Dreaming of a Balanced Budget

Well, the president gave a bum speech. Full of empty phrases. Hollow words. It was deep space for real ideas; there was nothing there…

And yet, he gave it so sincerely…you almost felt sorry for him. He would have made such a good college president or undertaker. Sad to see him waste his talents in politics.

We were disappointed, too, that he didn’t use any of our ideas. Don’t expect a balanced budget for this year…or any year of this president’s administration. Instead, he’ll add 75% to the nation’s official national debt – three times more than all the presidents who came before him put together.

Now, that’s an achievement. Something to be proud of. Something he can put on his tombstone.

Here Lies Barack H. Obama. America’s 44th president.
He bankrupted the US government.

And he could have achieved greatness. We had a dream about it. After the State of the Union address, we imagined a different speech:

“My fellow Americans, I know this is a go-along, get-along town. Everybody gets something. If you’re well connected you get a lot. If you’re not so well connected, you get less. Well, I’m not going along anymore. Instead, I’m going to change the rules…so that everyone has a fair chance of getting along.

“I propose to get rid of the phony dollar and re-introduce the real dollar. The dollar will be henceforth exchangeable at the rate of $1,500 per ounce. No questions asked. You give us $1,500 dollars; we’ll give you an ounce of gold.

“And the US government budget will be balanced. We’ll spend what we collect in taxes. Not a penny more.

“Of course, if you gentlemen and ladies want to raise taxes, I’ll let you explain why to the voters…”

Whoa. With those two reforms he could save America from bankruptcy…and put the whole world economy back on solid footing.

And if he wanted to make the US economy the world’s top performing economy he could go even further:

“I’m also introducing a flat 10% rate. I don’t care how you earned your money. I don’t care if you’re a citizen or an alien from outer space. If you live in the US, you send me a postcard. Tell us how much you earned last year, and send us 10% of it.”

Can you imagine? There would be a renaissance…a boom…a revival…like you’ve never seen.

Not that there wouldn’t be problems. Big problems, even. But at least there wouldn’t be any problem with the dollar…or the US public finances.

But it was only a dream, wasn’t it? And a waste of time. It’s never going to happen. We’ll explain why, below. Tonight, we’re going back to dreaming about women. It’s more fun.

Stocks were flat yesterday. Gold dropped $12.

Gold is dipping. How deep will the dip dip? We don’t know. But people who try to time the gold market almost never do well. They get out to avoid the dips. Then, gold shoots up again. The speculators are out of luck. They can’t bring themselves to buy back in at a higher price. So they miss the explosive final stage of the bull market.

What to do about it? Don’t speculate. Buy gold as a way to save money. Then, think of it as you would a collectible…or an heirloom. Don’t worry about the price. Just hold on. By 2015, you’ll probably be able to use a few ounces to buy a new house.

But remember this: there will also be a time when it makes sense to sell gold. When you can buy all the Dow stocks for a single ounce of gold…it’s time to get out of gold and back into stocks. Right now, the Dow is a little under 12,000. And an ounce of gold is only $1,335. Our guess is that the Dow will collapse to under 5,000…while the price of gold soars to over 4,000. Get ready!

When? Hey, you’re asking too much from a free e-letter. Just stay tuned.

Bill Bonner
for The Daily Reckoning