Thoughts on Markets

Saturday, September 20, 2008

America Home of the Unfree Chickens Ready for Plucking

Gold is showing recovery mode from the recent gut wrenching correction. The recent virtual seizure of the financial industry by the Federal Government assures us that the dollar will continue to slide and precious metals will cost more in dollar terms.

Silver is actually responding very nicely to the government actions. The pent up demand for precious metals is beginning to show up very nicely. The depletion of smaller coins and bars at the retail level continues. When the prices were artificially down, there was a very great demand. Now that prices are moving up, the demand continues.

The dollar does not look very healthy. The promise that nobody; that is, nobody in the financial business will be allowed to go broke regardless of the reckless us of resources. Of course, this will saddle the tax payers with a debt that will never be repaid without the destruction of dollar. Our foreign "friends" are becoming more disenchanted with our paper currency. They understand much more clearly than American citizens the result of this monumental debt and its effect upon the purchasing power of the dollar. Casey's Daily Resource Plus discussed this in the following paragraphs from today's issue:

"It was a truly remarkable day for the precious metals, as gold recovered fully from the biggest drop in nearly three decades. From Thursday’s afternoon peak to the early Friday morning low in London, gold gave up nearly $90, silver around $1.20. But as noted, by the time the smoke cleared on Friday afternoon, both metals were solidly in the black, and still rising as the Globex went into recess at 5:15.

All markets’ attention were focused Friday on Hammerin’ Hank Paulson’s latest brainchild, which essentially amounts to a bailout plan for everyone. Equities markets reacted predictably, shooting higher on the mistaken notion that this means the worst is over. The government will save us, hurrah hurrah.

Gold investors sent an entirely different message to those few who are still paying attention to reality. These moves can mean one thing, and one thing only.

Jim Sinclair of, put it succinctly: “Today's reported potential infinite bailout of all and any portends … the largest increase in dollars outstanding since the Jurassic Age … It closely models actions undertaken regarding the production of currency liquidity seen in the ‘Weimar Republic’.”

In our view, all Americans should be deeply concerned about what their government is up to. This is sheer fiscal insanity. Lest we forget, the 2008 budget deficit was already predicted at some $400 billion, even using the government’s lax standards. That was before the economic “stimulus package,” and way before the events of the past week.

The tragedy for the country is that these clowns won’t have to answer for their misdeeds after January, and that the only presidential candidate with the slightest grasp of economics, Dr. Ron Paul, won’t be taking the oath of office. If you don’t got gold, you better get some, because your paper just got hugely devalued. Again."

It seems as though much of the jump in precious metals was short covering by those who have been manipulating the prices. Perhaps, they have moved to the long side and are now buyers rather than shorters of the metals.

Even the base metals, including copper, made good showings yesterday. This, too, reflects a loss of some respect for the dollar.

The last few days of Federal intervention into markets show wake many folks up to the fact that we have a controlled economy and have moved very far away from the free market of our founders. This is a shame, because the U.S. Dollar for many years was a stable currency backed with gold. Our markets were much freer, as were our citizens.

The free market is capable of handling every challenge. However, for it to operate properly, unsuccessful businesses, including banks must be allowed to fail. This is the penalty that poor businesses face. The remaining successful businesses meet consumer needs with greater economy and efficiency. The successful businesses make the best use of scarce resources to satisfy consumers.

One other necessity for the free market to operate properly is for individuals and businesses which engage in fraud and other crimes to be appropriately punished by a godly judicial system in which no one or business can buy its way out of responsibility.

The freedom, we experienced under our prior stable currency, free market, and sound judicial system, was a blessing of God upon these United States. This led to great growth in wealth and multitudes of products and services which were never enjoyed to the extent of America during the freer days of our existence. We must pray that God will provide the people the will to select candidates which will follow the will of God and again bring the great blessings to our nation.

We now have none of these foundations for the market place with the heavy hand of government wielding its power therein. These draconian actions should remind us of totalitarian states of the past. Several, of which, we joined with much of the world in bringing down. We do not have a free market economy. We now have a centrally managed economy. It is a socialist, welfare state. One that cannot support itself, and is totally dependent upon loans from the rest of the world for our very financial survival.

Frederic Bastiat in his great book, The Law, had as a major theme that citizens get the government they want. He does not deny God's hand in provision of the government, but rather gives the people exactly what they seek. This was true in Israel's request for an earthly king rather than continue with the King. God gave them Saul who turned out not to be so good for them. Through the government schools, news media, television, and movies, Americans have been socially engineered into the concepts of Marxism. Thus, they crave a welfare state in which all problems are solved by government. They seek solutions directly from the entity which created the problems in the beginning.

We, as a nation, now seek not God's way, but the pragmatic. Thus, we live in a time when the prevaling belief is that "the end justifies the means," whatever it takes. Would that we would return to our Creator and live in accord with His word. We crave for God to bless America, but seem unwilling to return as repentant, obedient children to Him. Without these actions which He requires, we cannot expect His blessing.

I pray that you will share this with all of your friends and relatives that many will be convicted and turn with repentance back to faith in the God of our fathers.

Best to each, given the price, to each of you, Doug


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