Now Or Eventually?

Bev and I spent an enjoyable weekend with our friends Bill and Connie at Neskowin. Plenty of food, drink and conversation. Just plain relaxing with walks thrown in on the sand or through the town. One big difference between Bill’s and my outlook for the U.S. economy is time. He thinks eventually we will end where Greece is now, bankrupt, if we continue on our present fiscal and monetary path. There is still time to pull out of our nosedive. We just need the political will.

I don’t see any political will to cut trillions from our spending that can overcome the anger from the public once they see their programs being cut. I think it is too late. We both like Gold. He is not willing to guess how high the high is for Gold and it may take years saying the high is unknowable. I on the other hand think we could go parabolic and the endgame is over the next year and a half. I base part of my reasoning on the following chart:

(Click on to enlarge)

If we stay in the current uptrend, we will look like the period from 1970 to 1980 and the top is up near $10,000 in 2012. What’s the risk if I’m wrong? You own lots of Gold before everyone else. What’s the risk if he’s wrong? Anything denominated in dollars vanishes like the memory of summer heat in November.

2 Responses to “Now Or Eventually?”

  1. I guess a brief analysis of what occurs in the face of bankruptcy would be important.

    Would the result be something like the outcome of the Mexican default in the early ’80’s?

    Or, would be try to print our way out of trouble?

    I have a low variable marginal costs in my industry; the more I make tends to reduce average costs faster than increasing marginal costs. And I only have a couple of operating costs where the costs aren’t constrained by contract. Electricity, for example.

    Everything else is short–one to five years–or, long–more than five years. That should allow me to survive, due to the lags between recognizing inflation forces, and implementing price changes in response to those forces. So, dollar denomination is important to me, in both short- and long-runs.

    The problem I have with gold, although I have some holding in precious metals, is that two years of sanity in D.C. can and probably will evaporate the price levels of the last two years rather quickly. Imagine, repealing ObamaCare. Reducing regulations and allowing for mining and drilling. Simply allowing for increased oil production in Alaska would, I submit, drop oil price below $65.00 on the announcement.

    Ending subsidies for Green Tech? Ending mandates like ethanol?

    As the primary season progresses, and we see where we are by May or June, you may want to revise your estimates of a $10-k gold. In my opinion.

  2. TMI, as I understand the situation, hyperinflation ends with a depression and doing nothing will end in a depression through bankruptcy. Either way I believe we will have a new currency. There is some chance of sanity returning to Congress, but I’m not hopeful.

    Just saw the HBO movie last night “Too Big To Fail.” Amazing how overwhelmed our leaders were; just reacting. The next crisis when it comes will be much bigger and there doesn’t seem to be any planning or sanity.

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