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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Richard Russell
October 30, 2009
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Within a few weeks or months, the Obama administration will have Congress boost the $12.1 trillion debt ceiling. Over the next decade, budget deficits will add a total of $9 trillion. Experts say the real deficit will actually be higher by $4 trillion. Already, with today's low interest rates the interest or cost of servicing the debt is almost $500 million a day. In ten years the US national debt will be around $20 trillion. There's no way that $20 trillion can be carried or financed -- probably with substantially higher interest rates.

In 2009, federal receipts declined 16.6%. In order to deal with the rising debt problem, taxpayers will face higher taxes or massive spending cuts or both. The American people are not stupid. They see the approaching problems, and they are pessimistic about the future of the country. They fear for their children and their grand-children.

At some point, our foreign creditors will stop buying US debt. The US will no longer be an AAA-rated risk. At that point or before, the dollar will lose its reserve status and nations all over the world will move to unload or diversify out of dollars. At present, dollars make up a large percentage of every nation's reserves. Nations will move to protect the purchasing power of their reserves, which will mean moving away from dollars. If the dollar is distrusted, all fiat currency will be distrusted since almost all fiat currency is backed in part by dollars.

At some point the word "fiat currency" will become a dirty word. Before that happens, investors will be panicking to gold as a store of value. This is the rationale for holding gold over the long term. What happens to gold now is incidental. It's the long-term that is important. Until then, gold may fluctuate foolishly with the international level of the dollar.

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