Doug Casey On The "Recovery"
An excerpt from We Are Exiting The Eye Of The Storm.
"I’m not sure that many people really ever believed there was a recovery under way. Wall Street acted like there was – but only somewhat, since banks never started lending again. But unemployment has remained high; it’d actually be about twice the official 9% level, if it was calculated the same way it was 30 years ago. And outside of the price collapse of certain asset classes – like real estate – the cost of living has increased greatly for most people; the calculation of the government’s CPI is as corrupt as its unemployment numbers. I think it’s a mistake to talk about a double dip in the economy; we entered the Greater depression in 2007 and are still in it. A “jobless recovery” is not a recovery. The only thing that’s recovered is the stock market, to some degree. Aside from government hocus-pocus, the mirage of corporate earnings, and foolish investors wanting to believe it was safe to get back in the water, things have not gotten better. And they are about to get much worse."

The economy isn’t going to stay in the eye of the storm for much longer. The stab of panic we saw last week gave lie to the emperor’s new recovery clothes. It’s not just the losses on the stock market, but gold hitting significant new all-time highs in nominal terms, and Bernanke saying that the Fed would hold interest rates close to zero for another two years. That’s huge – and a huge mistake. It tells me that Bernanke has truly panicked. The impact this will have on the dollar cannot be overstated; it’s a guaranteed disaster. It assures that people will do all sorts of things they would not do without that artificially easy money.

What needs to be done is to let the market raise interest rates, to encourage savings – the accumulation of the capital needed to start moving forward on a solid basis. Instead of encouraging people to work, spend less than they make, and save the difference, these low interest rates encourage profligacy. They encourage people to liquidate savings and live above their means. As usual, the government isn’t just doing the wrong thing, it’s doing the exact opposite of the right thing.

And – adding insult to injury – not only are they doing the opposite of the right thing, they are actively punishing people who did the right things, who worked hard and saved. Pensioners living on fixed incomes are being forced to reach for higher and higher yields, which means they are being forced to put their nest eggs into riskier and riskier investments. This guarantees that the pensioners and the savers will be wiped out. Unless they put their savings into gold.

But nobody but crazy goldbugs even thinks about that. And it gets worse: The current course guarantees the total destruction of the U.S. dollar. Again, I cannot emphasize enough how serious this is. People all around the world save in dollars. If the dollar is destroyed, it won’t just be Americans who’re hurt, it will be all the hard-working people around the world who’ve struggled to scrimp and save and put money away for future needs. All these people who were wise and frugal, they are going to be wiped out. They are going to be left with absolutely nothing. This is criminal – it’s the stuff revolutions are made of. And that’s exactly what I expect we’ll see plenty of, all around the globe.