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Friday’s
Wall Street Journal was full of “optimistic” news for the U.S.
economy. It reported:
“Retailers’ reports
of robust November sales offered more evidence that the lackluster U.S.
economy may finally be gaining momentum, despite stubbornly high unemployment.
“According to 27 retailers
tracked by Thomson Reuters, sales at stores open a year or more rose 6% last
month, sharply exceeding a year-earlier gain of just 0.5%. Online
retailing also showed sizable gains.”
“Shopper
Splurge Buoys Hopes,” by Ann Zimmerman and Elizabeth Holmes,
WSJ, 12-3-10, p. A-1.
To
chart retail sales and present this as something good for the whole country
is lunacy, the kind of lunacy knows as Keynesian economics. Retail
sales are of interest to retailers. The country does not get any richer
via an increase in retail sales. It must be asked, who is doing this
extra buying and where are they getting the money? The answer, in this
case, is easy. The Federal Reserve is printing the money out of
nothing. Can simply printing money create real wealth? Last week
we saw Thomas Jefferson’s view that it cannot. And the United
States, under the wise leadership of such
men, emerged as the leading economy in the world. Today the idiots are
crying for a government “stimulus” of the economy, a system which
has been tried in a great many countries over the years and has been an
absolute disaster every time.
So
what is this pickup in sales in November? It is simply the first bit of
the newly created money to start making its way through our society to the
point where it is visible in the economic indicators. That money will
soon cause a general rise in prices, and the result will be that you get
poorer. So the retailers get richer, and you (and others like you) get
poorer. Can anyone explain how this is good for society as a whole.
It
is difficult to understand how idiocy like this gets parroted throughout our
society when the only proper place for it is the mental institutions of said
society. Less than 10 years ago the pages of the Wall St. Journal
were full of articles warning of a massive “deflation,” mostly
focused on commodities. Here is what happened.
The (less than) 50 point decline in the CRB in early 2001 was enough to set
the WSJ off kicking, screaming and predicting
“deflation.” Article followed article threatening a
terrible disaster. By the end of the year, the CRB was very close to
its long-term low just above 180. Today it is flirting with 600.
And what was the Wall St. Journal’s comment about the 400 point
rise over the past 9 years? Not
a word.
Again,
in late 2008, there was a similar commodity decline. You remember the
media hysteria which triggered that decline. Large numbers of commodity
speculators were frightened into selling by lies in the major media.
Believe the media and lose your money. That decline has now been almost
completely recovered, and it is not difficult to predict (unless one writes
for the Wall Street Journal) a massive commodity advance which will
make the 6 month decline of late ’08 appear petty by comparison.
What
do we know about countries which experience long, steep declines in prices?
Well, the primary example of this is the United
States, which experienced a 30 year decline
in prices from 1866 to 1896. An item which cost, on average, $1.00 in
1866 was down to 33¢ in 1896. This was the period which marks the
transition from an agricultural to an industrial economy. It was the
period of great inventors, such as Thomas Alva Edison, who created new
products which dramatically improved the lives of the average person.
It was the period when millions of people flocked to America
from all over the world because, in a figurative sense, the streets were
paved with gold. America’s
great prosperity during this period resulted from the fact that the gold
standard had been restored (after the Civil War) in 1879 and remained in
force for 54 additional years.
Now
what about countries which experience long, steep increases in prices?
The most dramatic case which comes to mind was Germany
in 1914-23. During this time average prices rose by 1 trillion to
one. The middle class was wiped out, and the people, in anger and
frustration, voted for Adolf Hitler, who was also a paper money advocate and
who in 12 years turned the country into a mass of rubble.
Even
worse than Germany was
modern Zimbabwe,
where prices went up by more than 1 trillion to 1. Life expectancy
dropped from 60 years to 40 years. Unemployment reached 90%, and there
were reports of starvation and cholera. This happened just a few years
ago, and yet there was hardly a word in the American media.
A
very dramatic case was that of Britain. Under its gold standard
Britannia ruled the waves and remained very close to the U.S. in economic
progress. But in 1931 she gave up gold, and in 1946 Britain elected a
group of Keynesians to run the country. Almost immediately, the British
pound collapsed. From being the leading country of the world, Britain
became just another European country. From the empire upon which the
sun never set, Britain set.
You
can see the same thing happen with the United States. Starting one year
after the abolition of the gold standard (or the last, slender tie to gold)
real wages in the United States started to decline. When I discovered
this (in the late 1970s), I sent out a press release to the 100 biggest
newspapers in the country (virtually all of them claiming to be
pro-labor). Wasn’t this the biggest news of the decade?
Yes. Did any of the papers print this news? No. Where can
you find truth these days? In the nation’s newspapers? Not
a chance. A collection of liars and frauds.
So
you see that more human actions are motivated by the desire for wealth than
most people will acknowledge. For example the paper aristocracy’s
desire is for more paper money, and this enriches them in the same manner it
enriches the counterfeiter. They consume goods which they have
purchased away from you with their counterfeit money. You get poor, and
they get rich. The paper aristocracy, by the way, is my name for those
people who benefit from paper money and who exert their political force to
keep it going, by analogy with the medieval aristocracy, who also controlled
the government and used it to take from the poor and give to the rich.
The nation’s newspapers, on the other hand, have a different
scam. They pose as the champions of the poor (to get readers) while
they are pandering to the super rich (again the paper aristocracy). So
the last thing they want to do is to alarm their readers by telling them that
they are getting poorer. This is why the nation’s media cooperate
in one amazing lie after the other.
Of
course, as a speculator in the nation’s financial markets, you cannot
afford to deal in lies. You must see reality as it is. When on
Sept. 15, 2008 the New York Times declared a financial crisis with
“deflationary” overtones, speculators in these markets believed
the Times, panicked and rushed to sell. Crude oil (which the Times
had been bulling in May) had hit a high of 147 in July of that year; it fell
to almost 35 by December. The CRB fell almost in half. Those
speculators who believed the Times were slaughtered. The Times,
itself, did not fare too well either. The price of their own stock (in
which they had invested heavily) declined from 40 to 4, and they had to take
a loan from Mexican billionaire, Carlos Slim.
Slim
says that he is focusing on “mainly mining.” He is ranked
by Forbes as the richest man in the world (ahead of Bill Gates), and recently
rumors circulated that he was about to buy out the Ochs-Sulzberger
family’s control of the Times.
But
the question for you, dear speculator, is where do you want to put your
money? Below we have the 10 year chart of the price of gold, and it is
obvious which financial good is burning up the track. During this time
the stock market is flat, but gold keeps climbing to new highs.
The
chart above shows the 10 year bull market in gold. Of course, no tree
grows to the sky, and over time any financial good will have both ups and
downs. But it should be obvious what we first noted in December 2002;
gold is on the move. It is an old saying of market speculators that the
trend is your friend. This means that trends continue on for far longer
than anyone expects, but the trading community refuses to believe.
Finally, after the move has gone beyond what everyone expects, there comes a
time when the speculators begin to believe. In the first grand cycle
bull market in gold (1970-80), this happened in 1979. The newspapers, which
were bigoted and biased against gold, were shouting, “double digit
inflation.” The price of gold was advancing, sometimes by $50
(8%-10%) per day.
That
day will come for the present bull market – but not today. I have
been studying the gold market for over 40 years, and my experience is summed
up in my newsletter, the One-handed Economist. This newsletter
is published every other Friday (posted on our website the following day) for
$300 per year. Special bulletins are published when the market is
moving rapidly, the most recent being Nov. 30, 2010. To subscribe,
visit my website, www.thegoldspeculator.com, and press the Pay Pal
button. Or, send $290 ($10 cash discount) to The One-handed Economist,
614 Nashua St. #122, Milford, N.H. 03055.
The
markets are moving rapidly, and now is the time to heed the old adage, he who
hesitates is lost. Thank
you for your interest.
Howard
Katz
The Gold Speculator
Howard S. Katz is the
editor/publisher of the One-handed Economist, a financial letter which combines
fundamental and technical analysis. He was a bug on gold in the 1970s and
became a bug on gold again in late 2002.
Subscribe to the Gold
Speculator (the One Handed Economist)
You can subscribe to
Howard Katz’s thoughts on commodities, stocks, bonds and real estate
are available in a letter entitled The One-handed Economist and published
every two weeks giving specific advice on trades in stocks and futures. This
letter is available (both electronic and paper copy) for $300/year with a
3-month trial for $100. Send to: The One-handed Economist, 614 Nashua St.
#122, Milford, N.H. 03055.(Include both electronic and mailing address.)
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