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The Indian Summer
by Professor von Braun
August 6th, 2000
The question that some economists should be asking is "will the booming US economy hang on until November?" It's election time here in the US and the mouth-pieces of both parties are furiously at work. After 8 years of fudging just about everything that can be fudged can it continue? The fudging that is. The current administration has certainly shown a predisposition to put their spin on any piece of economic data they don't like. Wall Street has gotten good at it as well, aided and abetted by the CNBC team of cheerleaders. It could even be said that sound economic principles are no longer required. All we need is the ability to rework the numbers and present them as if they are real.
Whatever appears as a potential problem Uncle Bill and his band of merry men will take care of it. Don't like the numbers? Fine, we will fix them. Need to get Al Gore elected? Fine, fudge a few more numbers. This is the administration that apparently produced, with much fanfare, a budget surplus that does not exist. Now every politician wants to spend it. Quite funny really! Where else in the world could you plan on spending a budget surplus that does not exist and have people believe it does. Is this the reason they have in the US instructions on drive up ATM's in Braille? How on earth is a blind person going to drive up to an ATM machine and make a withdrawal? Apparently with the same ease that politicians can plan to spend a surplus that does not exist.
This administration is the same one that will tell you there is no inflation. In fact they may well tell you anything you want to hear. Electricity prices in San Diego doubled in twelve months, gasoline prices in the US are 70% higher than a year ago, restaurant prices have increased, airfares have increased and there is no inflation. Well maybe a little bit, just a teeny little bit but we -- we of the society of fudgers and spin-doctors -- we have it under control, at least until the November election.
An interesting question is how do "they" expect to keep the price of oil and natural gas at these current levels between now and November. That's as well as keep the consumer consuming when the consumers wallet is getting a bit light. Stocking up on home heating oil will not help either.
One strategy would be to keep the US $ at high levels and point out to the oil producers the higher returns in Yen or Euros. That might work for three months. Another would be to subsidize the oil price by trashing the gold market. After all nobody seems to want the precious metal any more so make a deal with the Saudis and pay them in gold instead. One ounce of gold will get you 10 barrels of oil at $280 per ounce. Trash the gold market to say $240 per ounce and you get oil to $24 per barrel. That could work for three months as well. Might annoy the Swiss a wee bit, but what the hell, they have too much gold anyway. They said so themselves.
But what about the stock market? Certainly it looks like the Nasdaq is about to face correction number two, but the spin on that would be that it was overvalued anyway. No problem there.
The Euro looks like it's resuming its southerly direction, which will also put pressure on the Swiss. The Nikkei seems to be trending down as well so a strong US dollar may not go down well with Japan. But it is election time and anything goes.
Not content with not knowing what is "is", it is interesting to note that the XAU, the Philadelphia gold and silver index now includes Phelps Dodge, a company which is a copper producer. That's right - copper. Well it is a metal after all. Precious? Maybe the people in charge of this index are the same ones that use the Braille instructions at the drive up ATM's and produce the budget surpluses. Who knows? Perhaps we can look forward to copper being quoted per ounce or perish the thought, gold per pound.
With gold sitting at $272 spot, with the gold price action dictated out of New York, with the copper infused XAU ready to break down at current levels, one can not get too excited about the upside potential for gold at present. Let's not forget no inflation, no economic problems, no hiccups and no crises, just an election.
The Prof can be contacted by email at email@example.com
Copyright by Professor von Braun. All Rights Reserved. Reprinted at USAGOLD by permission.
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