Bad Dog

Gold and the Worldwide Flight from Paper Currency

I guess that would be why gold is down today and the dollar is up? If you look at the rise in gold since it was around $300, it doesn't look like it has been responding to paper money supply. It really looks like a whole bunch of other factors are playing as significant a role. Gold bugs have an idee fixe. Everything that supports their belief is lauded; anything else is ignored. Ultimately, there can be no "major flight" from paper because it is an essential medium of exchange. Gold just isn't. So Gold may go up but that doesn't automatically mean that it's due to a flight from paper.

Will Stimulus Have Positive Effect on the USD?

One of the increasingly obvious things that I see out in the regular world is the depth of very real fear in ordinary people. That fear is closing wallets and crushing spending. Until we can give people a sense that someone is in control and putting a floor under this economy, we will not see any recovery. In fact, we will see an accelerating decline. So I agree with Axelrod that happy days may not be around the corner, but failing to do anything would be very much worse.
The interesting thing about some of the comments you hear about the spending package is its size and its priorities. To those people, it is necessary to point out that in 1941, the USA paid millions of Americans to build and man machines that were sent halfway across the world to be blown up, shot down or sunk. At the end of the war, the US debt was about 120% of GDP, around $17 trillion in today's money. The conservative arguments of today would suggest that 1946 America would have been desperately poor and the country ruined. Of course, it wasn't and in fact entered into an economic golden age where technology and education raced ahead, and huge government infrastructure projects like the NIH and the interstate highway system were developed. At the same time, we rebuilt Europe! If the conservative arguments about spending are so good today, let them explain 1946 America.