Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Politicians Cannot Stop the Gold Bull Market

Commodities / Gold and Silver 2010 Nov 04, 2010 - 02:24 PM GMT

By: Jordan_Roy_Byrne

Commodities

I can guess the bear argument before they begin to make it. The republicans win congress and there will be a new mandate. Spending will be cut. Money printing may cease. We may have austerity in the US. The US Dollar will rally. This will crush the bull market in precious metals.


First of all, some must have amnesia. They must be forgetting that the largest expansion in government spending and debt came about during republican administrations. (Would Bush have done any different than Obama?). Suddenly they are going to get religion on cutting spending? Will republicans go against their brethren and end the wars? Will they cut social services when at least one person in 50% of households are dependent on Uncle Sam? Will they go for austerity when economic growth and employment growth are stagnant? These are not policies that will keep them in power.

Even if the US cut back and went to austerity, it wouldn’t ameliorate our debt burden. The national debt is $13 Trillion with a 2010 budget deficit of $1.3 Trillion and interest payments of $413 Billion in FY 2010. That’s right. The interest on the already accumulated debt is growing by $400 Billion per year. And that is at a low interest rate. What happens if we have to refinance in a few years at 5%? Interest payments could reach $700 Billion annually. With a small rise in interest rates, we could be looking at $1 Trillion in annual interest payments four years from now. That would amount to 25% of the federal budget or more. We are less than five few years away from default becoming a certainty.

And unlike the years following the Depression, the engines of growth, businesses and consumers are already quite leveraged. The 1930s eliminated the weak businesses and indebted consumers. Today, consumers have paid down some debt but have a ways to go. Meanwhile, bailouts from the Federal Reserve and cheap corporate credit, have allowed businesses to basically re-leverage when they should have been cutting back. Following WW II, businesses and consumers were in a position to grow and take on more debt. That is not the case today. Therefore, it is impossible that we “grow our way” out of the debt burden.

And no, the Federal Reserve or Ben Bernanke has no power to stop what is coming. Rising interest rates only put more pressure on the banking system and hurt the economy’s ability to grow in the short-term. The weaker the economy gets, the larger the debt burden becomes and the closer we move to some form of sovereign default. Of course, zero percent interest rates and quantitative easing have been totally ineffective in trying to juice the economy. This policy has only encouraged speculation (albeit rational) in hard assets.

In the coming days, financial media and various pundits will obsess over what the election means for the markets. Problem is, these folk only focus on the next few days or weeks. They hardly ever consider the primary or structural trends in place. Just remember that the big money is made by finding those structural trends and holding for many years. Do you think the big money is fazed by whatever happens today?

The big smart money has already taken positions in precious metals and the corresponding shares. They know that today’s results won’t change the bullish prognosis. Unlike the financial punditry of today, these folks are thinking five years down the road. They see default coming in the western world in one way or another. They know that precious metals offer safety and potentially, huge profits.

Even if you’ve yet to secure yourself with physical or enhance your portfolio with junior producers and developers, you still have time. If you’d like more professional guidance during this bull market, then consider a free 14-day trial to our premium service.

Good luck ahead!

Jordan Roy-Byrne, CMT
Jordan@thedailygold.com
http://www.thedailygold.com/newsletter

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules