Friday, September 19, 2008

Guns and Butter Part 2

Guns and Butter was a term often used to describe the policies of LBJ in the 60's whereby massive Government spending was implemented along with massive military spending needed to fight the Vietnam War. The end result was inflation,stagflation and 20% interest rates over the next decade or so. Given the announcement last night of the Fed's stepping in to buy toxic mortgages I think we are on our way to a '70's repeat. The U.S. is already the world's biggest debtor nation and over the past 7 days or so we've added probably another $300-$1trillion in additional unfunded obligations. Remarkable. I have no ideas where the markets are headed longer term but I am glad a have a reasonably decent position in gold and gold related holdings.

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