The New Gold Rush!

As California was the home of the original 1849 gold rush, Wall Street is now the cause for the new gold rush. The first one, fueled by greed after the Sutter’s Mill discovery, provided a nation the opportunity to improve one’s lot in life. Today’s gold rush, however, is being fueled by a discerning fear that our lot in life will diminish unless we own gold. This fear is rooted in the hundreds of billions of dollars being created by our government and thereby putting our currency potentially at risk.
How did we get into this mess? Contrary to media reports, capitalism has not failed us. No other political/economic system has ever produced so much freedom and opportunity while improving the standard of living for so many people. The terrible economic crisis that hit us in 2008 has crippled the reputation of capitalism, even though the crisis was caused by our government’s actions. We all know that printing too much money is not a good thing, but our government did it anyway, starting at Y2K with concerns about our economy and the new millennium. This led to the tech stock boom, and during the subsequent bust our government created even more money to save us again. This led to the housing boom – the money had to go somewhere! And now, we’ve just gone through our second bust this decade. How has our government decided to fix this one? By giving the addict more drugs!
Had the Federal Reserve not created so much money and kept interest rates so low twice this decade, this current crisis would not have been able to develop. All that money needed a home, and it eventually found it in home prices and the exotic securities created by Wall Street. For capitalism, this is merely the failure to handle all the money that government recklessly created. The three largest economic disasters—the 1930’s Great Depression, the 1970’s Great Inflation, and the most recent downturn—were all caused by government economic policy mistakes, but played out in the capital markets, and thus capitalism undeservedly received the media’s blame and the public’s scorn. Now the government has again opened our wallets and spent trillions in new programs and bailouts to “save” us.

So, what happened to the money? As for the actual dollars, much of the money went to shore up the banks and financial institutions that made horrible decisions with their cash, refilling their coffers with our money through the government’s TARP and other schemes. While our government has been spending over a trillion dollars to “stimulate” the economy, global equity prices and corporate bond values have surged.
However, building on these gains will require the economic recovery to enter a self-sustaining stage and not just be propped up by government intervention. Once the debt comes home to roost, we can all be assured of two things – the United States will be less wealthy than it once was, and assets priced in U.S. dollars will be more expensive.

While the United States was the first country to achieve dramatic capitalistic success, free-market reforms have spread the tide of freedom, opportunity, and higher living standards to countries around the globe. Today, economic capitalism is working well in China, India, and Latin America. While it may be true that the capitalistic model is not currently working so well here, that is because, like the proverbial kid next door who doesn’t respect your stuff, our government and Wall Street broke the model over the past decade. Even the communist government of China realizes the power derived from the economic engine of market capitalism. They are now our main economic competitor, successfully using our own offensive playbook against us, while our government uses France’s misguided playbook as our defense. Our government’s new strategy holds a deep, but incorrect, belief that government can create wealth. It cannot! It can only transfer wealth by taking it away from those who produced it, and giving it to those who did not. Abe Lincoln said, “You can’t make a weak man strong by making a strong man weak.”

We believe in the strength of the United States of America. Our greatness lies not in our elected politicians or Wall Street executives that brought us to this point in our history, but in the honest minds and caring hearts of everyday Americans. Until we remember that what really made this country the envy of the world was our sacrifice for a cause bigger than ourselves, we will forever be wandering – searching for a path back to the free market capitalism that created the greatest prosperity the world
has ever known.