Todays Economic Thoughts 7/30/12

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Jinco Inc.
You know if Obama gets reelected I'm going to wind up having spent my entire prime working years under an 8 year recession that when his 2nd term finally comes to an end he will still be blaming it on George Bush and fat cat bankers instead of taking "personal responsibility," a term this nation was built upon. When Obama insinuated that us small business owners didnt really build our own businesses I was infuriated. Shit I built mine with my bare hands, and my body pays for it everyday. I'd like that stupid fuck to spend just one day working with me to see what a real man does for a living in this country. Anyway, let us move on to economics. Do not expect a fourth quarter like last years fourth quarter. I expect diminishing revenues and growth globally and domestically. We need an economic downturn before things get better so that jobs made or kept alive during Obamas stimulus can be allocated to different sectors where they are most needed. This is usually no doubt a slow, painful, but necessary process in the recovery of an economy, and this process should have already happened if it was not for government interference in the free market. When the supply and demand between consumers and producers are allowed to

Justin Jinorio

happen freely, scarce resources which have alternative uses, labor included, will be put to action where it can create the most profit, wealth, and in turn job creation. When government impedes this natural exchange between millions of people, it also impedes on the economys chance of performing to its fullest potential. Jobs need to be destroyed for new and more prosperous sectors to be created. For example, the entire business sector of horses needed to be extinguished from the economy in order for the automobile to come into existence and be affordable to more and more Americans. This of course left thousands of people out of work in the horse industry, but those people moved on to jobs that were more beneficial to the economy and the raising of the overall standard of living for the economy. In short, without job destruction, new sectors that can be more beneficial to society will have a harder time in coming to existence. Government intervention, in this case stimulus, acts as a Band-Aid, and creates a temporary and artificial growth that does not allow the market to heal itself, as it needs to. This reminds me of a perfect example I researched about the differences of stock market crashes and their recoveries. After the Great Cash of 1929, unemployment got

crushed, but shortly thereafter there was a point where unemployment was on the rise. This occurred before government intervention. Shortly after the crash the pressure of popular opinion was to do something, and therefore Hoover and Roosevelt felt it necessary to do something in order to stay on the good side of the public opinion. Also at the time, central economic planning, and government interventionists theories were beginning to become popular and gain steam. As some of these policies were enacted in the United States, unemployment rates began to rise again to double-digit levels in which they stayed at for over a decade. The policies these officials enacted to help the people actually wound up hurting them more than if they had done nothing. In fact doing nothing would have been the ideal remedy. Government intervention disrupted the purity of the relationship between supply and demand, and consumers and producers, therefore impeding the transition of scarce resource, which have alternative resources into sectors where they could have been put to better use, thus enhancing the employment rate and production in America. Conversely, during the 1987 crash, the Reagan Administration had cut back government regulations and red tape so that the purity of supply and demand between consumers and producers was able to take its natural course. The result was that America recovered from this crash and eventually hit record-breaking unemployment numbers. This is just one of many examples I can give about how government policies, which may have good intentions, create unintentional and damaging consequences.

As the stock market is concerned today, investing in gold is the most obvious play. With the Euro losing value fast, and the already diminished U.S. dollar, investors will flock to save their wealth through investing in the surest commodity there is, gold. Today I am expecting a slight pullback in Gold, as I was going into the weekend, because of its four-day winning streak. Naturally price movements need a break. Do not let one down day shake you out of your position. Hold onto it knowing that it is a sure investment. Gold will continue to lead higher after this slight break. The $GLD resistance point is at $160.00 which converts to $1,600 an ounce for gold. If it pushes through this point expect a huge run in the gold market.