Schmidt's Gold Thoughts
Ned Schmidt, February 9th, 2010
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SCHMIDT’S GOLD THOUGHTS (9 February 2010):
The great blizzard that rolled across the eastern United States this past week should have served as an icy funeral pyre for the Global Warming Scam. Charles Ponzi was a rank amateur when compared to the attempt by climate evangelists to extract money from the gullible public. These would be weather Madoffs dream of the money extracted from the public by Keynesian economists, the clear champions of money Ponzi schemes. Money that appears to have been squandered.
Consider the complete failure of Keynesian economics in the U.S. Over the past two years, the U.S. government has run a deficit approaching three trillion dollars. Results? More than 8 million people lost their jobs. Get it right. As the deficit gets bigger, more people lose their jobs. Seems like even a devoted Keynesian economist would begin to understand that their holly doctrine is fatally flawed. Apparently, the only thing rising in this Keynesian mess has been the price of Gold.
Why does a nation allow these purveyors of economic drivel to manage its monetary affairs? Distortion after distortion of the marketplace by the Federal Reserve, as well as central banks in Spain, UK, etc., have resulted in repetitive economic dislocations. But, they are still allowed to distort the market for money by setting interest rates. Free markets set the price for everything from marijuana to food to gasoline to airline tickets, but the price of money is fixed by a group with no apparent divinely inspired wisdom.
Gold has served us well in recent years, returning far more than the paper equities so popular with some. We should recognize that the high return on Gold was due to special factors that may not be repeated exactly in all periods of time. That reality does not mean we should shed our Gold, for the evil brought on by Keynesian economists will again threaten us some time in the future. The enemy has not been vanquished, but remains lurking in the halls of government everywhere.
At the present, $Gold seems to be correcting. That should have been expected as no market rises without interruption. Some reasons can be found which may help explain this consolidation. Gold, remember, is just the universal currency. If dollars are bountiful, in dollars the price of Gold should rise. It acts just as the Euro or yen might do, as it is simply another form of money
Two major reasons exist for the U.S. dollar strength and Gold’s price weakness. First is the non-inflationary expansion of the U.S. money supply. Second is Greece. The latter simply has scared many investors. Greece is symbolic of the widespread sovereign risk in the world brought on by Keynesian inspired government deficit spending. Those investors have simply sought haven from sovereign risk by moving into U.S. dollars. Now the U.S., we well know, is a financial mess under the Keynesian economists. However, the U.S. mess may persevere for some time, while that of Greece and others seem more immediate.
As to the currently non-inflationary expansion of the U.S. money supply, M-2 NSA, we must remember what happened in 2008 and early 2009 is history. The impact of monetary activity in that period is fading. More important today is that the U.S. money supply is only 2-3% larger than a year ago. That rate of expansion in non-inflationary. That rate of increase in the quantity of U.S. money is such that the dollar is becoming rarer on a relative base. The value of the dollar should go up. The value of competing currencies, such as Gold, should recede.
