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EmailThe Case for $2,500 Gold in 2012
by Gregor Macdonald, contributing editor
Monday, February 13, 2012
Executive Summary
- Is the US indeed returning to growth?
- The implications of economic growth (or lack thereof) on gold's price
- Price targets for gold in various fiscal and economic scenarios
- Why $2,500 is the most probable price for gold in 2012
- Contingencies gold investors should be wary of
Part I: Gold Gets a Growth Scare
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II: The Case for $2,500 Gold in 2012
In a recent New York Times editorial, Christina Romer, former chair of the Obama's Council of Economic Advisors, essentially dismissed the view that manufacturing was a crucial component to any economy. Readers will recall my most recent essay on the boom in US exports, The Price of Growth, in which I also highlighted the skepticism of the economics establishment toward exports.
Subsequent to that essay, Annie Lowrey, the new reporter covering economic policy at the New York Times, wrote a fine overview piece that essentially echoed my own view: The US has a new industrial policy to bring back manufacturing and boost exports. The two are obviously inter-related. And it's revealing how many mid-career professionals in America are completely oblivious to the newest thinking on the subject. Indeed, we are learning more about the crucial dynamic mentioned briefly in Part I, which is that a relationship between design and manufacturing requires a close physical proximity to flourish.
Here is Alexis Madrigal on the subject as early as 2010, in an Atlantic piece, Key Question: Can the US Innovate Without Manufacturing?
An audience member asked a simple question with deep implications: if manufacturing continues to move offshore, can the United States continue to innovate? The premise behind the question, as Splinter explained, is that manufacturing isn't just where ideas are put into practice, but a key part of the innovation ecosystem. (He should know: he once ran Intel's top chip fab.) It's possible, the question suggested, that the factory itself is a site of innovation because the people closest to the work of building things know how to make them better. That view is a challenge to the simplified idea that research, product development, and manufacturing are discrete steps.
Between you and me, I think I've shown that the US is only at the very start of a long road back to recovery, which will not only establish a New Normal, but will have to include exports, manufacturing, and an economy with less surplus capital. The same holds true for the other two major players in the OECD puzzle, Japan and Europe.
So what does this mean for the financial markets, and in particular, gold?
Your faithful information scout,
Chris Martenson
Copyright 2012, Chris Martenson. All rights reserved.
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Comments
i find this article difficult to comprehend
Unless governments start giving the printed money to main street I don't see massive inflation hitting first. As another wave of defaults hit that puts pressure on prices to decrease in aggregate. But once bottom is hit and all that money is still out there, watch out!
Money Equation: M*V = P*Q => P= M*V/Q then taking the derivative we get dP = dM + dV - dQ over time...
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which is that a relationship between design and manufacturing requires a close physical proximity to flourish.
That might have been the case. But with the advent of*Enroll to see Link* which can be scaled up to print a house, the internet will continue to make geographical location irrelevant...
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I am still digesting this piece, but I can tell you that Gregor's point regarding the need to tie manufacturing to it's supporting structures is entirely correct in my experience. We are really not talking about the mechanics of "making" something, as in your 3D printer example...
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Gregor
Like Estatesavr, I also find your articles difficult to comprehend, but you always present interesting ideas. The depth and breadth of your knowledge and thinking are impressive. A sharper focus in your prose would be helpful...
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I. OIL
a. Oil rise, consumer is strangled, why make widgets?
b, Banks: Why lend, widgets are risky, keep paper at Fed, earn free paper, 0% interest rates, forever.
c. How much?
d. Jobs?
e, Wages?
f, Hit ceiling!
g...
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Yes, I've put a number of large themes on a collision course once again, in this essay. However, because I stand apart from the more typical views of gold, I find it necessary to explain why. And, this tends to require some lengthiness in the writing...
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Nice article.
Real growth is not happening now in the U.S., and may not happen again for most of our lifetimes. U.S. governement expenditures (healthcare, welfare programs, interest on the debt, etc.) keep going up exponentially. There has been nearly zero evidence that politicians or the general electorate have the stomach for the austerity required to hold the debt in place, let alone ever decreasing it...
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Gregor, I get very much what you are saying in all your postings, I just believe that Debt in every aspect of our world economy gives pause to any growth that is remotely meaningful. Oil prices will act as a lid for any sustained growth, will remain high because of the risk premium of above ground issues, and because of this I just can't see any capital being risked...
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I can tell you that Gregor's point regarding the need to tie manufacturing to it's supporting structures is entirely correct in my experience
I deffer to your opinion, Jim. I have plenty of ideas but no experience in developing them. My creative juices are twarted by the need to eat...
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