Heard in the Village: September 2010

“As General Motors goes, so goes the country.” That was a saying that was true for years. The villagers hadn’t thought about that until they saw the quote recently and began thinking. Self serving unions, self serving and disconnected management, increasing healthcare and pension  costs along with debt drove GM into bankruptcy. Then they thought about what Washington has legislated and regulated in the last year. The unions run the Democrats, Washington is disconnected from the country and financial rationality, they passed the healthcare bill that nobody understands and is expensive, Social Security is insolvent and they are increasing debt at an extremely fast pace. The villagers didn’t see much difference between GM’s recent past few years and the country’s future. The villagers still don’t understand how you cure a huge debt problem by going deeper into debt.

And the Federal Reserves compounds the problem by buying long term mortgages and debt that will go down in value as interest rates go up because of a falling Dollar. As the Feds buys debt, it injects money for economic growth which is likely to get stronger and create demand that forces rates higher. Many thought GM was foreshadowing the future of the country. To them, that meant we would be going through tough times for years. It also meant that the future after a few more years would be bright again. To comfort the pain of tough times, they started to talk about ways to invest in gold and silver. Gold has considerable upside potential if the Dollar weakens or as China backs it’s currency with gold and becomes an alternative reserve currency. India and China citizens are buying gold in large amounts now as well.

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