Gold’s Advance Indicates Failures of Bush-Obama-Congress Weak Dollar Policy

The U.S. dollar is teetering on the edge of relative worthlessness, but polite market reporters won’t really say it that way.

The news in recent days has been gold’s advance , from roughly $930 an ounce to $990 an ounce in the last few months. Gold’s luster isn’t from demand for jewelry or industrial applications for the metal. Instead, it’s climb is due entirely to a lack of faith by international businesses and investors in the value of the dollar.

This Bloomberg story spells it out clearly:

“The underlying factor [in the movement of gold’s price] is still the dollar,” Dan Smith, a Standard Chartered Plc analyst in London, said by phone today. “If we do see a break in the dollar, it could be one of the triggers to take gold higher.”

To interpret City speak for you, “a break in the dollar” means that dollar-holders in international markets will sell the dollar in order to buy other currencies. People sell a country’s currency when they see current or future weakness in its economic outlook. If they don’t think your economy will come out of a recession any time soon, or they your political situation stinks, they sell the currency. If they think your monetary policies stink – including the printing a lot of paper and flooding markets with it to create a short term ‘stimulus’ – then they sell that currency. Who wants to hold a currency that’s as good as toilet paper?

That’s what we’ve seen with all these “bailouts” and “loans” from the U.S. government to industry. It’s been an increase in supply in dollars. More dollars chasing fewer goods creates inflation, which means everyone’s current dollars are worth less and less. And hard assets, like gold, whose supply can’t be artificially inflated, increase in value.

A lot of blame can go around, to Alan Greenspan, George W. Bush, Ben Bernanke, Barack Obama, and the feckless idiots in Congress. Whoever you chose to blame, we’re in for a continuing rough ride, if gold’s move to $1,000 and beyond is the indicator it has been in the past. I think it will.

Oh yeah, just so you might recall, gold was selling for roughly $250 an ounce in 1999 or so. The inflationary policies of our government aren’t neatly pinned on one political party or another. There’s something else going on that’s more dastardly, as government pushes its continuing reckless spending onto our pensioners and elderly. It’s truly unforgivable what our so-called leaders are doing to us, now and in the past ten years. It’s also unforgivable what we’ve been electing to office, in terms of complete idiots, from both parties, at nearly every level of government.

Enjoy the ride. It’s going to be a doozy.