To boldly go . . . into the gold market
Bill Bonner, President of Agora Publishing and writing for The Daily Reckoning, UK Edition, takes advantage of the holiday lull to examine the current state of gold – amidst all its ups and downs.
Bill Bonner (The Daily Reckoning, UK):
The financial world is slowing down. Analysts… economists… and blabbermouths are getting ready for the holidays. The news flow is quieting. The noise is abating.
So, let’s talk about gold. But first… a note about the little train that couldn’t.
The Eurostar connects London and Paris. Last Friday, several trains entered the tunnel and stopped. According to the press reports, the weather was unusually cold in France and unusually warm in the tunnel. This caused some sort of malfunction, stranding 2,000 travellers under the dark water and thousands more on both sides of the channel.
It was a blow to France’s pride; the French consider their train technology to be the best in the world. Yesterday, President Sarkozy called the head of the Eurostar and chewed him up… and this morning, the trains were meant to be running again.
We rose at 5am to rush to the Gare du Nord, so we could get the 6:43 to London.
“You’re going to take the Eurostar,” said the taxi driver with a laugh. “Well… good luck…”
When we got there, it was obvious something was wrong. Passengers weren’t lining up in an orderly fashion. Instead, hundreds of travellers who had been waiting three days for a train formed a miserable, complaining mob.
We were just trying to figure out what was going on when a phalanx of police came down the steps, followed by another group of Eurostar staff members. They wandered around… formed the passengers into lines… answered questions and then, nothing happened. We waited…
And waited…
“This is intolerable,” one French passenger yelled at a young woman in uniform.
“You people have no respect for your customers. We’ve been waiting days to get back to our families… and you treat us like cattle. It wasn’t our fault the trains didn’t run as they were supposed to. It was your fault. And you should have done a better job of dealing with the trouble you caused.”
A murmur of approval went up from the crowd. The clerk walked away. We waited. Finally, after half an hour, your editor gave up. His business in London could wait. We walked over to our office, only about 20 minutes away, on foot.
Now… back to gold…
The price fell $15 yesterday to just under $1,100. We expected a correction in the gold market. But we thought it would come along with a correction in the stock market. Stocks rose 85 points on the Dow yesterday.
We take this as a warning: something is going on that we don’t understand. That said, there’s a lot going on that we don’t understand.
But the broad patterns generally make sense. Boom was followed by bust. As dear readers know, the force of a correction is equal and opposite to the deception that preceded it.
The deception of the Bubble Era being exceptional, the correction would be exceptional too – even under the best of circumstances.
But these are not the best of circumstances. Because several other things are happening… things that need to be reckoned with too.
• The US is losing its privileged place in the world. Americans now compete with many other people in many other places for the world’s resources – including its savings.
• The international monetary system, an experimental system built of paper dollars, may be falling apart.
• The days of cheap and bountiful energy are over.
• Governments are going broke. State governments. National governments. In Europe. In the Middle East. And in America.
• The engine of economic growth – Americans’ willingness to go into debt in order to consume more and more of the world’s output – has gone into reverse.
• And, governments are meddling on an unprecedented scale… delaying and avoiding necessary adjustments, possibly turning an ordinary depression into a Great Depression… or even a Much Greater Depression.
These are not small challenges. Any one of them would be a worthy crisis on its own. Put them together and you have the makings of a catastrophe.
What will happen? Don’t know. Wish we did.
A series of mini-disasters? Or one big planet-wide blow-up?
Or, are the authorities so smart that they can engineer trouble-free solutions to these challenges?
Click here for the rest of Mr. Bonner’s commentary at The Daily Reckoning, UK Edition.
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