January 14, 2015--It's Not His (Obama's) Fault

My Florida friend Henry is counting the days until the end of the Obama administration.

"Only 664 to go. Days," he said jauntily the other day. "When I checked this morning on the Obama Countdown Clock that added up to 15,959 hours or 957,393 minutes. None too soon for me."

"You're pretty serious about this," I said. "I know you haven't liked him from the beginning but now you really seem to hate him. You're a smart guy otherwise, so tell me why you do."

"He's screwed everything up. In the Middle East, in race relations (and you know I'm not a racist), and especially the economy."

"The economy?" I couldn't let him get away with that. "I know you can't stand Obamacare and what you claim it means to you as a small business owner--though as I've pointed out to you through the years it's actually good for you with your staff of less than ten. But isn't the rest of the economy in pretty good shape exactly a week short of his having been in office six years?"

"Good shape? With so many still employed, salaries of middlc-class workers not growing, and all those young people still without jobs or underemployed?"

"Much of that is true. Things are far from perfect, but what do you say about his list of accomplishments--starting with gas prices. Aren't you impressed that that gas-guzzling pickup of yours is costing you at least $1,000 a year less to gas up than it did two, three years ago? You were blaming Obama for high gas prices then so does he get some credit now that they're lower?" He didn't respond.

"And what about your favorite--the stock market? When he took office it was languishing. But yesterday the S&P 500 Index closed at 2,023. That's a 145% percent increase. Not bad, yes? And a big deal for middle-class workers who have much of their retirement savings in stock funds. Does Obama get any credit for that?" Fiddling with his coffee, Henry didn't respond.

"And unemployment? The rate last week dropped to 5.6%, the lowest since 1999, the last year of the Clinton presidency. What do you think about Obama's role in that? You didn't hesitate to blame him when it was much higher so now that it's significantly lower, what do you think?" Again he ignored me.

"Then your actual favorite--inflation. You remember how five or six years ago you were touting Peter Schiff as your economist of choice who was predicted that because of Fed and Obama fiscal policies inflation would soon be at Weimar Republic levels and you were buying gold to protect yourself from the sky falling? How's the inflation rate looking to you now at 1.3 percent? These days we're actually worried about deflation. And how's your $1,900-an-ounce gold doing? The last time I checked it was way off its panicky peak and was selling for only $1,240 an ounce. And what's Schiff peddling these days? Not anything positive about the Obama Economy I suspect." More silence.

"I could go on but these are a few highlights which could also include low interest rates, a stronger dollar, how the deficit has been cut by more than a half--from $1.4 trillion annually to $514 billion-- and how America is becoming energy self-sufficient. So I guess this means you hate Obama for other reasons. Enlighten me. I'm willing to say you're not a racist, but what is it then?" He stared at his watch and said he needed to run. He had a meeting he needed to get to.

After he left Rona and I continued the conversation. She said, "One of my favorite things besides conservatives refusing to give Obama any credit for the improved economy is their explanation about why it's better. That they can't deny--that's it's better."

"I know where you're going with this."

"First, all of a sudden the leading Republican candidates for the presidential nomination are expressing concern about inequality and the plight of poor people."

"I saw that even Mitt Romney is. The same Mitt Romney who two years ago was moaning among rich people in Boca Raton about the 47 percent of Americans who are the 'takers.'"

"And then there was new Republican senate majority whip John Cornyn on Morning Joe two days ago ignoring the question about Obama's role in improving the economy while claiming that the reason things are better is because business leaders, when they saw the Republicans were about to take control of both houses of Congress, began to hire people. He suggested it was a sort of Mitch McConnell bump."

"This is so preposterous--the economy began doing better six years ago on the first day Obama took office and now Republicans are claiming that the good news is the result of the election in November, all of two months ago. I love it."

It was by then time for us to go. "One more thing," Rona said. "Is there really an Obama Countdown Clock?"

"Indeed there is. You can look it up on the Internet. In fact, you can even buy one."

"Amazing."

April 17, 2013--Gold Bugs at the Green Owl

The gold bugs at the Owl were not happy.

Back in 2011 they were in full ascendancy tinged with a touch of arrogance. Those of us with conventional asset portfolios of stocks, bonds, cash, and real estate were subject to a barrage of their self-congratulations and experienced continuing trepidation as we had not yet fully recovered from the plunges of 2007 and 2008. And, worse, hadn’t had the smarts, or guts, to diversify into gold.

Those who had listened to Peter Schiff on the reasonable economic right or were subject to the rants of lunatics Glenn Beck and Dick Morris to the right of that, seeing the sky falling and runaway inflation inevitable—Weimar Republic style—those, in panic and paranoia, were buying as many Krugerrands as they could afford and were thinking about adding to their stock of dried beans, bottled water, and AK-15s.

Off the per-ounce high of $1,888 in August 2011, they had seen the value of their gold hoard drop 17 percent during the past few months, then quivered as it begin to fall off the cliff last Friday--when the price fell 4.0 percent--and then were at risk of becoming unhinged when it plummeted 9.35 percent on Monday, the steepest one-day decline since 1983. The next day, on Tuesday morning, you could pick up a one-ounce Australian Kangaroo Nugget for a mere $1,366 bucks. 

In the meantime, even after falling 266 points on Monday, the Dow Jones Industrial Average was still at nearly 14,600, more than fully recovered from its low of 7,552 back in November 2008. 

"I think I'll stick to decaf, Traci" Ted said, staring morosely at his empty cup, "I've had about as much excitement as I can handle." For years he has been boasting about his attaché cases bulging with gold coins. "I'm ready for anything," he reminded us back in the days when we were doing the staring into coffee mugs.

When I would challenge him about what he would actually do when Armageddon came--“You’ll fill up your Hummer with gas with one of those coins?"--he would sit there, brimming with smug confidence, nodding and smiling back at me. 

"If that happened," I persisted, "if it really hit the fan, you think they'd have gas?" He'd kept on grinning. "Much less electricity to work the pumps?" 

"Here's what you don't understand," he said, leaning close to me and putting one of his meaty hands gently on my slumping shoulder, "Those of us who are ready, prepared, if you get my full meaning, have our ways. We know who we are and we know where to go to get more of what we need." He would wink at that. "I mean everything we need." To illustrate, he made a gun out of his hand and, in case I missed his meaning, demonstrated by repeatedly pumping his trigger finger.  

And with that he would puff himself up, hoist himself up off his stool, and swagger, cowboy style, out toward Atlantic Avenue, leaving me with not much of a retort and, in truth, with continuing worries about where the country was headed and if we did in fact have enough money. Or enough bullion to buy a loaf of bread. 

But now, with his world slipping out of control, Ted muttered, “I bet you want to talk about that Paul Klingman BS.”

“You mean Paul Krugman’s column in yesterday New York Times?” He grumbled affirmatively. “I’m surprised to learn you read him. I thought you were exclusively devoted to the McKinley Goldbug Newsletter?” 

“Gotta keep up with the enemy,” he growled. 

“As a matter of fact I did see it. The one that also dealt with the Winklevoss twins, who made a pile from suing Facebook. How they are sinking their fortune into a scheme as radical as hoarding gold—bitcoins, I think it’s called, digital currency for on-line transactions. Cyber money that would take the place of tainted conventional money. Tainted because, to the likes of the Winklevii, the Fed is printing so much of it that it will at some point lose all its value.” 

“I’m not into that bitcoin business,” Ted said, “That sounds crazy even to me.” Thankfully, at times Ted does display a sense of humor.

“But of course,” I said, “you’re talking about what Krugman wrote about gold and gold bugs.” He shrugged. “I myself thought he got it right. That gold as currency doesn’t make any more sense than paper money. In fact, less. There isn’t that much of it and it’s hard to lug around. It’s all abstract. Gold itself is good for filling teeth and making wedding rings. Not much more. It has value because it’s relatively rare and hard to mine and refine. By that measure we could go on the diamond standard or hoard plutonium coins.”

“Now you’re sounding like the one who’s crazy.” I caught the faint beginning of a smile.

“I liked that quote from Paul Samuelson. How money—all kinds of money, that I suppose would include wampum and cowry shells—is a ‘social convenience.’ If people will accept it in exchange for goods and services by definition it has value. Including paper money like dollars, which are backed as legal tender through the full faith and credit of the government.” 

At that he eyed me skeptically. Preemptively, I continued, “I know what you’re about to say—you have a problem with the government keeping its promises even when it comes to backing its currency.” 

“Especially when it comes to that—to backing up the formerly-almighty dollar,” he was back to growling. 

“Look, for sure I’m not confident about what will happen in the future. Things could get better or they could get much worse. One thing I do know for certain is that all your gold and your dried beans will get you only so far. And then you’ll be just like the rest of us. Scrambling for scraps.”

At that apocalyptic vision he smiled beatifically. “But all your crying wolf and claiming the sky is falling hasn’t happened. In fact, our economy, with its problems, is stronger than it was five years ago and there is minimal inflation. And as a consequence, your gold is beginning not to look so good.” 

“Wait till tomorrow,” Ted said. “You’ll see. The sky is falling. But to see it you need to get your nose out of your New York Times once in a while.” It was my turn to smile. 

“Traci,” he called out, “let me have some of that high test. That is if the Owl’s still accepting American money.”