the guttermorality case for gold

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you know me, folks--i'm no genius; i'm just some guy who gets drunk and transcribes whatever random shit happens to pass through his alcohol-inflamed synapses between mkf cocktails 1 and 3 on any given night.

am i booze-eloquent? yes indeed, i am. am i someone whose drunken pronouncements should in any way be taken seriously? astonishingly (to me, anyway), apparently at least one of you out there thinks so.

so, before the reader in question rushes out to invest his meager savings in gold merely on my say-so (much less any of the rest of you), i feel it necessary to elaborate on my position.

for those of you who couldn't care less, i promise to keep this as short and sweet as possible (and for those of you who wonder, i bought the bulk of my gold back in 2006 when it was half the price it is now and everybody told me i was crazy).

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our broken economy is in recovery, we are told; the recession is over. the people who are telling us this point to evidence that (a) the housing market seems to be bottoming out, (b) the dow has recovered 50% of the value it lost since its high two years ago, and (c) leading economic indicators are pointing upwards. cool, huh?

while i would (and easily could) dispute each and every one of the above points, that would make this post longer than i want it to be, so let's just assume for the sake of argument that each is correct.

the thing these economic cheerleaders fail to mention in their pep rallies is that the only reason all this shit is happening is because of something euphemistically called quantitative easing--a fancy name the federal reserve dreamed up for their practice of creating massive amounts of money outta thin air in order to fund all of this foolishness while simultaneously keeping interest rates artificially (and ridiculously) low.

in other words, it's sorta like referring to an intensive-care patient who depends on life-support for his every breath as "recovering."

but damned if all this artificial stimulus hasn't worked, sort of--people are buying houses with government-backed 4.75% 30-year fixed-rate mortgages, and the stock market is suddenly awash in cheap money.

the problem, of course, is that all this inflation of the currency has debased the dollar, shaken the confidence of our creditors like china and japan (upon whom we depend for our lifeblood) to the point that they're hesitant about buying any more of our debt, and driven the price of gold well past $1,000.

the fed has promised the world that it's gonna end quantitative easing at the end of october, and if it actually follows through on this promise, a couple of interesting things will happen very quickly:

first, and most importantly for our purposes, the dollar will strengthen almost overnight, and the price of gold (in dollar terms) will plummet.

second, and most importantly for the politicians, easy money will dry up and interest rates will spike, thus killing not only the artificial housing recovery but the artificial stock-market rally as well. housing prices will collapse, the market will tank, and voters will panic and demand heads on spikes.

so there you have it, my friends--a sophie's choice if ever there was one: will the fed (1) keep printing money in order to maintain the uneasy status quo, even though such a policy ensures certain hyperinflation of our currency at some point down the road; or (2) stop the madness, let the economy finally take its lumps and hit a painful rock-bottom so a true recovery can take place?

with mid-term elections coming up next year, and knowing my politicians as i do, i'm betting they're gonna go with option 1, kick the can down the road and hope they can keep the current bubble inflated for at least as long as they're still in office.

which is why i'm hanging onto my gold.