July 29, 2011
By Kevin Michael Grace
As this column is written the Congress of the United States in engaged in momentous deliberations. Whatever the decision on the debt ceiling limit made by the assembled Democrats and Republicans, one thing is certain. It will go down in the annals of American history as one of the great legislative compromises, perhaps even as crucial as the Missouri Compromise of 1820, the Compromise of 1850 or … Sorry, folks. Got caught up in the moment there. Checking the Drudge Report too often will do that to a man.
No, the debt ceiling “crisis” is nothing of the sort, and whatever Great Compromise Obama, Boehner and Reid arrive at will be forgotten as quickly as yesterday’s microwave dinner. The latter-day Solons of Washington are reminiscent of nothing so much as the drug-addled desperados of Bruce Robinson’s Withnail & I. And in defence of the latter, they were at least amusing and had some awareness of the place where their depravity had led them.
Consider the metaphysical puzzler presented in Withnail by Danny (pictured below): “Politics, man. If you’re hanging on to a rising balloon, you’re presented with a difficult decision—let go before it’s too late, or hold on and keep getting higher. Posing the question: how long can you keep a grip on the rope?”
We don’t know how long Washington can hang on, but the feeble “cuts” proposed by the Republicans demonstrate that even the “hard-liners” will not let go, even as the debt balloon swells to bursting.
Fox Business reports that John Chambers of Standard & Poor’s has declared that only continued deficit cuts of $1 trillion a year will prevent a downgrade of America’s Triple-A credit status. Karl Denninger comments, “The ‘most-recent’ proposals cut anywhere from nothing in actual spending (Democrat proposal) for 2012 to $90 billion (Republican). And neither contains any actual cuts on a forward basis—the Republicans are at least honest about it and say they just ‘hold discretionary non-defense spending at 2011 levels.’ That’s not a cut in spending.”
Reuters reports today that Dagong Global Credit Rating of Beijing has already decided on a downgrade. Chairman Guan Jianzhong declared, “We will definitely cut the rating, regardless of whether there will be a compromise. It has already dealt a blow to investors’ confidence.” A downgrade will mean higher interest rates, leading to bigger deficits, leading to higher interest rates—and, before you can say “knife,” the world’s most powerful democracy will be in the same place as the world’s oldest democracy. And unlike Greece, there is no EU to bail out Washington.
The philosophical Danny said, “London is a country coming down from its trip… There’s going to be a lot of refugees.” In the event, he preferred to light up another joint. In Washington, they prefer to raise the ceiling, the better for the balloon to rise ever higher.
The bad news about globalism is that there are no longer any safe havens. We’re all in this together, so long as we all pledge our loyalty to the Paper Standard. The good news is that there is an alternative: gold and silver. It is for this reason that “metalheads” are no longer condescended to by the Establishment; they are increasingly regarded as “wreckers” were in the final days of the Soviet Union.
As Jim Willie, editor of the Hat Trick Letter, explains in a lengthy essay, “Conscience of a Gold Investor,” “We feel an urgent need to defend ourselves against a crippled corrupted US Dollar. The level of debilitation cannot be adequately put in words, as it has lost perhaps 70% of its value just since 1980… The US Economy cannot be rebuilt or sustained on bond fraud, debt auctions covered by the printing press, endless war, phony accounting, outsourced industry, home equity extractions, rigged financial markets, constant deception on economic recovery, falsified economic statistics, and pursuit of the next asset bubble. The end game is fast along.” He concludes, “Individuals must put aside all matters of conscience and focus on survival, real value and truth. The patriotic thing to do is to survive and preserve wealth, period!”
This is what those who decry “goldbuggery” refuse to understand. As investors increasingly feel as Willie does and follow his advice in betting on metal against paper, the prices of gold and silver will continue to rise, regardless of their supposed “real” worth. At press time, gold was worth $1,618.60 and silver $39.72.
At the Globe and Mail, Martin Mittelstaedt adds his voice to the swelling chorus, “Some market observers are even suggesting what might once have been unthinkable: that gold shares are becoming value investments, or compellingly cheap stocks with good prospects.” According to Ronald-Peter Stoeferle of Erste Group Bank AG in Vienna, “The best opportunities lie in intermediate producers that are posting significant output growth and have mines in low-risk jurisdictions, such as Canada, Mexico and Chile.” Four producers that Erste believes occupy that niche are Alamos Gold, B2Gold, Centerra Gold and Eldorado Gold.
Peter Koven at the Financial Post notes, “Kaminak Gold Corp has only completed one season of drilling at its Coffee gold project in the Yukon, and it doesn’t have a resource estimate yet. No matter—Versant Partners analyst Rob Chang is very impressed with what he sees, and is initiating coverage with a Buy rating.”
And Koven reports that “Agnico-Eagle Mines Ltd. is making an aggressive move into Goldcorp Inc.’s backyard… It is investing $70-million in Rubicon Minerals Corp, the most exciting junior development company in the Red Lake gold camp in Ontario.”
Finally, Reuters reports that New Taipei City in Taiwan has instituted a new kind of lottery. Citizens who bag dog excrement from streets and parks and deliver it to the authorities will win tickets for a draw awarding gold ingots worth $2,100, $630 and $420.
One is tempted to suggest that the canny Taiwanese have solved the riddle of the Philosopher’s Stone, but on second thought it appears that they will shortly receive a rather disgusting lesson in supply-side economics.