As I understand it, gold attracts investors afraid of economic collapse, or (worst of all possible worlds) hyperinflation.
And there are reasons we should all worry about that. What our government will do when it can no longer repay its debts — or even continue in debt maintenance — is anybodys guess. A traditional response has been to print money and devalue debt by making the money worth less. The problem with this is that at some point that process of making money worth less makes it worthless. And thats just not a good thing.
Thats what Zimbabwes in the midst of right now.
Thats how Germany wound up with the Nazis.
If it happened in the United States, it could end what has been called our American Experiment.
Almost anything could result.
At present, the political consequences of the foreseeable crisis should be one thing, but are another.
Since we know that our federal government is pushing closer and closer to deep economic instability, Americans should unite around one simple idea: No more budget deficits. Immediately return to budget surpluses — not by the end of Obamas first term. (Thats an old evasion. Bush did it, too.) Any member of the House or Senate who votes for a budget that is deeply in deficit is engaging in something close to treason.
But that is not how current politics plays. Americans may be riled up, but dont see how they can change anything. The Tea Party movement showed some real contrarian spirit, and has provided the established media and political voices with an unsettling glimmer of things to come. But still, disaster seems far away.
I have the feeling that this far away is not really all that far.
Still, its probably far enough to allow for a major correction in gold. Hyperinflation is probably not a near-term likelihood. The recent increase in the money supply may not prove so inflationary as some have thought. Wasnt it a reflation, after a deflation? Investors looking at the increase in the quantity of money may have jumped the gun on its inflationary significance.
A lot of people would sigh in relief at a gold drop. That would reinforce the notion that the dollar hasnt hit its downward value spiral. Yet.
And none of us really want the dollar to fail. Do we really want to endure a major crisis? No.
Sayonara, high gold prices. The world is just not ready for you yet.
Still, your heyday (high day, high epoch) will come.
Of course, the reason I want gold to go down in price — even collapse — is to allow me to buy a much larger stock than I am now able.
Gold sports a longer-term significance than it appeared to possess back in the 80s and 90s, when our monetary system was stable and our governments debt burden still manageable. Neither situation seems to be the case now, especially regarding debt (just weeks ago Congress raised the debt limit to $12.1 trillion — and many expect another such upward adjustment to be required soon). Theres a major chance of a major inflation up ahead.
Owning gold is the furthest thing from idiotic. Buying more at the next major downturn in price, probably wise.
But what of Fridays $15 drop? A drop in the bucket? Dont ask me. Still, that caveat aside, while the experts predict a downward plummet in the gold price, I hazard that this downward fall will not fall far at all.