end they’re not going to be paid. As Franz Pick used to say, government bonds are nothing but guaranteed certificates of confiscation. You don’t want to be holding them when the music stops. Other than that issue I’d say we’re on the same page.
Now we have gold versus fiat paper money. What about gold versus all electronic money with no cash.
You say government spending cuts and a balanced budget would cause gold to drop in value. What if the government scrapped our fiat paper system, which means no more physical dollar bills, and started all over to an all electronic cashless system (I hope it doesn’t happen). Is an electronic cashless system another way for Gold to drop in value?
The system you describe is essentially what we have right now. Only about 3% of the dollars that comprise the money supply exist in actual paper form. The balance of the money supply is just bank credit; numbers on your screen when you log into your account.
All other things being equal, the value of a currency is more dependent on how stable its supply is rather than the actual form it takes. In the case of bank credit, it is almost always expanding, making each dollar worth less each year.
I think an electronic cashless system would most definitely drop the value of gold. As scary as it may be, an electronic system is becoming more and more of a reality everyday. I myself cannot even fathom such a thing and hope it does not happen in my lifetime. However, it may offer some protection from inflation and other issues but only if it can be implemented correctly on such a large scale.