GOLD: THE CASE FOR AND THE CASE AGAINST

 

Gold is a stability hedge.  So the case for gold includes everything that could seriously destabilze our economic system.  This would include:

REASONS TO OWN GOLD:

1)  If the liquidity crisis that is now affecting small to mid size banks across the nation, which is being addressed in a series of rolling bailouts, and several Fed programs which enable these banks to receive hundreds of billions of dollars in "loans" that provide liquidity, does not magically disappear over time. 

Rather 2) commercial real estate which comprises a large segment of small and mid sized banks portfolios morphs into a full blown crisis, taking down these banks and requiring the most massive bailout yet.

3) This crisis or any similar crisis forces the Fed to cut rates back towards zero fueling a new and more serious round of crushing inflation.

4)The current rise in interest rates causes not only a commercial real estate crisis (which is in progress) but also a crisis in residential real estate as risky loans to low income households have resulted in the debt burden and interest costs for homes to attain all time record levels.  And as households have to spend more  and more of their income to service these loans they have less and less to spend on anything else as they hurtle towards foreclosure.  The average debt to income in the US is 40 percent.

5) As every western economy is in exactly the same situation every central is being forced to print more and more money for bailout (or technically non-bailout) facilities for their banks causing debt to rise to levels that are impossible to service, we are hurtling towards a sovereign debt crisis.  It ma not happen tomorrow.  But it will happen.

6) The extreme financial repression that occurs from the bailouts shoveling more and more money to the richest percentile, while the politicians seek to balance the books on the backs of the poor by cancelling food stamps, and making medical care unavailble, etc etc thus fueling a populist rage that results in violence.

7) The rise of nationalisitic strong men throughout the west who seek to placate populist rage with trade wars, sanctions, hot wars, and the scapegoating or minorities continues to disrupt supply chains and make goods that are already expensive, unaffordable thus fueling a virlulent inflation - and disruptimg industry that doesn't comply with political strictures.

THE CASE AGAINT GOLD:

All of these problems magically disappear.  Or maybe they're just not nearly as destabilizing as they appear to be.