Thoughts on Markets

Monday, October 06, 2008

Gold Strong - Dollar Strong - General Market in Crash Mode

Gold is on a tear upward this morning, as it should be with the inflation which is being put in the pipeline as a result of the Bail Out. The dollars input into the economy will lead to price inflation. Of course as gold approaches $900, it may get kicked back down artificially. It is currently 872.30 and silver is 11.82. Both are showing strong upward moves. The shortage of gold is still evident.

The mining stocks are not doing as well as gold, but then they are not down like the general market with the DJI off 362+ to 9959+. The general market remains in crash mode. Some of the detraction from the mining stocks may well be sales to obtain cash to cover margin calls or just investor fear of all paper assets.

It is amazing that the dollar remains strong in view of the disappointing economic news of last week. Even though the manipulated upward employment report indicated a loss of 159,000 jobs during September from virtually every sector of the economy, the dollar is stronger against all by the Asia currencies. The Asian currencies, particularly, the Japanese Yen and the Chinese Renminbi are quite strong against the peachy green back.

England, Iceland, and the euro nations are beginning to feel the credit crunch which we have been experiencing for almost a year. This is putting downward pressure on the Pound Sterling and the euro dollars. Indirectly this is positive for the dollar as I explained in the Investment Tracker for this month.

The Daily Pfennig pointed to an article which gives a concise, accurate assessment of the cause of the housing bubble debacle. See it HERE

We definitely need the capitalistic free market economy which will provide the most efficient use of the scarce resources which are available. It does this by punishing inefficient unprofitable businesses and rewarding others with profit. The consumer, ourselves, are the beneficiaries. We, consumers enjoy increasing employment, greater variety of products and services, and lower prices. This is the impact of our votes (spending in a free market). Our dollars or other currencies are rewards to the efficient profitable businesses and withheld from the wasteful businesses which change their operation, change product, or become more efficient for successfully competing or fail completely.

The controlled economies (socialistic, communistic, and totalitarian) reward or "save" those that are unprofitable by bailing them out. As a government becomes more totalitarian, it takes over the failed businesses, mortgage companies, and banks which effectively perpetuates their squandering of scarce resources to the degeneration of the entire economy. The wealth of the nation is destroyed over time as regulation and taxation increases.

A thorough study of the word of God reveals that a true free market is the model it specifies for us. There are also guides and rules which require sound money, private ownership of property, individual responsibility, and limited government as our Constitution specified. Though this man made documentnot perfect, it is one of the best plans for government in the history of men on earth. Let us pray that the Lord will raise up statesmen who will return to our Creator, recognize His law, and again give the government respect for our Founder and our Constitution.

Best to each, Doug

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