No Gold or Silver Bullets for Anyone's Gun

Rock, Fiat Paper, Scissors, Gold

It's September and the first day of fall just happened, at least here in Arizona, and I assume that our seasons work normally in relationship to the rest of the country, unlike our clocks which neither spring forward or fall back. Arizona is heat, then no heat, and unlike other places, Arizonan's move life outdoors right about now, doing their book sales and block parties and fairs when the rest of the country has begun shopping for scarves and mittens and breathing a chilled air filled with fragrance: wood burning, sweets, precipitation, roasted nuts, hot fowl drifting from homes and restaurants.

There is little good news anywhere. 30 year home loans can be got for 4%, or rather, the pricing has fallen (thanks Fed Chair Bernanke with your magic twists), but there is no market for the product. The Fed is still imagining it can do something, but with rates as low as they are, and with our do-nothing Congress, there is nothing that the Federal Reserve can do from a money manipulation standpoint that could help our economy.

I would argue that what we now need is a major bailout for homeowners. Not that I think they deserve it, but it's the housing drag that will sink us, with people worried about having a place to lay their heads each night. You will not spend an extra unnecessary dime if you are struggling just to hit your mortgage payment. That fear, that burden, has to be reduced. Otherwise, the whole country, the irresponsible and responsible alike, will get dragged knee deep into the quicksand.

There are no silver bullets anymore. Even the run-up in gold prices seems suspect, with gold ETF GLD falling about 20 points in two weeks, and hitting it's first Thursday to Friday period in a long time with a move that was statistically major. If you can't earn money via interest from your bank, or protect your stash via gold or silver, then what? Where is the safety zone? Swiss currency perhaps? And where will the actual wealthy park their cash in order to preserve it, all things looking shaky? Hard cheap assets like real estate perhaps? (And didn't billionaire hedge funder John Paulson shift into buy cheap real assets mode, only to get burned when we didn't bounce right back to our feet?)

I am starting to see more "safety zone" type questioning, and that's bad. We've seen the almost comical protests down around Wall Street in New York, largely by people who don't really know what Wall Street firms do day to day, and while this is not a true uprising, I can envision a point when people morph from recreational protests to more focused and angry displays of disaffection.

The Fed has no power, having done all it can. President Obama has little power, boxed in or flummoxed by his political opponents. Congress has no power, even this weekend failing to agree on short term spending agreements to keep the government rolling through November.

We are very nearly at a point where people HAVE to work together to fix things, or we will roll over into a period of extended stagnation. Not disaster, but like Japan's long period of asset deflation and malaise. Except, without the savings and general stoic sensibleness of the Japanese people.

Shamefully, our economy would be on the verge of chugging along if Republicans had not taken such a genial delight in sabotaging people's respect and trust in federal institutions. They preach that government cannot be trusted, that it is the beast, the great inhibitor of freedom. This, when a unified and aggressive government confidence is necessary.