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Friday, June 18, 2010

Confused and Disgusted

WTF is going on with gold and silver. I'm happy, but it makes no sense.

The dollar is up against most foreign currencies, the unemployment numbers (as "trustworthy" as they may be) are better, consumer prices are down, and a number of world leaders are talking about how the euro is getting ready to crater against the dollar.  Yet as of this moment, gold is up about $15 from yesterday's close (which was up $15 from the day before).

Is the world finally waking up to the fact that the "highest and best use" of fiat currency is as kindling?

Maybe it has to do with the fact that the world has specifically lost confidence in the dollar.  Talk like this isn't helping the boys in DC -
Russian President Dmitry Medvedev said Friday he has spoken with Chinese officials about boosting the role of emerging-market currencies and that the Chinese yuan, the Indian rupee and even the Russian ruble should partly replace the dollar among the world's reserves currencies.
Sure looks like that super-secret, gotta-keep-it-under-wraps Federal Reserve Monetary Policy is working like a charm...  The world quakes in fear at the mighty dollar.

Oh, wait, they're not quaking in fear... they're giggling...


Speaking of burning money...
But make no mistake: we will fight this spill with everything we've got for as long it takes. We will make BP pay for the damage their company has caused. And we will do whatever's necessary to help the Gulf Coast and its people recover from this tragedy

President Barack Obama, June 15, 2010
"The Coast Guard came and shut them down," Jindal said. "You got men on the barges in the oil, and they have been told by the Coast Guard, 'Cease and desist. Stop sucking up that oil.'"

A Coast Guard representative told ABC News today that it shares the same goal as the governor.

"We are all in this together. The enemy is the oil," said Coast Guard Lt. Cmdr. Dan Lauer.

But the Coast Guard ordered the stoppage because of reasons that Jindal found frustrating. The Coast Guard needed to confirm that there were fire extinguishers and life vests on board, and then it had trouble contacting the people who built the barges.

ABC News, July 17, 2010
The real kicker is that they were already using these barges, and they were working.
Sixteen barges sat stationary today, although they were sucking up thousands of gallons of BP's oil as recently as Tuesday. Workers in hazmat suits and gas masks pumped the oil out of the Louisiana waters and into steel tanks. It was a homegrown idea that seemed to be effective at collecting the thick gunk.
"... as recently as Tuesday..."  Hey, isn't that the exact same day when the president said he would do, "whatever's necessary"?

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Andrea said...

It's crazy and I'm not even going to pretend that I understand it. Any of it. I just keep stocking up on food and lamp oil.

Chief Instructor said...

Andrea, indeed. It's getting a bit surreal out there. When an administration-lover like George Stephanopoulos starts being concerned when Obama uses "martial law-like" language, you know things are getting a bit dicey.

"GEORGE STEPHANOPOULOS: What struck me tonight, Diane, is you know those Oval Office addresses are often used when the nation is at war and tonight the President used martial language. He talked about a “siege,” the “assault on our shores” and his “battle plan” to fix it. And he said we have to “rally together.”"

MikeH. said...

I think the only thing we all need to understand is; just keep stocking up. It's going to be a very long, rough road after the splat.


Chief Instructor said...

Mike, yep, there is some much uncertainty right now. It's so difficult gauge what is going to happen next. All of the "normal" signals are screwed with so fully that they are almost useless. Up is down, left is right.

Montezuma said...

Re: Gulf Oil Disaster... Obviously this administration has failed regarding it's response. So I was initially optimistic about the appointment of Ray Mabus as the Gulf Restoration Chief (despite the fact that "mabus" is specifically mentioned in the Nostradamus Prophecy)... I was optimistic until I heard that his appointment is only PART TIME??? So much for the idea that we are truly committed to cleaning this up.

I have been reading this book called Epicenter -- by Joel Rosenberg... It is really quite amazing and has really been an eye opener for me.

Anonymous said...

Isn't freedom wonderful? You are free to buy gold at the asking price and the owner of the gold is free to ask what they want. And both parties are free to decide if America's policies and mistakes make gold worth more then dollars. The government is printing dollars as fast as they can and spending even more then that on programs that will only increase in cost over time. The free market knows the U.S. is in deep trouble and the dollar will continue it's downward spiral. But that being said the market is fickle and the information is not perfect so don't assume too much based on a temporary increase or decrease in the price of gold.

Ryan said...

I think I'll be sticking to silver for awhile. Gold just might be past the ridiculousness limit for me. Other than that I think Russia is just spouting and blustering. At best they are a petrol state with ebbs and flows in their economy to match. Their stock market is a half a joke and they are more than half a dictatorship. China is a big market and producer but nobody trusts them.

All this talk about moving to another reserve currency seems dead in the water because there isn't a big and stable enough option. With the Euro tanking I think that is becoming more clear. Maybe this whole special drawing rights type thing could happen but otherwise I am not holding my breath.

Chief Instructor said...

Montezuma, I know nothing about this Mabus person - I'll need to do some research. I just started reading "The Road To Serfdom" - I'll look into "Epicenter" and see if I can get it on the "To Read" queue!

Anon, yep, I look at my gold and silver as a hedge, not an investment. I believe that over time, inflation must increase (for the reasons you indicated). The dollar will devalue. Precious metals will help to offset some of that damage.

TOR, I think the new reserve currency has a decent shot at happening. Aside from being able to spit in the eye of America, having a "basket of currencies" will help to smooth out market fluctuations. And like the Dow Jones Industrials, if one of the currencies in the basket starts to suck too loudly, they just replace it with another.

For the US, it would suck. For everyone else, it actually makes a lot of sense.