Huckabee wins Iowa and my faith in the GOP as the vanguard of limited government and fiscal restraint has been destroyed. The only one talking any kind of sense in economic terms is Ron Paul. But the average voter has no idea about monetary policy and therefore can't make heads or tails of what the populist Libertarian/Republican is talking about. Come to think about it, the lack of understanding about free market economics among voters is appalling.
Commodity prices know no bounds. Oil briefly hit the century mark twice in this new year. Fuel oil per gallon has increased from 0.97 cents in Nov. 1997 to $3.17 in Nov. 2007. Time to go long on oil, gold, wheat, raw materials, and short everything else.
"Since 2001 the dollar price of oil and gold have run in almost perfect tandem. The gold price has risen 239% since 2001, while the oil price has risen 267%. This means that if the dollar had remained 'as good as gold' since 2001, oil today would be selling at about $30 a barrel, not $99. Gold has traditionally been a rough proxy for the price level, so the decline of the dollar against gold and oil suggests a U.S. monetary that is supplying too many dollars," a Wall Street Journal editorial states.
The price of wheat and soybeans increased 3.4% and 2.8%, respectively, which follows a 75% increase in their price in 2007. I know demand has grown in India and China causing these commodities to rise in price, but that goes only so far. Such increases also follow the fall in value of the dollar very closely.
I am no monetary expert, but it appears the Nixon Administration's decision to take the dollar off the gold standard on Aug. 15, 1971 based on run-away inflation seems flawed. An expensive war in Vietnam, government spending, and bad Fed policy led to inflation. It seems that Ron Paul understands this based on his campaign planks of ending military adventurism, reducing government by 60% to 70%, and abolishing the Federal Reserve System. Too bad he won't be president.
The day Nixon switched to a floating currency Ron Paul was quoted in the Texas Monthly saying, "After that day, all money would be political money rather than money of real value. I was astounded." Soon after Mr. Paul decided to run for Congress.
On related matter, Ron Rimkus of BB&T Asset Management was on Bloomberg this morning arguing that the U.S. economy was already in a recession. He added to his argument that job numbers would catch up with this reality soon and that part of the blame should be placed on the Fed for acting to slowly to the credit crisis.
These are some of the issues that are discussed at IncreMental Advantage's conferences. For more information, please visit www.incrementaladvantage.com.