The Economy Guy

All markets moved sideways today as Tiger Woods teed off in the Masters.

In today news……

Store Chain Profits – are rising much more than people predicted.  This is a very good sign that consumers are going out and buying again.  However, this isn’t the whole story.

Unemployment Claims – went up last week.  Remember all that hoopla a week ago when the unemployment rate came out?  You would have thought that the  entire employment problem was solved then – as the trend was only up.  Well, here is one statistic that shows that the trend isn’t necessarily up.  The Labor Department said the number increased by 18,000 to a seasonally adjusted 460,000.  You see this number is just a computer generated estimate of what’s going on out there – the Labor Department doesn’t go out and count noses.  It said that “it is difficult to adjust for the Easter seasonal influences….”  However, California had its unemployment offices closed last week (to save money?) and didn’t even claim ANY new unemployed – so the number is probably worse.

Greek Debt Crisis – continues to shake the financial world.  The interest rate being paid on Greek debt right now is 7.5% – much higher than earlier predicted.  Has it topped out yet?  Who knows!!!  As long as there are rumors that the Greeks will default on their debt, this interest rate will increase.

Sign of the Times – Ryan Air is going to start charging for using their toilets.  Wow, now we can SEE who has the money when we are flying in Europe.  There is also a small airline in the US who is charging for carry on bags – and those folks get to board the airline first.  Just another trick to make money.

Tonight’s Dinner Conversation…..

How will it all end?  That is a question people have been asking since our economic meltdown 18 months ago.  I have previously stated that it will end as a deflation or as depression following a big inflation – and I am leaning toward this outcome.

However, tonight I want to introduce you to a third alternative.  This is a very creative one, and is close to my heart because it involved gold.  A very knowledgeable person has predicted that:

1. If the US still holds all the gold that it says its holding at Fort Knox, and
2. the gold there hasn’t been pledged or promised to another nation,
3. And, the gold price can be incrased to $5500/ounce

Then, the US would be solvent again.  Today, the US is bankrupt (technically speaking) as it owes more than it owns.  But if the gold can be revalued, then this bankruptcy issue goes away, and the results would be:

1. The Dollar would strengthen
2. All the debts could be paid off
3. the world would come back into an efficient trading order.

Now, the question is – Can gold ever get to $5500?  Here are my answers to that:

1. President Franklin Roosevelt increased the price of gold with a  stroke of a pen during the Great Depression – a precedent,
2. Gold is a freely traded commodity today – standing at $1150 right now – so a 5 fold increase is feasible
3. The US Government has lent gold to banks so the banks could use the metal to back trades in gold on the commodity market.
4. JPMorgan is the biggest holder of “shorts” on the gold futures market.  I wonder why they are short – and the answer I believe is because they are a front for the US government.
5. What would happen if the shorts held by US banks were sold on the market?  Why, my goodness, the price would skyrocket.

So, if the Treasury ordered those banks (who own 80% of the gold shorts) to sell those shorts, then gold would skyrocket in price, and the sky would be the limit.  Now I wonder if anyone is smart enough in the government to have thought of that by themselves?

Here are the last numbers for today:
Dow Jones 30 Industrial – 10.927 (up 30)
10 Year Treasury Bond – 3.90% (no change)
Euro – $1.3348
Gold – $1152 (no change)
Oil – $85.63 (down $0.25)
Gasoline – $2.30  (down $0.02)