Gold and the “Stimulus” Package

January 28, 2009 Inflation, Market Updates, Politics No Comments

Who will benefit between gold and the “stimulus” package? It is clear that fear is the going to be decisive in determining the winner between gold and the stimulus package!

The markets are awaiting the results of the Fed meeting today with their usual wide-eyed enthusiasm. The Fed will solve all of the markets concerns with some new wonder program that will right the ship. That is simply not in the cards. The Fed is a private organization that has only two missions, to control the wealth of the US and to spread that wealth amongst their friends. What happens to the taxpayers of the US is the last thing on their minds!

With that said, the DOW is currently up 117 at 8,291, the NAS is up 42 at 1,547 and gold has been dragged down $10.00 to $887.70.

Gold futures fell Wednesday, retreating further from the $900-an-ounce mark as investors awaited word on any fresh moves the Federal Reserve may have to resuscitate the U.S. economy. It appears that this weeks FOMC meeting will announce that they may not commit to purchase long-term U.S. Treasurys. The theory is that this could put a stop to, or at least slow, some of the dollar’s recent losses.

“Stimulus Bill” Smoke And Mirrors

On the other side of the pond, Germany, the world’s second-largest gold holder after the U.S., denied rumors that it is selling gold from its vaults. It is curious that the announcement came after gold had been pushed back through the $900 mark. Gee, one could speculate that Central Banks coordinate their actions? Naw, that would put it into the conspiracy theory column and we all know what kind of nut jobs reside there.

At the Fed’s last meeting they were “evaluating the potential benefits of purchasing longer-term Treasury securities” in addition to “large quantities of agency debt and mortgage-backed securities”. That statement set investors worrying that the purchase of more debt would devalue the dollar, and thus set gold up as an alternative to treasuries as a store of value.

Central banks didn’t want that notion getting traction, hence the apparent reversal that is leaking out today. While all of this speculation is boiling around, the dollar is off .422 at

83.982. This is just more of the same, rumor here, leak there, in an attempt to keep everyone looking in the wrong direction. This is the battle for $900 an an ounce that I mentioned yesterday. The outcome is a given! Gold will take out the $900 level. The only questions are when will it occur and how long will it take?

congress in session Gold and the Stimulus Package

"Stimulus" Package Boondoggle!

Well here we go again! The House is set to vote on President Obama’s “stimulus” package today. Just like last years package, this one is so important that it must be passed before we get a chance to look at it. Sound familiar? Just imagine if your doctor told you that your condition was so serious that they had to operate on you to find out what was wrong with you. You would run for the hills on that diagnosis. This can only pass if it is grounded in fear and no one looks at it’s particulars. On second thought, the current crop of bozos in Congress could pass anything today.

Let’s look at the numbers as they stand today. The Congressional Budget Office states that only $26 billion of the proposed $825 billion, that’s 3%, will be spent in 2009. In 2010, $110 billion, 13%, will be spent. That means that 2 years into the new administration’s term only 16% of the “stimulus” money will have found it’s way into the economy. What happened to the urgency that required we immediately do this deal without looking at the details in order to jolt the economy out of recession?

Smoke And Mirrors Gold and the Stimulus Package

Smoke And Mirrors: What You See Is Not What You Get!

This bill is pure political BS designed to alter the nature of our economy forever. This is the lurch towards socialism that many on the opposition feared would occur under this administration. The urgency is being hyped in order to slam this through before anyone knows what’s really in the bill. So much for bi-partisanship and for that matter, so much for the American way of life! The president has hammered home the theme that the “stimulus” package is “an investment in America’s infrastructure”. The CBO reports that only $30 billion, just 3%, of the entire package is dedicated to road and highway spending that may take up to 10 years to trickle into the economy.

I could get into the “green” energy portion of the package, but it is not even worth mentioning because it is only 2% of the package spread out over 7 years. On the bright side, there is $350 million dollars for birth control measures. Everyone knows that free birth control will put the brakes on a recession every time it is tried. It’s economics 101! Let’s move to on to the effect that this latest government boondoggle will have on gold before my head explodes!

The ongoing expansion of government waste will drag the dollar down as surely as the sun will rise tomorrow. The problem with all of this is that none of these programs will halt the recession. If anything, these measures will only exacerbate the problem and slow down any chance of recovery in the near future. In addition to that, the ever increasing debt will seal the dollar’s fate. There will be no other way out for the government but to inflate the dollar to levels that no one on this country would ever believe possible here. “It can’t happen here” will once again be proven wrong.

Gold, silver and gold stocks will reflect this destruction of the dollar. Use any downdrafts that occur during the coming storm to buy gold, both physical and stocks. I realize that at these price levels purchases become costly, but one should also consider silver coins and gold coins of less than one ounce. Put yourself on a monthly regime and purchase what you can afford. The rewards will be great for those that prepare for the future.

Tomorrow we will hear the pronouncement that comes from atop Mt. Fed. I know that I will be “holding my breath” until then. NOT!

Till tomorrow, good luck and good trading!