Gold News

Up-to-Date with the Big Sell-Off

The trouble began in 1968 with Lyndon Johnson...
THIS is what we're hoping for, writes Bill Bonner in his Diary of a Rogue Economist...
A big selloff.
Not that we want to see people lose money. What do you take us for?
But we've been watching this show for many years now. We want to see how it turns out.
To bring you up to date, in 1968, the US switched from gold to the kind of money that grows on trees. That's when President Johnson asked Congress to end the requirement that Dollars be backed by gold.
It allowed a huge increase in credit...and debt. Thirty-seven trillion Dollars in excess credit allowed Americans to live beyond their means for decades. They were spending money that nobody earned or saved.
Year after year – through Democrat and Republican administrations...through good times and bad – debt continued to build up.
And as time went by debt became more important. The US economy...US financial assets...US lifestyles...and the US federal government all came to depend on it. None could survive in its present form if it were forced to live on what was actually earned.
When the US stock market crashed in 1987 Alan Greenspan came to the rescue with more EZ money.
It was a daring and provocative move; never before had the nation's chief central banker expressed such an interest in stock prices. Previously, Mr.Market was responsible for the stock market; Mr. Central Banker stayed out of his way.
And ever since, central bankers have taken upon themselves the grave and absurd task of guarding speculators' backs. That's why the Fed intervened so eagerly in the markets in 2001 and again in 2008.
The Fed may not be able to spot a bubble, but it has no such trouble when it comes to busts. And although it has no interest in pricking a bubble, it treats a bear market as though it were an Ebola epidemic. Whenever there is the slightest hint of an outbreak, it rushes in with hoses and disinfectant.
That's why we are so interested to see what happens next.
Will the Fed come to its senses and let Mr.Market do his work? Will it allow investment mistakes to be corrected quickly and naturally? Or will it meddle once again...and make them worse?
Perhaps we will find out soon.

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

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