“The Comeback Kids,” is this week’s headline at The Economist . On the cover of the latest issue is a photo of Bill and Hillary Clinton…arm in arm…
“Will Hillary Clinton be the next U.S. next president?” we asked a friend who thinks about this sort of thing.
“Yes, most likely,” came the answer. “People don’t really like her…but those Clinton years are looking better and better. And they think that by voting for Hillary Clinton, they’ll get Bill Clinton. And with Bill will come the Clinton years again. No subprime debt problem. No housing slump. No war in Iraq.”
In other words, when the comeback kids come back, peace and prosperity come back with them.
Yesterday brought news of comebacks. For example, it almost looked as though the U.S. dollar was coming back. Anyway, that was how the financial media described Monday’s bouncing buck.
But wait…it still takes more than $1.40 to buy a pound (GBP). And the yen (JPY) is still trading over 118. And the Australian currency (AUD) just hit a 23-year high against the dollar. So, reports of the dollar’s health may be exaggerated.
Still, oil fell below $80. And gold lost ground too, when measured against the kind of money you don’t have to dig out of the earth.
We are still fascinated by the simple observation that the surest bet you could have made 35 years ago was also the most obvious one. When the dollar was cut loose from gold on August 15, 1971, that gold would rise and the dollar would fall was as certain as anything you ever get in the financial world.
“We have a little technology…the printing press…” says Ben Bernanke. Using this printing press – or even without it, in this modern, electronic age – the feds can create all the dollars they want. But unless they know something we don’t, they can’t create even a single additional ounce of gold.
“Gold is the answer,” we keep saying.
The only trouble is: we haven’t quite figured out what the question is.
What will be higher next year? Gold? We don’t know…
What is the safest place for your money? Gold? We don’t know…
What starts with a G and ends with a D and rhymes with ‘old’? Ah, there…
The Bill and Hillary Clinton Years look like golden years in many ways. Not because of anything the Clintons did. They came in at the tail end of a huge boom – and managed to avoid messing it up.
The boom had begun during the Reagan Administration, after Paul Volcker got control of inflation. Then, interest rates could fall for the next 20 years. Cheaper, more abundant credit had the usual effect; cautiously at first…then recklessly…people threw money around. The U.S. economy boomed. Stocks rose 12 times – so much that people sold their gold to get in on it. Even the central banks sold gold. The yellow metal was out of fashion.
Lately – say, for the last seven years – gold, too, has been making a comeback. It’s come back almost all the way to where it was in January…when Ronald Reagan first took the presidential oath.
Now what? What will it be? Another ‘golden era’ when Hillary Clinton is elected? A final, inflationary blowout bubble in the world’s markets? Or the comeback of tougher times…like the stagflation of the pre-Volcker years?
The big question is probably this: can the Fed now save stocks, housing and the economy by destroying the dollar?
Gold is probably the answer to at least one of those questions.
Markets and Money