Bernanke’s rosy outlook

A well-known high-level Merrill Lynch analyst fisks Bernanke’s embarrassingly optimistic report to Congress earlier this week on the US economy (low inflation, more jobs, blah blah), demolishing it point by point. PDF File. A must for those interested in what’s really behind all those positive numbers Bernanke cited.

The Discussion: 2 Comments

I”m interested. One of the reasons I read blogs is to learn from material that I wouldn’t discover otherwise, and that PDF bit fits the bill. I realise it’s just one analyst’s opinions, but it’s a set of figures that adds depth to my understanding. A bit difficult to comprehend with the acronyms and specialised terminology, the way The Economist’s articles on international finance used to be (before I dropped my sub because its right-wing snark irked me too much.)

So the U.S. economy is looking unwell, but it’s a slow-motion sickness. We won’t hear that from Bernanke until after it’s impossible to cover up. That should be enough of a decent interval for Alan Greenspan to hang onto his sainthood.

Off topic, but I think it was me who was the embittered longterm exile speculating on the collapse of the American economy that Pha and Nanhey were referring to on the now-closed thread. I’m still predicting it, although not overnight. That’s why part of me is a gold bug (and silver, which is at a better price ratio to gold than it has generally been in historic terms.)

There is a creepy side to gold bugs, though. The only time gold REALLY pays is when there’s a financial disaster. That makes the price skyrocket. Otherwise, you have a lump of metal that just sits there and varies through some standard deviations. It’s hard to sell if you’ve got the actual coins, because you pay a premium to the dealer when you purchase them and then you have to pay the dealer AGAIN to guarantee that they’re real when you sell! And few of us have sufficient money to buy enough metal in certificate form that we can flip to profit from those slight standard deviation fluctuations.

So my gold bug side has an evil desire to see something BAD happen. That’s counterbalanced by the fact that only a small percentage of what I’ve got is metallic, and the realisation that billions of people would be made miserable by anything that would be profitable for me. I’m not evil enough to wish for that.

February 18, 2007 @ 11:33 am | Comment

I would rather be able to make my money from a nice bull market as opposed to banking on misery. But when it comes to investing I try to be pragmatic, especially after I learned first-hand the price you can pay for optimism ungrounded in reality (think 2000 and the dot-coms). Like the Merrill Lynch analyst, I see too many converging trends approaching, all signalling some serious hard times for America. So based on what I see, gold makes sense to me at this moment, as do certain foreign currencies like the Japanese Yen and even the RMB. Still, I don’t want the crisi to happen – it will hurt me, making it harder on my family and others very close to me, and I don’t have enough liquidity to invest a lot in gold, so no matter what it does I won’t get rich from it. My salary comes from multinationals, most of them based in the US, and if there is a crisis I could lose my job. So I’m not rooting for crisis. (Also, gold can soar without a full-blown crisis, as happened during the Reagan years.) About billions being hurt – unfortunately this is a cyclical fact of life: people get hurt, and helped, by economies from time to time. We’re always going to have bull and bear markets, recession and inflation and deflation and good times and hard times. I will put my money where it makes sense based on what I see and read, with some moral restrictions – I’m not investing in tobacco companies or weapons manufacturers. But as I watch America’s housing and auto industries crash, the wars against “terror” escalate and the government taking exrtaordinary steps to keep people ignorant of what’s happening with the dollar, I have no choice but to conclude this is the right time to buy gold and similar commodities, though of course I could be very wrong.

February 18, 2007 @ 12:49 pm | Comment

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