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April 29, 2008
The
Trouble With the Doom and Gloomers
by
Marco den Ouden
I
originally wrote this article in November 2003 but did not publish it,
partly because I thought I might be wrong. Maybe the doom and gloomers
were right and gold was going to $5000 an ounce. Maybe the mother of all
depressions was just around the corner. But now, with inflation fears
all around, gold topping $1000 and ounce in March, the contrarian in me
says this is the time to publish it or be damned. Please remember in
reading it that the pamphlets and predictions cited were from 2003.
“In the coming months a new terrorist attack on US soil will devastate
the Dow!” screams the headline. “Panicked investors will flee to gold,
driving it to $3,000 even $5,000 an ounce on a spike.”
This is the come-on leading off a 24 page booklet that arrived in my
mailbox recently. The pitch is from James Dines, a financial newsletter
writer. Of course, the argument is that you’ll need his US$195 a year
newsletter to save your portfolio from disaster and even profit from the
predicted turbulent times ahead.
Dines is hardly alone. Nick Guarino writes a tract called the Wall
Street Underground. Not as refined as the urbane Mr. Dines, Guarino
opines in his August-September 2003 issue that “I’m so excited I can
hardly stand it! It’s our tenth anniversary and we are about to
celebrate it with another no-shit stock market wipeout.”
Guarino goes on to predict the market will crash yet again and that the
bull we’ve been riding since October 2002 is actually a “sucker rally”.
Full of venom, Guarino believes that Wall Street is “nothing more than a
conspiracy of fat cats out to screw the ignorant masses out of their
money”.
He predicts a 6000 Dow sometime in the Spring of 2004 with gold hitting
$400 an ounce, a remarkably timid projection for gold from such a gloomy
Gus.
Dines and Guarino are just two of a number of stock market analysts that
can best be described as the doom and gloom crowd. They like to scare
folks into believing the end of the world, financially speaking, is
nigh. Their arguments are subtle and variable according to
circumstances. But they are hardly new. They were riding high in the
late 70s as well. Back then the doom and gloomers included such
luminaries as Howard Ruff, Harry Browne, Jerome Smith and the Aden
sisters.
Inflation was high and moving higher. And there was a palpable feel that
the currency could become worthless – a hyper-inflation like Germany had
in the 30s or Hungary in the 40s. I lapped up their stuff as did many
others. I stood in long line-ups at the ScotiaBank in downtown Vancouver
to buy gold and silver bars on paydays as the price of gold soared in
1979 to peak at over $800 an ounce in January 1980.
I subscribed to a few of their newsletters, read their books and
followed some of their advice. I even went so far as to follow up on
Howard Ruff’s advice to stock up in case there were riots in the streets
and you had to stay cooped up for an extended period. Ruff, of course,
recommended building and stocking a wilderness retreat where you could
hide out armed to the teeth to save yourself from the collapse of
civilization as we know it. But I couldn’t afford a wilderness retreat,
so I just bought a bag of unprocessed wheat which I hung in the attic.
Of course, I had to buy a grinder too!
Foolishly I held on to my gold which I bought all the way up as it went
all the way down again too. Not one for grinding wheat and baking my own
bread, I eventually chucked the “supplies”. At least I resisted the
invocation to arm myself to the teeth, though one of my friends who
shared the communal house we lived in at the time slept with a loaded
Smith & Wesson 38 under his pillow. He relented and put it away in his
dresser when I argued that I might accidentally stumble into his room
half asleep instead of the bathroom next to his room, and I didn’t
particularly want to get blown away in the middle of the night. Yeah, he
had camouflage army fatigues too.
Back then the argument was that the US government (always the villain
with the doom and gloomers) was inflating the money supply at an
unprecedented rate and the German scenario of runaway inflation, people
shopping with wheelbarrows full of useless currency, was just around the
corner. Or if the American government managed to get that under control,
then surely there would be a depression.
The economics seemed sound enough. And it all goes back to the
definition of money.
Money is a medium of exchange and a store of value. It brought humanity
out of primitive barter society into civil society. As Alan Greenspan
puts it in Gold & Economic Freedom, a tract he wrote years before he
became Fed Chairman, "the existence of such a commodity is a
precondition of a division of labor economy." Without it, "men had no
means to store value, i.e. to save" and "neither long range planning nor
exchange would be possible."
Greenspan goes on to explain that money must be a luxury good, that is,
something relatively scarce. Thus, in post-war Europe, cigarettes served
for a time as money because of their scarcity. Over the ages, precious
metals became accepted as money because of their scarcity, their
homogeneity and their divisibility. It was easy to divide gold into
equal size and weight coins or wafers. They were portable.
Eventually kings and other rulers took control of money and became the
sole minters of coinage. Dishonest rulers sometimes cheated the people
by a practice known as clipping - shaving tiny bits from the gold coins
and melting the shavings into new coins for their own profit. The
untrained eye did not detect the altered coins until it was too late.
Honest rulers countered this practice by introducing the ribbed edging
on coins. This edging made it impossible to clip coins and demonstrated
to the people the faithfulness and dependability of the ruler's coinage.
As society and commerce grew, it became impractical to carry around
heavy bags of gold to make transactions. As Harry Browne explains it in
his first book How You Can Profit From the Coming Devaluation
(1970), warehouses started storing gold and issuing receipts to the
owners. These warehouses were the first banks and the warehouse receipts
were the first paper currency. As long as the receipts represented real
gold, actual stored value, this was a sound and honest practice.
But then governments started issuing fiat money - paper currency that is
not backed by gold. Either they issued warehouse receipts (bank notes)
in excess of the actual amount of gold held in storage, or they
dispensed with gold altogether and made the issued paper legal tender by
legislative fiat. Without the physical restraint of having to have the
actual gold in storage, governments could and did issue money at whim.
Thus was born inflation.
In a brilliant chapter called What is Inflation?, Browne introduces the
hypothetical case of a couple of perfect counterfeiters (he suggests it
is the reader and himself in partnership). They go into a town and spend
$20,000 in crisp new $20 bills. They leave town with $20,000 of goods.
The townsfolk thank the visitors for their extravagant spending and
think their lot improved by the passing through of the strangers. But
has it?
As Browne puts it, "It’s obvious we have benefited from the situation.
We traded paper dollars that have no real value for products that have
real value."
But "assuming that no one ever learns our little secret," he asks, "has
our gain actually hurt anyone else?"
Think about it a bit. Who loses? The merchants don’t. The bills are
perfect and are just passed on to others in purchases, change or
deposits in the bank. If we as the counterfeiters aren’t hurt and the
merchants themselves aren’t directly hurt, who, if anyone is?
The answer is everyone is hurt a little bit. Think of it this way, says
Browne. Before we came to town, it had a certain amount of goods owned
by the people of the town. After we leave it has fewer goods, and more
money to bid for those goods. Less supply (fewer goods) and more demand
(more money) means prices will rise. Inflation! That is the cost of
perfect counterfeiting.
The conclusion is obvious. When governments inflate the money supply
(i.e. - issue paper money in excess of actual value stored) we have
inflation. Prices rise. You can see why I like Browne’s book. The theory
is elegant, straight forward, logical and is just plain common sense.
This, in a nutshell then, is the gold bug's theory of money. Gold is
money. Paper currency ought to be warehouse receipts representing actual
tangible gold in storage. When governments cheat and issue more paper
than they actually have gold, they are creating inflation and are
practicing a modern version of the ancient dishonest practice of coin
clipping.
During the seventies,
inflation raged. Hard money pundits such as Jerome Smith and Harry
Browne predicted a hyper-inflationary blowout. And it looked like they
might be right. Inflation, Browne explained, feeds on itself. To avert
recession and keep interest rates down, the government must inflate at
an ever greater rate just to stand still. The comparison was made to a
junkie who must take larger and larger hits of heroin to achieve the
same high.
In January 1980, after
gold had jumped from $218 to $684 in a year, most of the increase in the
preceding six months, Smith published an article in his World Market
Perspective called "Hyperinflation Now". "With a trebling of the
dollar price of gold and a six-fold increase in the price of silver,"
wrote Smith, " hyperinflation began in 1979."
On January 21, 1980,
gold peaked at $850 an ounce. But then something unexpected happened.
The price of silver and gold began to moderate. And by mid-1982, gold
had dropped to just $304 an ounce and silver was down to $5.10. The
hyper-inflation and depression predicted by the doom and gloomers did
not materialize and gold remained in a funk for twenty years. What
happened? Why were their predictions so wrong?
Several reasons. The
Federal Reserve in the US and other national banks let interest rates
climb to the high teens to combat inflation. The masses in India, a
country where precious metals are popular in ornamentation and utensils,
began to melt the family silver and sell it into the richly priced
market. Huge supplies of silver came on stream.
The conservatives,
Reagan in America and Mulroney in Canada, started on programs of
deregulating the economy and privatizing government operations. But
while they were expected to slay the twin dragons of inflation and
deficit spending, they failed on the latter front. The national debt of
both countries rose to staggering proportions during their tenure. A new
monster was rearing its ugly head - insolvency. Some smaller governments
(the City of Cleveland and Orange County, California, among others) went
bankrupt. Everywhere governments were being forced to the wall by their
huge debts.
This set the doom and
gloomers off again and we saw folks like James Dale Davidson and Lord
William Rees-Mogg come out with The Great Reckoning: Protect Yourself
in the Coming Depression in 1991. Doug Casey come out with Crisis
Investing for the Rest of the 90s in 1993. It echoed a familiar
theme. Disaster was around the corner.
Davidson and Rees-Mogg’s
earlier work, Blood in the Streets, published in May 1987,
predicted a 1929 style stock market crash. A few months later the
October 1987 crash happened. They predicted the Japanese stock market
crash. That happened too.
Clearly Davidson and
Rees-Mogg are no pikers in the economic analysis game. And their new
tome predicted the worst was yet to come.
They base their
predictions and analyses on a broad theory of history they call
megapolitics. This is a theory based on power and the physical limits
placed on the exercise of power. They also make a great deal out of
cyclical patterns in history. Thus on the basis of five great credit
cycles over the last 300 years, the last ending in 1929, and the
circumstances surrounding these booms and busts, they predict an
impending collapse greater than the Great Depression. You might say that
they are predicting the mother of all depressions.
They are very careful to
hedge their bets though. "Our own view is that cycles and patterns from
the past are good ways to explore what may happen, but not the basis for
forming a view of certainty," they say. "In human affairs there is no
certainty about the future."
The broad sweep of the
book is too complex to go into in detail here. They deal with the
information revolution, the relationships and patterns emerging from the
economies of Britain, America, Japan and Germany, the rise of Islamic
fundamentalism as a greater threat to Western society than Marxism,
increasing crime and violence in urban centers and so on.
The important thing for
our consideration here is their arguments for a deflationary depression
in the 90's. These include rising debt to GNP, high returns on
investments that outstrip growth in profits, debt compounding faster
than income, debt growing in proportion to the money supply and so on.
They argue further that
deflation is not a conscious policy on the part of authorities, but
rather "the culmination of an historic process that takes years to
unfold." The reason a deflationary depression will come, they say, is
because after years of inflation and deficit financing and the buildup
of huge national debts, the time has come to pay the piper. The excess
debt must be liquidated. The alternative to deflation, inflation, is
worse and politicians know it. Nevertheless, they again hedge their bets
by saying a hyper-inflationary depression is a possibility. "You should
prepare yourself for either outcome, which means remaining alert to the
dangers of both."
One of their more
interesting analyses is the list of parallels between the 1920's and the
1980's (23 altogether). Everything from the abandonment of the gold
standard to lower inflation to Republicans in the White House to
Prohibition and today's "War on Drugs". But again, they cite a host of
differences as well (20 this time).
The upshot of the entire
book is a list of guidelines to steer yourself safely through this "age
of crisis". Many of the suggestions are good common sense and worth
following in any kind of economic climate. Advice such as put your
business on a sound footing, maintain adequate insurance, connect more
closely to family and neighbours and even turn off the television and
read or play chess instead.
But as we know, these
dire predictions did not come true either. The 90s were boom times. The
stock markets soared throughout the decade. Where did the doom and
gloomers go wrong in round two?
The best explanation
came from the bulls. Canada’s own Pat McKeough with Riding the Bull
in 1991 proved to be the prescient one as he argued that liberalization
of the economy, lower taxes and free trade would spark an economic
revolution, a booming economy and a soaring stock market.
On the debt issue, a
socialist government in New Zealand did the unthinkable. It adopted a
hard stance on the problem, privatizing, deregulating and freeing up
their economy and tackling the national debt head on. Their finance
minister Roger Douglas was knighted and became a conservative folk hero.
Clinton in the U.S. and
Chretien in Canada followed up on the deregulation and privatization
begun by their conservative predecessors and also began to attack their
deficit problem, though not with as much zeal as the Zealanders. In the
mid to late 90s it looked like the debt monster was on the verge of
being slain.
Why did the predictors
of doom and gloom for the nineties go wrong? The main reason is that
they underestimated the intelligence of their opponents. They predicted
that politicians would continue to be seduced by the lure of inflation
and deficit spending.
What they didn’t count
on was a major paradigm shift in public opinion. Here in Canada, for
example, the Vancouver Board of Trade originated its debt clock. This
huge, constantly clicking counter, lodged in a prominent window in the
Bank of Hong Kong downtown, galvanized public opinion against profligate
government. BCTV’s Newshour, the most watched local newscast in Canada,
installed the debt clock in its studios and broadcast it every night on
the news for over a year. Similar attacks on wastrel governments in
other Canadian cities produced a grass roots groundswell of public
support for fiscal responsibility.
In Alberta, Ralph Klein
became the province’s most popular politician by wrestling the
provincial debt to the ground. In Ontario, after several years of NDP
socialism, the people elected Tory Mike Harris on his promise to emulate
the Klein revolution. And federally, Paul Martin has been able to effect
a concerted attack on the deficit and is now the successor to Chretien
as leader of the Liberal Party.
Politicians in
democratic countries don’t have the power to run roughshod over the
people. They answer to the people. If the people want fiscal
responsibility, they will get it because they control the coin of the
political realm, their votes.
One need only look at
the remarkable story of Brazil to see how a determined government with
visionary leadership can do a complete about-face on bad policy, driven
by necessity and the market. Brazil was running as high as 5000% annual
inflation until 1994. Then, in July of 1994, Finance Minister Fernando
Henrique Cardoso put together a team of foreign-trained economists to
reform Brazil’s monetary system. He did. Inflation slid to 23% the next
year and then declined to 4.5%. Cardoso became President of Brazil and
and continued to work on cutting government spending. Brazil did not
introduce gold backed currency to accomplish this change.
After the doom and
gloomers success in the seventies and their failure in eighties and
nineties, they came back with a vengeance in different garb in the late
nineties. The new scare for the next decade was Y2K. Remember the dire
predictions of the collapse of civilization when the Y2K bug kicked in
at the turn of the century?
There were two distinct
camps on the Y2K analyst landscape. One camp actively worked to make
corrections, rewrite code, replace old computers with new, make
emergency plans and so forth. These were the moderate Y2K analysts.
The other camp argued
that it was impossible to fix the problems. First they argued that there
were not enough programmers to go through millions of lines of code.
Secondly, they said there was not enough time to test all the embedded
chips. They predicted the complete failure of our banking system, our
communications systems, our energy supply, and even our food supply.
They argued that the only thing people could do to ensure their safety
and survival was to retreat to the wilderness with a huge collection of
supplies and cash and armed to the teeth. (Doesn’t that sound familiar?)
They predicted the "end of the world as we know it" and even had a
website
with that name. Yes! Thendoftheworldasweknowit.com! This camp were the
apocalyptics.
The trophy for Best
Doomsday Prophet goes to Gary North, an historian. North not only held
the most pessimistic views on Y2K, he believed the problems were
unsolvable in nature. As he put it, "I'm saying that it's over. Right
now. It cannot be fixed." The problem, he said, was systemic so we
better head for the hills. North had over 3000 pages on his website to
support his arguments.
To some extent North
exemplifies a mindset of the more extreme of the gloom merchants. They
aren’t merely predicting the end of the world as we know it. They
actually hope for it.
A leading critic of
North’s scare mongering, Steve Davis, a moderate and the author of Y2K
Risk Management, pointed out that North is a leading spokesman for a
fanatical religious movement called Reconstructionism that longs to see
the collapse of the U.S. government so it can be replaced by a strict
theocracy. He quoted North as saying "So, of course I want to see Y2K
bring down the system, all over the world. I have hoped for this all of
my adult life. In my view, Y2K is our deliverance".
Few of the doom and
gloomers are religious fanatics like North, but many share his visceral
hatred of the American and indeed, all governments. They want
catastrophe to strike as a slap in the face to the statists of all
varieties. An “I told you so” for the ages.
When Y2K rolled around
with no effect, the disaster mongers had no choice but to go back to the
economic arguments. And, fortuitously, the mother of all stock market
crashes happened to lend some credence to their scenarios. Sure, they
predicted disaster for the nineties. They were just a decade ahead of
their time! Now they’re back on the same kick that they were on in the
late seventies and early eighties. Not only has disaster struck as they
predicted, but we ain’t seen nothing yet. The worst is yet to come. And
that brings us back to the present – the Guarinos and Dineses and sundry
other prophets of doom.
The argument today is
that the massive debt incurred by governments and individuals over the
last ten to twenty years must be liquidated and that such liquidation
will result in disaster - a depression, a further collapse of stock
values and so on.
While it’s true that
governments were tackling their debt problems going into the late
nineties and started running surpluses (and Canada still is), the
government that matters in their eyes, the United States government, has
faltered. The war on terrorism is taking its toll. From a surplus at the
end of Clinton’s term of office, the US government has slipped back to
an annual deficit of over half a billion dollars a year with an
accumulated national debt of $7 trillion. That’s a seven followed by
twelve zeros and that ain’t chicken feed. On top of that, consumer debt
is also a serious problem. So of course, a modern version of doomsday
must play itself out.
Will these worthies be
any more accurate than the doom and gloomers who predicted disaster for
the eighties and nineties? In a word – no! While there is a logic to
much of their reasoning, there are some fundamental flaws as well.
Most of them, especially
the hard money crowd, are influenced by the Austrian economics of Ludwig
von Mises, one of the greatest unsung heroes of the twentieth century. A
key element of Misesian economics is the impossibility of economic
calculation without a market. Mises argued that economic choices were
subjective. People act as individuals pursuing their own goals and
interests. Sometimes these interests include other people either as
families or businesses.
Mises argued that the
economics of central planning and government control must fail of
necessity because no government agency has the resources to know and
understand all the desires, hopes, dreams and economic choices of all
the myriad players in a society. All it can do is reward the hopes and
dreams of some at the expense of others.
Furthermore, Mises
argued that central planers must fail because they cannot predict the
future. They cannot predict what new scientific advances will be made.
They cannot predict what new inventions will be made. They cannot
predict how people’s tastes will change. So any attempt to dictate these
things will foil the natural course of events. And the natural course of
events is constant progress as people seek to better their lives by
interacting with others.
It is this
subjectiveness of individual choices and the essential unpredictability
of the future that is at the core of Mises philosophy. Yet the doom and
gloom crowd maintain that they can predict the course of future events
from the past, whether by analyses of past booms and busts or great
cycle theories, the megapolitics of Davidson and Rees-Mogg. Ironically,
they often invoke Misesian economics to justify their predictions. It
can’t be done. The future is unknowable. Davidson and Rees-Mogg, more
erudite and moderate than most, had it right when they said “In human
affairs there is no certainty about the future.” How the US debt problem
resolves itself remains to be seen, but there is no inevitability about
economic collapse and depression, though it remains a possibility.
Some are viewing the
decline of the American dollar as symptomatic of the faltering US
economy. But the American dollar is under constraints today that central
banks weren’t under thirty or forty years ago. Today money traders in
all the major centers of the world can respond to changes in the world
instantly. Currencies float freely against each other in an
international money market. We truly live in a world where money is a
commodity, responding to the market influences of supply and demand.
Governments, in fact, are in the "business" of supplying money. Because
there are many such "businesses", they compete to provide stable and
reliable currency. Competing governments, once thought of as a
contradiction in terms, are now a reality.
Certainly governments
have the power to run amok, to inflate the currency willy nilly, but
they cannot do it without consequence. They are held in check by market
forces. And in the end, since gold, silver and other precious metals are
freely available for purchase by citizens, they are measured in those
terms as well.
Where the US dollar ends
up is, in the end, a question of US government policy. It can and will
do what is necessary to maintain a stable dollar. I believe the dollar
currently is in transition as a deliberate policy. The doom and gloomers
maintain that the US government has lost control of the currency.
Julian Simon & Falling Commodity Prices
While the gold bugs
believe that gold will soar inevitably as a result of failed US monetary
policy, there is a greater economic force at play that they ignore. An
economic force that says any such surge in the price of gold must be
temporary.
Economist Julian Simon,
author of The Ultimate Resource set out to challenge the
predominant doom and gloomers of the last few decades, the
environmentalists. Amid almost daily cries that the world was
overpopulated, that our air and water was deteriorating, that food would
become scarce and expensive as a result, that the world was on the
threshold of ever increasing scarcity, Simon pulled out his tables of
facts and figures to prove that food production per capita has been
steadily increasing, that air and water are cleaner than before and
improving, that the price of resources was declining and so on.
Simon challenged his
detractors to a bet "that the cost of non-government controlled raw
materials (including grain and oil) will not rise in the long run". In
1980 Paul Ehrlich, the fear-monger about over-population, took up the
challenge. Simon let Ehrlich choose five commodities. Simon’s bet was
that the commodities would be cheaper after ten years. The commodities
chosen were chromium, copper, nickel, tin, and tungsten. They bought, on
paper, $200 of each, then waited ten years. In 1990, Simon collected a
check for $576.07, the amount by which the aggregate price of the
commodities had dropped. Tin, for example, had dropped from $8.72 a
pound in 1980 to $3.88 in 1990.
If Simon’s thesis is
correct, and it appears to be, why should this not also apply to gold?
Shouldn’t the price of gold drop over the long run? And in fact, since
the U.S. government unpegged the price of gold from $35 in the early
seventies and allowed it to float, the price found a level, surged
briefly (very briefly) to $850 an ounce) and has continuously dropped
since then. (With short term fluctuations, of course. Simon’s thesis is
for the long term.) In real terms, it has dropped considerably. The
current three year bull market in gold can be seen as one of these
fluctuations.
In the end, the market,
as it always does, determines what is money. It’s all well and good for
the gold bugs to assert that gold ought to be money. Or for governments
to assert that dollars, francs, lira or pesos are money. Whether they
are money or not depends on what the consumer mandates. In a country
with questionable money, the former Soviet Union for example, the local
money runs in tandem with a market established money. The ruble appeared
to be money on the surface. The American dollar was used as money in a
thriving black market. The ruble market encountered shortages and
scarcity. Anything was available in the black market.
Until a black market
economy establishes itself using gold as money, fiat currencies will
continue to be effective money. The cyberspace company, e-gold, is in
fact, trying to establish a cyber-market operating on gold. Personally,
I don’t bet on them succeeding. Their market will be limited to die hard
gold bugs. As long as governments maintain some semblance of fiscal
responsibility, people will retain their confidence in its marketability
and fiat currency will be king.
Gold and other precious
metals are commodities, like copper, tin, wheat or pork bellies. They
are not "money" in any practical sense at all. I cannot buy my groceries
with gold. I cannot pay my phone bill with gold. I do not get paid by my
employer in gold. But I do carry out all these transactions in Canadian
dollars. Now if that ain’t money, what is?
Ten
Year Cycles in Doom and Gloom Predictions?
The predictions of doom
and gloom, interestingly enough, seemed to be coming in ten year cycles.
Browne and the gold bugs in the early seventies were dead on accurate as
inflation soared. They then repackaged their material in more strident
turns as inflation increased towards the end of the decade and into the
early 80s. Howard Ruff published Survive and Win in the Inflationary
Eighties in 1981, a last hurrah for the gold bugs as gold entered its
twenty year bear market. Then the megapolitics of The Great Reckoning
came along in the early 90s. The argument of an impending depression
in the nineties based on great cycles also proved to be wrong. Then came
the Y2K scare as Gary North and the apocalyptics hoped for the end of
the world as we know it. We’re still here!
And now, after a major
bear market, the 9/11 terrorist attacks on US soil, the war against Al
Qaeda in Afghanistan and Saddam in Iraq, and mounting US deficits, the
doom and gloomers are back in style with a vengeance.
Whether they are correct
in their predictions remains to be seen, but in the end, life goes on.
Disaster is relative. In the seventies I was a young man starting out in
the workaday world. I was not invested in the market at all, did not
even know there was a recession on or that there was a bear market in
stocks. Towards the end of the decade I started to pay closer attention
to forecasts of disaster as inflation started to soar and bought gold
and a bag of wheat. But life went on. I continued at my job and never
missed a day’s pay. I never experienced any real disaster other than in
my mind – a fear of hyper-inflation.
People are more
resilient and self-reliant than the doom and gloomers give them credit
for. Barring war, hurricanes, tornadoes, floods, and fires, life goes on
for most people - barely paying attention to the price of the dollar or
the vagaries of the stock market. In the scheme of things, they are not
as important as family, having a roof over your head and food in your
stomach.
As far as investing
goes, in any market, even a bear market, some investments continue to go
up. There is no magic to picking successful stocks or investment. Use
the time-tested philosophies of Warren Buffett or William O’Neil (How
to Make Money in Stocks) and you can’t go far wrong. Gold? As long
as it stays in an upwards trend, it can continue to be a good
investment. But watch for it to hit a peak and continue on its long-term
inevitable down-trend.
The doom and gloomers
are doom and gloomers for a reason. Fear is a powerful motivator and a
good marketing ploy. There are millions of dollars made capitalizing on
the fears of the masses and if they can add to the fear, they add to
their profits. So when a fat pamphlet arrives in your mailbox screaming
disaster is afoot, remember they are preying on your fears. They are
trying to sell you a product. And they are not new. Prophecies of the
end of the world have been promulgated and regurgitated since time
immemorial. They have always been wrong, and, in all likelihood, they
will be wrong again.
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