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Rand Paul, son of Congressman Ron Paul (R-TX) and soon to be labeled (R-KY) himself, had a big win last night that put him into the Senate while the results were mixed for other Tea Party candidates. It should be an interesting legislative session ahead – not that much of anything will get done (or undone) with a divided Congress – but the electorate certainly expressed their dissatisfaction with the status quo.
Paul’s message and that of some of the other Tea Party candidates certainly resonated with senior citizens where support for the movement was generally quite high. Favorite line from Paul’s acceptance speech: “We are in the midst of a debt crisis, and the American people want to know why we have to balance our budget and they don’t”.
When it becomes difficult to find reporting about the gold price like this commentary($) by Mark Williams in the Financial Times (alternatively, here), you’ll know that we’re near the end of the secular bull market that is now just ten years old, but, until that time, the prevalence of this type of thinking toward the metal – the fundamental misunderstanding of the historical nature of money and hubris on a grand scale regarding the monetary system that is now in place (which, in itself, is both remarkable and naive given what’s happened over the last few years) – then, you know that gold prices have much higher yet to go.
Few silver linings when gold bubble bursts
Beware of bubbles. Tulips, the dotcom boom and pre-credit crunch real estate have a lot in common; they are assets that were in vogue, became overbought and eventually fell to earth. And now it’s gold.
Historically, two-thirds of gold demand comes from the jewellery industry and from countries like India and China. The remaining demand is generated by investors, manufacturing and the dental industry. But over the last four years, gold has staged a spectacular price rise and won many new investors. Everyone from hedge funds to individuals has jumped in, seeing gold as a way to improve portfolio diversification. Today portfolios often allocate 5 per cent or more to gold. A decade ago such an allocation in sound investment circles would have been heresy.
Well, tick off “List of prior asset bubbles” for this anti-gold rant, but, for some reason, this piece is missing the most important argument against the metal that is now an industry standard – gold earns no interest and pays no dividend.
Everyone’s talking about a “gold bubble” again and how its bursting will wreak havoc on those foolish investors who succumbed to the lure of tulips, dotcom stocks, housing, and now … a shiny yellow metal. But, the funny thing is, this latest bubble seems to keep bursting and re-inflating – unlike other bubbles that stay burst – and the most recent price increases still haven’t surpassed that seen either two years ago or four years ago.
An odd “bubble” indeed and the reason why, here, it’s called the “Recurring Gold Bubble”.
[Here's another one from a few years back (we'll be back home soon) that featured Greg Ip, formerly of the Wall Street Journal and now in the employ of The Economist. As was the case for this item that appeared here on June 26th, 2007, during the month of June, Greg always had something interesting to write about after BIS Chief (and Austrian Economics sympathizer) William White submitted their annual report.]
ooo
A story about Austrian Economics showed up in the Wall Street Journal yesterday – but not in the newspaper. Fed-channeler Grep Ip wrote this in the Real Time Economics Blog:
Amid Financial Excess, a Revival of Austrian Economics
Does the U.S. risk repeating the mistakes that led to the Great Depression? The Bank for International Settlements’ annual report, released Sunday, suggests that it does, and offers a remedy steeped in the doctrine of Austrian economics.
In the 1930s adherents of the “Austrian school,” named for its Austrian-born proponents Ludwig von Mises, Joseph Schumpeter and Friedrich Hayek, argued the Great Depression represented the unavoidable remediation of misallocated credit and overinvestment in the 1920s. The Austrian school largely failed to become orthodoxy as first Keynesian demand management appeared to end the Depression and later monetarism blamed the Depression on inadequate attention to the money supply.
Austrian economics, however, has enjoyed a minor revival in the last decade, most prominently at the Basel, Switzerland-based BIS, which has few formal banking duties but is an important talking shop (it is sometimes called the “central bankers’ central bank.”) The BIS’s leading “Austrian” is a Canadian, William White, the head of the bank’s monetary and economic department and sometimes-rumored successor to retiring Bank of Canada governor David Dodge.
In defense of those who think the mainstream media sometimes misrepresents economic statistics, painting an even bleaker picture of our current condition than they really should, the headline to this McClatchy story is presented along with the underlying data from which it was generated – More Americans are poor than ever before, census finds.
Now, it is true that the 43+ million Americans living in poverty today exceeds the 40 million that fell into that category back in 1959, but the current population is about 310 million versus only 180 million 51 years ago and, as shown above, when adjusted for population growth today’s poverty rate is still about 40 percent below the previous high. The poverty rate is noted in the second paragraph of the story, but it seems to be an afterthought.
By Tim Iacono, Since 2005
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