Today’s daily is stuffed full of interesting comments on the election. In case you wonder where I stand, well I am a fiscal conservative and a social liberal. The thing is, I don’t believe an election as important as this one should be decided on social issues. If Obama wins, my taxes will go up, my estate tax will go up – so be it. But the price of gold will also go up – both short-term and throughout his second term. You saw what gold did in Obama’s first four years. Gold rose from $800 to $1,700 so let’s call it a double +. I expect the next four years will reward us with the same. We end up in 2015-2016 with Sinclair’s promise of $3,500.
If Romney wins, gold will probably drop, for the short-term, but any attempt to slow down or cut off QE and cut spending will be a disaster beyond what most people can imagine. His policies will yield $3,500 or more in 2013. At least, that’s what Jim Sinclair says. And then there’s John Williams who warns of hyperinflation in 2013 regardless of who wins.
I wish I could believe that at least one of the candidates offers a solution, but alas, such is not to be the case. Plus, the Senate is a joke as neither side will consider compromise, even if it is for the good of the nation, and Washington will be in gridlock with nothing of importance being accomplished. I am not being a doom-and-gloomer. That’s just the way it is and it is best to admit it and act accordingly.
One way or the other, we have a year – or we have three or four years. That’s when we hit the wall and no matter how we prepare, none of us will escape unscathed. Still, I’d rather navigate the rough times with gold and silver than with the dollar.
Susan and I will watch with great interest. Though I prefer Romney, he is not the answer. There are no saviors out there. Our lives are about to change and no one likes change. Button down the hatches; this is it!
Here is what our friend Bill Murphy (LeMetropole Café) says about the election:
Along with any credibility associated with the jobs report, I want to bury the idea that either Presidential candidate will have a specific effect on the stock market, precious metals, or the catastrophic U.S. fiscal/economic situation. The popular promotion in the media is that Romney will be good for stocks and bearish for metals. The latter idea I guess because of his threat to get rid of Bernanke, who is an economic straw man for the banks anyway – as would be his successor.
Let’s take a look beneath the hood of this argument. We’ll look at the black and white numbers with no editorial or slant. The Government is currently borrowing 40 cents of every dollar it spends. If it were to cut spending in a meaningful way to reduce that number – let’s say a 10% cut across the board in order to reduce that borrowing rate to 30 cents – imagine what that would do to the economy. Imagine if they cut entitlement spending by 10%. People would starve and seniors would go without healthcare. The Dept. of Defense, the largest employer in the world with 3.6 million employees, would have to unload close to 400,000 employees. The only thing a 10% cut would do is reduce the rate at which the Government is accumulating debt, if the economy stayed the same, which it wouldn’t.
If the Government cut spending 10% to try and take a whack at the deficit spending, it would send our system in an economic tailspin and throw our economy into a depression that would make the 1930’s look like a day at Disneyland.. Now imagine that Congress passed a hard law require immediate balancing of the budget. 40% of all Government would stop. That would annihilate our system. Armageddon. Mad Max. A balanced budget would only stop the increase in debt accumulation, it would do nothing to reduce the $16+ trillion outstanding. Ahh, but under any of these scenarios, Romney is promising 12 million new jobs…
My point here is that there isn’t any possible “fix” for our system that either Romney or Obama can implement in order to solve the fiscal cliff problem without sending our country into chaos. To be sure, this would lead to the “reset” our country needs, and in the long run it would be a good thing, but there isn’t one sane person out there who would sign up for that. Neither Romney or Obama have any choice except to extend the madness of more deficit spending, more debt accumulation and more money printing.
If you think Romney has some sort of “magic underwear” solution he’s hiding, please read the quote from Bill Buckler’s Privateer, probably the most candid and truthfully analytic newsletter available:
Mr. Romney has now been the official Republican candidate for two months. Over that time, he has spent an unprecedented amount of money (as has his opponent) to get out a “message” that boils down to this: “You’re better off with me than you would be with him!” He has said absolutely nothing about his “plans” to address the fiscal and financial condition of the US and its government. There is a good reason for this, Mr. Romney doesn’t have any plans.
I’ve been whining about the latter statement since the first debate. And the reason neither Romney nor Obama have laid out a specific plan is because any plan to cut spending and debt accumulation would destroy the economy. This is what happens when you have an economic system that is based entirely on fiat currency and very little actual substantive economic production. Hell even Apple’s IPhones and IPads are manufactured in China. For some reason many Wall Street analysts have said that the new IPhone would add 1% to economic growth. Given that Apple’s stock price is down over 13% since the new IPhone was introduced, I think we can see how retarded that notion is.
In addition, anyone notice how the Fiscal Cliff deadline was never addressed in the debates. It’s related to the previous point, but it’s worth pointing out, because neither candidate can possibly do anything with that situation except override the legislation and increase the Treasury debt limit by quite a bit. Even if the Fiscal Cliff were allowed to kick in – and we know it won’t be – the Treasury debt limit would still have to be raised. I’ve seen some estimates which suggest that we would be looking at an initial increase of at least $2 trillion in order to fund the Government for the next 12 months.
So as you can see, regardless of which candidate prevails tomorrow, they both face the same unsolvable, catastrophic problem for which neither has laid out a game plan to address because any action taken to address the problem sends our country into economic and social Armageddon. For that reason, the Fed will have to continue increasing QE in order to continue buying Treasury bonds in order to finance the voracious, unstoppable Government spending. Moreover, for those reasons, the current price pullback in gold and silver should be bought with both hands, as it is a true gift from JP Morgan and the CFTC.
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Here is Richard Russell’s take on the election:
November 5, 2012
Question — What’s coming up after the election?
Answer — I’m going to abide by the verdict of the stock market and state that Obama will be re-elected for another four years. If that’s the case, here’s what we can expect: (1) a liberal Supreme Court, (2) a blocked or stymied government, and (3) a permanently big government. Obama wants a permanently big government. His current budget plan calls for spending to reach 23% of GDP by the year 2022, which would be the highest spending, except during WWII, in the nation’s history. All the new spending will come from entitlement programs, and mainly from Obamacare. By 2016 Obamacare will fundamentally reshape the way Americans receive health coverage — with millions of people forced into subsidized government-run exchanges after their companies drop coverage, plus roughly 17 million people added to Medicaid. Obamacare’s regulations and mandates will fundamentally reshape the insurance market, making the rules virtually impossible to unravel. As is the case with other major new entitlements, once on the books, the fight will no longer be whether to keep it, but over arcane rules, cost controls, benefits and the like.
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