This week marked the celebration of President Obama's first "100 days" in office. It is droll in this context to reflect that in history, "the 100 days" is generally accepted as describing the period in Napoleon's career between his "escape" from Elba and his final defeat at Waterloo in June 1815. For most Americans, of course, this does not register. In American history, "the 100 days" pertains to the beginning of Franklin D Roosevelt's (FDR) first term in 1933. That "100 days" began with the forced closure of every bank in the US and ended with the connection between economics and politics in the US transformed.
Political intervention in the economy of the US did not begin with FDR, it began in earnest with his predecessor, Herbert Hoover. So did the depths of the first stage of the 1930s depression. What FDR did was to cement the government's role in the economy firmly in place by introducing a welfare state to the US and by cementing in place the concept of government "guarantees" covering everything from bank deposits to the ability to borrow to buy homes.
This transformation has never been rolled back or curbed in any way. To the contrary, it has grown ever since into an enormous and all encompassing blight affecting every facet of life. It is now reaching its climax amid economic circumstances which are actually worse than they were when FDR took office for the first time in March 1933. And in the midst of it all comes a headline from Reuters item published on May 1: "Obama revelling in (US) power unseen in decades."
According to the Reuters article: "...it is a level of influence and power for a president that is literally unprecedented from any time since the New Deal and Frankin Roosevelt." Mr Obama is maintaining a 60 percent plus "approval" rating. He will soon have the opportunity to begin to appoint Supreme Court Justices with the announced retiment of Justice David Souther. Most important of all, with the "defection" of Senator Arlen Specter from the Republican to the Democrat side of the political "spectrum", Mr Obama's party, the Democrats, will have a 60 vote majority in the 100 seat US Senate, enough to exercise control over BOTH houses of the US Congress.
Mr Obama has made it perfectly clear that he is in full agreement with his Treasurer Mr Geithner and his central bank Chairman Mr Bernanke. This means that the present method of fighting the recession - throwing ever larger quantities of borrowed "money" at it - will continue. The problem here is that after about 75 years of employing the same method, the level of debt built up has reached a point which is literally unsustainable. When FDR ended his first 100 days in office, the population of the US was 126 million and the federal government owed $US 22.5 Billion. There was little or no "unfunded debt", the US welfare state was just being born. At the end of Mr Obama's first 100 days, the population of the US is 304 million. The federal government owes $US 11,250 Billion and is responsible for "unfunded liabilities" of anywhere from $US 60,000 to $US 80,000 Billion on top of that.
The latest estimate of US federal government spending for the fiscal year which ends on September 30, 2009 is $US 3,750 Billion. At that rate, the US government is now spending in about 10 hours what FDR's first administration spent in a year. Take a look at the increase in population since 1933. In 1933, the US government spent $US 4.6 Billion on 125 million people, that's a per capita amount of $36.80. In 2009, the US government will spend $US 3,750 Billion on 304 million people, that's a per capita amount of $12,335.50. Is this increase really necessary?
Sadly, most people have been literally "conditioned" to think that it is. But take the population differences into account and reflect on this. If present government expenditures were reduced by 99 PERCENT, that would take US federal government spending down to $US 37.5 Billion or per capita spending of $US 123.35. That is still more than THREE TIMES HIGHER than it was in 1933, when government power and spending SKYROCKETED to "protect" Americans from the 1930s depression.
A welfare state and an economic interventionist government is a VERY expensive proposition.
Yet all governments, most global media, and the majority of the people in the US and everywhere else are clamouring for it to get even bigger, just as they were in 1933. Not only in the US, but all over the world, government spending or "private" spending generated by government loan guarantees are seen as the ONLY remedy for the economic malady that now ails the world.
The year 1933 was the last year in which Gold circulated as money in the US. By the end of that year, not only had Gold gone out of circulation as money, but Americans were prohibited by law from owning Gold in any form. Look closely at the results.
Since the resurgence of global stock markets nearly two months ago, Gold has been dormant. For most of the past month, it has traded in a very tight range between $US 870 - 910. At present, it is right in the middle of that range. It is simply waiting to "re-assert" itself. The current global recession/depression is the first one since the advent of the US welfare state in the early 1930s which will not be able to be resolved by piling new debt on old. This time, a more fundamental prescription is required, as it has been many times before in history. This time, the only cure is a return to SOUND money. When that becomes too obvious to continue to ignore, Gold's present "dormancy" will end.
(Chart appears here in original analysis)
A new low was hit on the chart when spot future Gold closed in New York at $US 705 on November 13 last year. This pushed the chart two "Xs" below the $US 715 support level established in late October and equalled early in November. Then came the first big turnaround - and upturn on the chart - of November 14. The region between $US 700-720 firmed as SOLID support for Gold. That support "zone" was emphatically confirmed as Gold rose by just over $US 110 between November 13 and November 28 last year.
On February 20, as you know, Gold made it all the way back to its previous all time highs. But it did NOT break through the $US 1000 barrier. Since then, Gold retreated to just below the $US 900 level in three moves down. What is being traced out on this chart is a gigantic "reverse" head and shoulders formation. The trading range between $US 900 and $US 1000 was broken early in April. For the past month, a tighter range between $Us 870-910 has been established with Gold right in the middle of that range as of May 1.
We began the table below in 2007 and have extended it into 2009, even though Gold in all four currencies in the table remain well above their 2006 highs. The all time highs for Gold which occurred in 2008 have remained intact in US Dollars and in Yen.
But in terms of the Euro and especially the Aussie Dollar, the situation is very different. Gold hit new all time highs in both currencies on January 30 with situation being duplicated by Gold in terms of MANY other currencies. On February 20, those highs were taken out when Gold hit $US 1000. With Gold now more than $US 100 below that level, and with several currencies having risen against the US Dollar since then, Gold is off substantially. But as before, the only thing we still await is for that $US 1000 level to be broken through on the upside.
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