Great Depression Online Archive Issue:

Where Will the Money Go?

Great Depression Online
Long Beach, CA
May 29, 2009

Inside This Issue You Will Discover…

*** Buy Low, Sell Lower
*** No One’s Hiring
*** Where Will the Money Go?
*** And More

Buy Low, Sell Lower

In the macro sense of economic markets, things are hardly predictable…or logical.  What one thinks should happen doesn’t.  And what shouldn’t happen does.

If you’ve ever bought or sold stocks you know how it works.  There’s only one simple rule: ‘Buy low, sell high.’  And if you follow this rule you’ll get rich.  Yet many who’ve tried have painfully discovered that while this rule’s simple, it’s not easy.

Most investors, in effect, do the exact opposite…they buy high and sell low.  After that happens a few times they get smart and buy low.  But then something unexpected happens…the stock doesn’t go up; rather it goes down.  And then they sell.  This is called ‘buy low, sell lower’ investing and it’s a great way to go broke.

~~~~~~The Real Story on Gold~~~~~~

Gold bugs have long touted the yellow metal’s time-tested store of value.  But, contrary to popular opinion, gold isn’t always the best investment when times get tough – and we have the analysis to prove it.  Our friends at Elliott Wave International have just released a brand-new eBook that will help you decide just how – and when – gold and silver should be put to work in your portfolio.

Among the unique insights in this free eBook are 6 eye-opening tables that reveal how gold and silver performed vs. stocks and T-notes during each of the 11 recession-expansion cycles of the past 100 years.  These tables alone are worthy of a high price tag, but you can download them for free.  You’ll also get valuable analysis for gold stocks, precious coins and more – all at no cost.

If you have even the slightest interest in gold and silver, you must consult this free 40-page eBook now. It will show you how to invest in precious metals safely and successfully like no other resource can.  Learn more about the 40-page Gold and Silver eBook here.

~~~~~~~~~~~~~~~~~~~~~~~~~

Since bottoming out on March 9th, the DOW is up 30 percent.  Oil is up nearly 80 percent this year.  And since April 6th gold is up over 10 percent.  Yields on 30-year Treasury bonds are up from 2.54 on December 18th to over 4.60.  The dollar’s taken a nose dive of late too – down 10% against the euro since early March.

And while these price movements are indicators of inflation, unemployment seems to be telling a different story.

No One’s Hiring

The Labor Department reported yesterday that the number of newly laid-off people filing for unemployment fell last week, signaling companies are handing out fewer pink slips.  The problem, however, is that no one’s hiring.

“The number of people continuing to receive unemployment benefits rose to 6.78 million – the largest total on records dating back to 1967 and the 17th straight record week,” reported AP.

So while layoffs are slowing, because no one’s hiring, unemployment’s still rising.

The “rise in continuing claims for jobless benefits means the unemployment rate, which reached 8.9 percent in April, will rise in May, economists said.  Many economists expect the rate to approach 10 percent by the end of this year.”

Until recently, what’s happened in this economic depression has been what you’d expect to happen.  Unemployment’s been rising, while prices have been dropping.  But what seems to be developing now is an even more adverse scenario…unemployment and inflation are rising simultaneously.

What gives? 

Where Will the Money Go?

The Phillips curve says there’s an inverse relationship between inflation and unemployment.  When unemployment goes down, inflation goes up.  Conversely, when unemployment goes up, inflation goes down.

Now we have rising unemployment and indications that inflation’s picking up too.

We believe it’s the government’s reckless deficit spending and bailouts that’s causing this contradictory occurrence.  For if the money supply were stable it would be impossible for unemployment and inflation to rise in tandem. 

In its truest sense that’s what inflation is…the expansion of the money supply.  And since the onset of the financial crisis the Federal Reserve has been expanding the money supply with a determined singleness of purpose – to debase the dollar.

That’s the goal.

You see, a weaker dollar is the quick fix for re-inflating asset prices, home values, and to ease the burden of the national debt.  And the Fed finally seems to be getting just what they’ve wanted – some inflation.

But who does it help?

Certainly not they guy who lost his job and is now watching gas prices creep back up.  Perhaps if he can hang on long enough the rising tide of inflation will lift his homes value back above what he owes on it.

Still, there is no certainty the extra money will show up in house prices, or stocks…places where it makes people feel wealthier.  Rather, it could show up in food, gas, and shaving cream prices…places where it eats into your paycheck.  What’s more, this government manufactured inflation could quickly get out of control.  Prices could double and then double again, seemingly overnight.

That the money will go somewhere is a given.  Where the money will go…that, no one quite knows.

Sincerely,

M.N. Gordon
Great Depression Online

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