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A view of the American economy from afarJoel Stern I grew up, was educated, and worked professionally in the US. Five years ago I left America because I no longer had any faith in the future of the American economy - and hence - American society. I spent many years as an economics and business journalist, but two years ago I switched subjects and became the editor of a business magazine covering natural resources companies. The reason for the change is that in late 2002 I became a gold bug. Essentially, I saw what all the other gold bugs out there were saying, and decided it was true. So I bought a fair chunk of the shiny stuff, and decided that I would not only invest in the precious metals sector - but also devote my professional talents in journalism to reporting on natural resource companies. It all started a few years ago. I came into contact with the notion that the US economy was going to face hard times in the years ahead - and why I should invest in precious metals. The idea that the US was in bad shape economically was foreign to me. I grew up thinking the US would always be a superpower. After the Soviet Union fell, they said the US was the "only superpower" left - we were told. So how come the world's only superpower is broke? You got me, but that is what the mainstream financial press is saying these days. That the US is broke. Who would have thought of that happening, just five years ago? Ten years ago? Ever? Yet today that is the case. Not a day goes by in the world's business press that the enormous size of the US public, private, and government debt isn't emphasized and pointed to as a huge cause for concern. Interesting how what was considered a "conspiracy theory" a year ago is today a "mainstream" topic The mainstream press never used to talk about this subject - of how much the US government is or isn't in debt - and how it has become so bad that the IMF recently commented that "the US is broke." While a year ago, it was a 'conspiracy theory" to suggest this - and that the US was awash in red ink - today it is common knowledge. Another fact
that is widely reported in the mainstream press today is that
the US can simply "print up money" and use it to pay
its obligations. That very apparent fact of life never appeared
in the press until fairly recently. How and why the dollar was
an "international currency" was never an issue with
business and economic editors. Suddenly - it is. Today the concept of "Peak Oil" is written up everywhere in the mainstream media. The last time I saw a conspiracy theory become that mainstream that fast was in late 1999 when the "year 2000" bug got into full force. For the longest time that view was also exclusively the domain of "conspiracy theorists," and such views did not appear in USA Today. So something here is changing here. What exactly - or what to call it - I don't know. All I know is that since 9-11, the world's "tension" dial has been switched on full. The goal seems to be to weaken the US dollar, and thus never have to pay a price for all the debt that has been created via Treasury Bills and Federal Reserve debt (from issuing money) - but merely have it worth a lot less. Let's be honest. In the end why is it so terrible if all these Asian countries who were only able to have such trade surpluses with the US (remember when the US used to have trade surpluses with foreign countries?) because they took the US debt paper in return - lose some of that value? Who cares? If they were stupid enough to sell their finished goods to America in return for "US paper debt" good luck to them. While America may lose its luxury of having the dollar be the world's currency reserve - in the end - life in America shouldn't change very much if the value of US debt instruments - and the dollar - tumble outside of the borders of the US. Yes, imported goods will become more expensive - but that may actually be a blessing in disguise for America's decimated industrial sector (or what's left of it). Fact is, despite what the "conventional wisdom business media" says, the world's economy isn't and doesn't have to be considered to be dependent on the US economy for growth. The establishment economists and mainstream business publications always tout that line - that the US economy is the engine for the growth of the world economy. It isn't. If the US economy goes down the tube, the rest of the world will survive without it. Nobody has really ever given much proof of why this necessarily has to be the case - nevertheless - the viewpoint is accepted as gospel. . Perhaps this is the "new spin" the mainstream business press has been given to hand the masses, but we "alternative economists" should no better. If the US exited the planet earth tomorrow, the rest of the countries in the world would go on existing just fine. So refute all attempts at convincing you that if the US dollar and US economy falls, the international economy goes with it. It doesn't have to be that way. Gold is not just a hedge against the weakening US dollar So how does that relate to the price of precious metals? Well, let's look at how the mainstream press is presenting the bull market in gold. Personally, I can't stand reading about how the price of gold is only about the amount the US dollar losses. That is not right. There are long-time structural shortages in both gold and silver. The price has been held back for a long time by forces that should not be able to manipulate the price of gold to their advantage. As more and more countries decide to back up their currency with additional purchases of gold - and the Chinese consume more and more of gold - gold can only rise in value as the supply limited and the demand will increase. If demand for gold as an investment vehicle rises, then it will not longer be true that gold is "just a hedge against the weakening US dollar." Listening to the mainstream press one would have to conclude that there is a definite agenda to have the world believe that the only reason anyone would want to buy gold is as a pure hedge against a weakening US dollar. When presented as a legitimate investment sector, the case for precious metals are never given a fair hearing. Lately the approach seems to be to just tell the people it ain't worth more than what the US devalues - so as you earn US dollars it really doesn't make a difference to you as much, because even if you buy it - with your weakened dollars - you are going to lose either way. So just forget about it. So perhaps what needs to be done is to have a price of gold set in something other than US dollars - based on basket of world currencies, including the US dollar. Wouldn't that make more sense all around, and then the direct linkage to the US dollar can be diminished, which would serve all precious metal producers and investors better than the current situation? There is no
inherent reason why the price of oil has to be valued in US dollars
- and then in all the other currencies. It is obviously that
way because it serves US interests, but that argument too would
be considered "a conspiracy theory" just a few years
ago. Until fairly recently the mainstream view didn't except
the notion that anything there was any connection between the
price of gold, and "US interests." Even just last year,
where did you read about how important it is for the price of
oil to be in US dollars, in order to create demand for the US
dollar? Not long ago that would have been a view only "conspiracy
theorists" accepted. Today one sees these viewpoints plastered
all over the mainstream press. |
