Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Almost 1% and 3% on the Week
By: Chris Mullen, Gold-Seeker.com

Ira Epstein's Metals Video 5 26 2017
By: Ira Epstein

COT Gold, Silver and US Dollar Index Report - May 26, 2017
By: GoldSeek.com

Really Bad Ideas, Part 2: Giving Up Without Admitting It
By: John Rubino

Silver Minersí Q1í17 Fundamentals
By: Adam Hamilton, Zeal Intelligence

The story behind continuing strong bullion coin demand
By: Michael J. Kosares

Fedís Shrinking Balance Sheet and Gold
By: Arkadiusz Sieron

The FANG Market Rig Will End Terrible As All Rigs Do
By: Graham Summers

Sentiment Speaks: Central Banks Control Nothing
By: Avi Gilburt

Hereís Why I Think Renewable Energy Is Finally Living up to Hype
By: Frank Holmes

 
Search

GoldSeek Web

 


Greenspan's $500/Oz. Legacy


-- Posted Thursday, 4 August 2005 | Digg This ArticleDigg It!

Housing prices are booming.  The NASDAQ and S&P 500 stock indices are at four-year highs.  The Russell 2000 index is at an all-time high.  The unemployment rate is not far from near-decade lows.  This is the legacy that Alan Greenspan wants to leave.

 

During the 1980s and 1990s, Greenspan became addicted to the attention he was receiving from the highest levels in the White House and on Wall Street.  It was in those years that he began selling out his sound money principles in exchange for a lifestyle of private jets and fancy limousines.  When the Internet bubble imploded in 2000-2002, Greenspanís magnificent legacy was in danger.  Fortunately for him, he held the keys to a 21st century electronic printing press giving him the ability to create and make available more cheap money than this country knew what to do with.  This unprecedented liquidity injection bailed out equity investors, junk bond hedge funds, and major banks and created a massive real estate bubble that still exists today.

 

After cutting interest rates to record low levels, inflation began to rear its ugly head.  Despite the governmentís best attempts at doctoring the Consumer Price Index, the average American could feel that something was different.  Whether it was rising gas prices, higher electricity and grocery bills, or increasing healthcare costs, inflation started to creep into society.  These inflation fears have caused Greenspan to raise rates in a bite sized fashion over the last few months.  The yield curve has become flatter than a pancake as long-term rates refuse to budge despite the Fedís best attempt at jawboning the long end of the curve up.

 

We believe that Greenspanís recent testimony to Congress was his final attempt to jawbone long rates higher.  The financial press was certain a few months ago that rate hikes would end by summertime, now it is a given that rates will be hiked for the remainder of the year.  We continue to predict that something in the economy or financial markets will break in the coming quarters.  At that time, the Fed will have no choice but to stop hiking rates and likely begin lowering them again.  There is no way Greenspan (or his successor) will take the heat for a recession or a deflationary depression.  Stagflation is much more politically acceptable as people tend to remember nominal numbers rather than real numbers.  A weakening Dollar and $500/oz. gold price are small prices to pay for the Greenspan legacy to be solidified. 

 

The problem is that putting Humpty Dumpty back together again is no small task.  While some additional weakening in the Dollar and $500/oz. gold may be palatable to financial markets, the ability to contain the Dollarís further destruction from those levels will be no easy task.  Greenspan has helped create structural spending problems in the U.S. that cannot be fixed overnight.  Couple this with gigantic wage gaps between the U.S. and Asia and the recipe for a currency disaster is born.  Until the U.S. consumer restrains his penchant for spending every nickel he makes, a widening trade deficit and Dollar weakness loom.  In fact, as we rapidly approach seven and eight percent current account deficits, the odds of the Dollar decline becoming disorderly only increase.  Once again this points to the benefits of owning gold and silver.  Gold seems destined to break $500/oz. in the current environment, but if people begin to see through the problems with the Dollar and the interest rate box the Fed is in, then gold prices may quickly leave 500 bucks an ounce in the rear view mirror.

 

more follows for subscribers . . .

 

Todd Stein & Steven McIntyre

Texas Hedge Report

 

Todd Stein & Steven McIntyre are internationally known analysts and editors of The Texas Hedge Report, a market newsletter that highlights under and overvalued securities in the equity, bond, currency, and commodity markets

 

For more information, go to http://www.texashedge.com


-- Posted Thursday, 4 August 2005 | Digg This Article





 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.