A Dramatic Juncture for the US Economy

Thursday, July 14, 2011
By Paul Martin


Up to now it’s been obvious that the “safe haven” money has gone into the Dow, gold, Treasuries and the dollar. But Monday the Dow was the “odd man out”. Why? I wonder, was the Dow left out in the cold? Could it be that the economy is starting to deteriorate even further? Could it be that the stock market is following in the footsteps of the great stock market rally of 1929-1930 — at a time when the economy declined all during the great advance?
As matters stand, I’m concentrating on RISK. The US dollar and Treasuries have been doing quite well, but I see risk in both of them (as does Bill Gross of giant PIMCO). Today there’s risk in everything from commodities to T-bills, but I sense that the least risk lies in gold.

If, for the sake of argument, we’re on the edge of the second Great Depression, then Ben Bernanke will sense it, and he’ll open wide the monetary spigots. We know one thing about the studious Professor Bernanke. He will not tolerate deflation or a failing economy. I don’t care what the good professor says about the end of quantitative easing he’ll keep short rates at anywhere from zero to minus-zero while he thinks of some way to secretly introduce more monetary juice and stimuli into the economy. Remember his famous helicopter warning?

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