There’s gold in them thar hills.
Herewith a few mysteries of modern economics and modern economics journalism.
Gold: Gold is extremely high compared with where it was ten years ago. It is still comically low compared with inflation and where it was thirty-one years ago. Adjusted for inflation, it is barely half of what is was in 1979. But still, it has climbed like a madman in the last couple of years. Supposedly it has risen because “investors” (read “speculators”) fear inflation and a disarray in government finance that will leave investors without a safe investing tool, except for the barbarous metal.
But, in fact, what economists often say they are fearing is disinflation, a steady fall in prices. This is all over the Wall Street Journal and other financial publications. If we are fearing disinflation, then why are we buying a metal that pays no interest, whose industrial uses account for a fraction of its price, and is basically a commodity — which means it moves down as we get disinflation? Why do we think that we need to hold gold, mainly an inflation hedge, in an era of declining or very modestly rising prices?
If the answer is that we need to hold gold because we fear the collapse of U.S. Treasury finance, then why are U.S. Treasury bonds the most sought after instrument on earth? In a time of fear of a federal government fiscal meltdown, “investors” would normally shun Treasuries. Instead, they are being bought as if they were sliced bread. This brings us to the question of …
Government finance: If the combined effect of President Bush 43’s tax cut deficits and President Barack Obama’s spending mania deficits is to degrade confidence in the dollar and the treasury, why has the dollar rallied strongly in the summer and why are Treasuries wildly high? These are pieces of a puzzle that do not hold together. Obviously, investors and speculators still have plenty of confidence in the finances of the U.S. government. This leads us to the next mystery, which is…
Tax cuts: in that case, especially since the Obama regime obviously believes (rightly or wrongly, probably rightly) in deficit spending as a much needed economic stimulus, why is the Obama regime demanding an end to the Bush 43 tax cuts? They add to the deficit and presumably strengthen the economy thereby. Why end them when we are in the shallowest of recoveries? That is, if the world’s confidence in the treasury is still strong, and if deficits stimulate the economy (as many smart people believe), why raise taxes and lower the deficit right now? If it is a matter of “equity” for less well off citizens, then has the President considered that less well off people pay no taxes on income in any event? Doesn’t that make up for some of the lack of “equity” in well-heeled people getting tax cuts? Perhaps this is a matter better addressed when unemployment is 5 percent, not nearly 10 percent.
It all comes down to a quote my dear father was fond of repeating, “Observe, my son, with what little wisdom the world is run.” This was from Baron von Oxenstiern, and may have reflected how little wisdom was needed to run the world or maybe how little wisdom was employed in any event.
I add my pitiful addendum. Follow the money and the power. Any trader and any politician can always find some theory, phony or valid, on which to hang his self-interest. It is up to us, the public, to find where the truth is situated.
Having said that, it now up to us to take a nap and then go out on the lake.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?