11/09/09 Beunos Aires, Argentina – In 1949, the Soviets and the Allies divided Germany into two parts. One part followed a traditional capitalistic path to reconstruction. The other part took the socialist road. Remarkably, they kept this test going for 40 years.
Of course it was misery for many of the test subjects. People were so eager to get out of the East German control group, they risked their lives jumping over the barbed wire. Then, when the wall was down, the population of East Germany collapsed…more than one out of every ten people moved to the West!
But it was a great experiment for economists. Too bad they didn’t learn anything.
What they should have learned is that when it comes to making people materially better off, government spending is a poor way to do it. It’s great for the few favored firms who help Washington raise and spend its trillions. It’s great for Goldman, in other words,
But what if you don’t have an inside track with the government? Well, you’re out of luck. You get to stand in line to buy inferior goods and services – produced by government-owned industries and protected monopolies. That was what the East Germans did. And, of course, you get government bureaucrats telling you what to do…and preventing you from improving the quality of your life.
That’s what they did in East Germany. And that’s what they’re doing, now, in the United States of America – in a less obvious, less heavy-handed fashion. Who owns the biggest auto company in the US? Who provides the finance for the finance industry? Who controls the health care and education industries? Who’s the biggest employer? Who finances our houses? Who runs our banks?
Well…you know the answer.
But here’s another question: who’s headed for bankruptcy? Same answer.
What can you do about it? All you can do is to anticipate where this is heading…and position yourself to profit. Or, at least position yourself to protect your assets.
In that regard, you may want to replace the FED with the GLD, if you know what we mean. The Fed is derelict in its duty to protect your paper dollars. GLD – an ETF for gold – is a very simple way of doing your own central banking.
But should you buy GLD now? Ah…they don’t make it easy, do they?
So, should you buy gold now?
A quick answer: it depends.
If you’re buying gold for quick profits, you will probably be disappointed if you buy it now. The price has been going up for weeks. It’s probably ready for a rest.
Also, gold moves up with stock prices – both anticipating an inflationary recovery. We think this will turn out to be a mistake. There is no real recovery underway. And no inflation either.
If and when stocks collapse, gold will go down too. At least for a while.
But if you are buying gold as the Chinese and the Indians are buying it – as a monetary reserve, not a speculation – there is no time like the present. Sometime in the future, we wish we could tell you when, gold at $1,100 will seem like a giveaway.
Until tomorrow,
Bill Bonner
The Daily Reckoning
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Zorro
I want to know how greenbacks are circulating inside them.
suck up from markets, possible.
finance each other, possible.
vacuum and burn , possible.
US has super brain cells ,Yes.
Sorry, Bill. I don’t agree with you that the “government” is running our business now….we have been devoured by the voracious greedy capital flows and now the government has become the savior to those who have mucked up the system.
We are light years away from how the “Eastern” Europeans ran their economies.
We just have gutless, bought and paid for “elected” officials that are screwing up the whole works by not overseeing the rich moguls in the playhouse…..
Without “destructive construction” of our economic cycles (with the system we espouse) and leaving that activity to proceed, ie, let the “too big to fail” FAIL!!!!
That stimulates not only new political debate but new businesses and hopefully in a progressive sense, business that if it wants to have the rights of individuals, take the responsibility of individuals and stop destroying our environment and clean up after itself.
(Most individuals don’t have a clue what socialism is anyway)
Light YEARS?
Hahahahahahahahahahahahaha
*snort*
Hahahahahahahahahahahahaha
(Whatever kind of -ism you want to call it, great leaps forward are being made)
As a former GLD holder, but still a holder of physical gold, I can only say beware. Read that prospectus carefully, keeping in mind all the points in the chain of custody of that gold, at which failure to produce that which is claimed to be owned, can occur. Each one carefully states that the GLD share owner has no recourse. Add to that the role of bullion banks in this chain of custody, who have huge short positions. If it is not in your possession, you don’t own the gold, because you don’t know how many claims there are for every ounce. Would it not be just a convenient way to drop the price of gold overall by creating a selling panic in the ETF shares?
I agree with Sierra, Bill,A completely unregulated capitalist system doesnt work any better than socialism. They both arrive at the same place. Morality and ethics try to curb greed and human weaknesses, but they need the support of a policeman to insure compliance with the rules of honesty and fair play. At least we have to maintain a level playing field.