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President Obama is expected to make an announcement Wednesday night in a new state of the union address. The gist of the speech will be on the economy and a controversial point will be to curb government discretionary spending in 2011 for 3 years by enacting a spending freeze. Exempt would be the Pentagon, veterans programs, foreign aid and the Homeland Security Department which are some of the largest components of the federal budget. The projected total savings could add up to $250 billion over the coming decade. But while $250 billion seems like quite a significant amount, the big picture doesn’t look so rosy. The So yes, the government is doing something to address this insurmountable debt, but in the grand scheme of things, it’s not much. This is especially troubling considering the IMF, UN, and metals consultancy GFMS all warn that the economy may take a ‘double dip’ if stimulus packages were withdrawn too quickly. As we’ve seen with recent jobs reports, recovery is lagging and the economy is in too fragile a state to sustain itself. So Obama and the Fed are stuck between a rock and a hard place. But the good news, as a gold investor you win. Let me explain… First off, if Team Obama continues to spend money it doesn’t have, it means the Fed’s will be ramping up the printing presses. Printing money increases the money supply which in turn translates into inflation down the road. And as we saw in the 1970’s gold performs extremely well during inflationary times. On the other hand, if the Feds miraculously stop spending money, the economy could fall into another recession and take a second dip. We know from experience that the Fed’s way of dealing with a recession is monetary stimulus. So if things do get worse, you can be sure that it’s right back to the printing press, triggering the same inflationary cycle I just explained. Gold investors win again. It’s a win-win situation for us gold bugs.
Yours in profits,
Roger Gaines |
