Hoover and FDR

It seems as though history continues to repeat itself.  During the first ‘great depression,’ Herbert Hoover was President at the outset.  He instigated the things FDR would later enlarge upon, none of which worked.  Now we are in the beginning of the second ‘great depression,’ and it’s almost exactly the same scenario.  George Bush started the plunge downhill with his $720 billion TARP nonsense, which most of the Republicans voted for, including John McCain, but not of course, Ron Paul.  Now, with Obama as President, he is enlarging the things Bush started, just as FDR enlarged the things Hoover began, and history is repeating itself.  Now, instead of $720 billion, it’s said that it will be $10 trillion before it’s over, and I hope being “over” doesn’t mean the entire US economy, but it might well be.  As in the days of Hoover and FDR, none of the ‘stimulus’ worked, as it still won’t.  Henry Morgenthau, FDR’s Secretary of the Treasury, said that all the spending “hasn’t worked,” and he was correct.  It took WW II to get us out of the first great depression, and we can pray that it won’t take the same to get us out of the second great depression.

One big difference, as I have written before, is that during the Hoover-FDR  first great depression, there was absolutely no inflation.  None.  Why?  Because the dollar was backed by gold!  It was illegal to print trillions of paper dollars during the first great depression. That’s why FDR tried to get everyone to turn in their gold.  He could then spend more gold-backed dollars.  Also, there were no credit cards, no interstate roads, and virtually no air travel.  Stocks were being sold with little or no down payment, just as homes were being sold for the same requirements during the second great depression.  During the first great depression, there was no trillion dollar credit card debts.  During the first great depression, stocks plunged as they have done now, but perhaps a little bit further.  Then, there was no PPT or plunge protection team to keep the stock market artificially high; and you can bet your bottom dollar that the PPT has been busy of late.

Speaking of stocks, can anyone give me a reason why they have gone up a thousand points, other than the PPT?  650,000 or more each week are getting laid off, businesses by the thousands go bankrupt or close each week, prompting even more layoffs, and the chain reaction continues.  One of my clients says that stocks are going up because during a hyper inflation, everything goes up, and that is a good point, but there are no profits anywhere, so I think that argument my not be totally true.  I honestly do believe that gold and the Dow will cross eventually, with the Dow on its way down and gold on its way up.  Gold and silver will NEVER go to zero like paper assets (sic) can and have done and will continue to do.  With hyper inflation, gold and silver will be made to go up even further than other prices, I believe, because more and more people are seeing the beauty of tangible beautiful, historic money, in the form of gold and silver, and there is only so much of it out there.  As it becomes more and more difficult to get, due to increased demand, prices of metals will have to go sky high in dollars.


We drove over 3200  miles last week, mostly in Texas, and going to and from there.  The Blue Bonnets are out and beautiful, but even in Texas, the economy isn’t good at all.  While Texas houses haven’t plunged like Las Vegas, California, and Florida, it’s because they never got that high in the first place.  Still, layoffs are plentiful, and tourism, motels, and other non-essentials are hurting…even in Texas.  Closed auto dealerships are plentiful, and in one wonderful German restaurant, which used to have people waiting around the block on a Friday evening, we were seated instantly.  The second great depression is going to leave an unemployment rate of close to 20% before it’s over and all the spending and bailouts are merely postponing the inevitable, and making it worse with hyper-inflation.  The term “trillion” was unheard of a couple of years ago, as far as deficits are concerned, and now that term is thrown around like penny candy at a fair 50 years ago.

Silver is down a buck an ounce from a week ago and gold a hundred bucks.  Great buying opportunity, because they won’t stay there.  Silver is an unbelievable bargain.  In 1980, when gold was $850, silver was $50, or a 16 to one ratio.  If the ratio was 16 to 1 now, as it was then, and has been throughout history, silver would be $55 an ounce, not $12.25.   It will happen. because history cannot be denied.  It you’ve got the place to put it, get silver!

The Daily Reckoning