The Obama jobs plan is basically a renewal of the payroll taxes, with a bonus tax cut for employers. Just another big tax cut scheme with some infrastructure goodies thrown in. This will of course be financed with more debt, also reducing the Social Security coffers to make it insolvent more quickly. This is all inflationary, keeping up the huge budget deficits because there will be no cuts in government spending to make up for the lower taxes. You cannot be too bearish on the S&P because giving out extra money is a sure fire way to stop a recession in its tracks.
As I mentioned last month about the doomed dollar, it was a foregone conclusion that payroll taxes would be extended. All the budget deficit debate was all talk, no action. Gold is lined up to go parabolic within the next 6 months, it is basing at the 1700-1900 range ready for liftoff. At this point, the path of the S&P doesn't matter, gold has gone off on its own road, where dollar weakness will only add to the fuel. The current dollar rally is merely temporary. A Pavlovian response to European sovereign debt worries with no fundamental basis. No one can match the USA when it comes to huge budget deficits and money printing.
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The Obama jobs plan...
Unimaginative crap -- same old same old.
The US has spent the last couple of generations doing two things:
1) Systematically dismantling much of its basic manufacturing infrastructure, including many everyday, useful, and necessary products with somewhat high barriers to entry -- the loss of know-how, which normally evolves in manufacturing, is incalculable;
2) Importing millions and millions of immigrants who are unsuited for other kinds of high value added jobs -- this is primarily why they were poor in the countries they came from.
In Praise of Hard Industries
Like some say: All of this is going to end badly.
And I don't really get this sentence:
You cannot be too bearish on the S&P because giving out extra money is a sure fire way to stop a recession in its tracks.
When you give people free money, they will spend some of it. It is basic economics, when consumers spend more money, the economy does better.
The problem is in a deflationary environment you can't force people to borrow. Tax cuts are not inflationary but debt creation is. However, the money supply is in a contraction. There will be another spurt of inflation when the Dow reaches about 9000 but it will be a last gasp that will last a few months.
There is no inflation. Priced in today's gold prices, all commodities are in depression cycles.
You cannot be too bearish on the S&P because giving out extra money is a sure fire way to stop a recession in its tracks.
I guess I would have phrased this You should not be... because "cannot be" is often used in the opposite sense, e.g. when someone says "you can't be too bullish" it means they are really, really bullish, i.e. it's virtually impossible to be too bullish, not that you shouldn't be bullish.
Anyway, I get it now.
There is no inflation. Priced in today's gold prices, all commodities are in depression cycles.
Maybe we looked at different textbooks when defining inflation. Isn't a high gold price the very definition of high inflation?
Simple barometer is that higher gold is reflective of inflation when all other commodities rise proportionally and in tandem. Gold is rising for other reasons, namely paper devaluation and sovereign risk. Yes, gold can be a hedge to inflation but it is also a store of wealth during hi soverign credit default risk. central banks were not devaluing currencies in the 70's when commodities skyrocketed. THAT was inflation. If gold is signaling inflation, then crude oil should be trading at $150-$200
I concurr. Gold is rising because of the perceived risk of all other assets relative to gold. With interest rates near zero there is no inflation. Look at the charts the money supply has stopped growing and is contracting. The dollar will soar. As this thing progresses it will be as if God just snaps his fingers and all the dollars in the world disapper.
disappear.
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