Today's news, dominated by more evidence the economy is failing, has caused multiple experts to question the Fed's ability to do anything further to revive the economy. It is being said the Fed is bewildered.
As the words were uttered, markets took another hit, and precious metals rallied from overnight lows back to levels near multi-week highs. Evidence that housing is still stumbling and jobs are becoming more scarce have dominated the last few days of market news. If the Fed is truly bewildered the question remains, what next?
Surely, if this attitude prevails as mid-term elections draw neigh, the chances of any Democrat being re-elected is almost nil. This is exactly what the conservative right has been saying. Your policies have done nothing but kick the can down the road. Only now as we face the problem again, it is under the weight of a crushing budget deficit and trillions more debt.
Still, a host of analysts and experts hold tight to their faith in the markets and curse the likes of gold as a safe haven. Every other day, it seems, the question is raised whether gold has run its course. Yet, gold keeps running steady and true. Some say the bubble is about to break, but how can a bubble be close to bursting amidst such negative sentiment.
At some point even the doubting Thomases have to believe. Then the real rush to safe haven gold begins. Some believe gold demand is at the brink of exploding along with the gold price. Others hold fast to hopes the markets will be revived. Again I reiterate my own personal longing for the days when opportunities in stocks and real estate were abundant but evidence those days are long past is just too overwhelming. Now, the order of the day is survival while the task at hand, for millions, is how to arrive at the time when you get the gold watch. To what asset will you now trust your savings and retirement accounts?
This morning on CNBC, Charles Nenner, founder of Nenner Research, declared the Dow Faces Bouncy Ride to 5,000. He says we will see this in the next 2 to 2 1/2 years, near peak time when Boomers want to retire. At the same time, Nenner is also bullish on gold and silver over the longer term and expects the precious metals to start a new leg higher by the end of the year.
Frankly, this is no time to be bewildered. America needs something to happen soon. More stimulus is being contemplated, so are higher taxes and expiring tax cuts. One pumps more free money into the economy, fueling inflation fears. The other sucks money out of the economy and strikes deflation fear in the heart of the Fed. Pick your poison.
Which is the likely course of action? Since debt kills in deflation, the Fed appears willing to do just about anything to prevent it. In deflationary times no one wants to owe money on anything that is losing value. Even less desirable, is lending money. Who wants to lend money against depreciating assets?
If stimulus just kicks the can down the road, causing inflation to run wild, stimulus may not be the best choice but the lesser of two evils. The Fed is already buying more Treasuries as foreign demand appears to be waning. Stimulus may well be the next move.
Is there a better choice? Perhaps we should follow China's lead. In anticipation of a global economic slowdown, China has directed its citizens to own gold. In fact they say take some of every paycheck and buy a little gold. In deflationary times gold becomes like cash and if stimulus needs to be the solution to our economic woes, own gold as an inflation hedge.
Gold appears to be the solution which likely explains why central banks are buying it and so are citizens of China and throughout Europe. Not long ago it was reported citizens of Greece were paying as much as $1700 an ounce to own gold. If as Nenner says, gold is about to enter another up-leg in its bull run, and stocks are about to enter a huge downturn, now may be the best time to own gold.
What bewilders me is why gold is never recommended by our government or by the Fed. I fear a day when the system collapses and foreign countries and citizens own more gold than does America. In my humble opinion, gold is the cure for bewilderment.
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