Precious Metals As Lifeboats In A Sinking Ship
The musicians are fiddling as the world burns. Global markets are navigating slowly in an ocean of greed, stupidity and compromise. Hundreds of years ago, masses of people took to the streets of Europe dancing madly in a kind of national “moshpit”. The cause of this “St. Vitus” mania was never diagnosed.
Today, we are witnessing a similar type of irrational behavior which defies reason. Prominent politicians and economic elites are doing a macabre dance in the grand ballroom of the supposedly unsinkable ship of state. How else to explain that the debt reductions being considered save perhaps a couple of trillion dollars over the next ten years? They are being lauded as meaningful reforms. In reality, they are bandaids applied to an arterial hemorrhage resulting from massive debt and mounting deficits.
It is just not computing. These ten year stratagems to control debt are an inadequate tourniquet that will only worsen the bleeding. Huge debt increases or deficits will continue to grow. The measures necessary to revive the patient are nowhere being proposed. Our public sector is swollen beyond recognition.
What is required is a rational collective that at least keeps our financial ship afloat. We are slowly drowning in a system that costs $6.7 trillion dollars every year at all levels of government, Federal, State and Municipal.
A great scam is occurring as our leaders focus mainly on measures that are at best only stop-gaps. They are not taking the steps needed for the survival of our country. Spending and entitlements need to be cut surgically. Political pork must be excised effectively. Tax increases must be approached with extreme care, less we kill the patient.
Sadly, there are few contemporary leaders who have the moral ethicality, stature and bravery to make the necessary actions that our Founding Fathers might have taken had they been confronted by similar challenges.
George Washington’s Farewell Address published in 1796 had it right. With a vision, characteristic of a biblical prophet, he looked far ahead, two hundred and fifteen years, to our time. In no uncertain language, he cautioned against needless foreign entanglements and kicking the excessive debt can down the road to our children, that rightfully should be our responsibility to correct.
Instead, we are surrounded by leaders who profit from a system of cronyism, insider dealings and leveraged vote-buying. Politicians will face another beating at the ballot box in November of 2012 if their economic irresponsibility continues to run amok.
It makes no sense that the 2012 budget should be above the $2.2 trillion dollars in anticipated revenues. Simply put our spending is way more than our income. The truth is we are broke as a nation. We could not manage our households in such a reckless manner.
Shortly, a “compromise” will be reached. It will be exactly that, a face saving political maneuver for the time being. The real battle-lines will have to be faced eventually as we approach the 2012 elections and their aftermath.
For the time being, there will be minimal resolutions to a serious problem. Eventually, the musicians will have to be paid in legal tender.We allow ourselves to be swayed from our highest principles of national morality. Our survival will hang in the balance.
What does this mean for our subscribers? Precious metals represent lifeboats in the midst of what Gold Stock Trades has labeled the “Titanic Syndrome” – the conceit that our financial ship is unsinkable. So have the bubbly ready for the pending announcement of compromise and subterfuge. We may run for awhile, but we will not be able to hide from the coming deluge of 2012.
Although the technical picture for mining stocks and precious metals is improving, there will be periods of volatility as the global markets shake. A consolidation in gold and silver bullion in August would be normal and healthy.
We are in this for the long term and maintain our confidence in the secular uptrend in precious metals which results in large profits. There has been some technical damage to the downside in our selected miners. This is characteristic of moves in the precious metals market which are designed to shakeout the summer soldiers and weak holders.
This current weakness in miners may be attributed to the declining equity markets and the need for liquidity. The U.S. dollar is benefitting from the risk of contagion of bad debts through the Euro-Zone and foreign exchange interventions by the Japanese. Italy appears to be the next Greece. The Euro’s recent uptrend is under pressure as Trichet begins Europe’s next round of quantitative easing and the Gold ETF (GLD) is reaching my late January targets.