NEW YORK -- Did six inches of snow blanketing the Northeast corridor in the US have something to do with the move in the gold price today? Why not, everything else has been attributed to moving the metal hither and thither. Indeed, those claiming a global conspiracy to suppress the price of gold have some new cud to chew on with the departure of the Bush economic brains trust – Treasury Secretary Paul O'Neill and advisor Larry Lindsey.
There’s little to be surprised about. O’Neill is not a party man. He came to government from Alcoa with big ideas – even good ones like slaughtering the tax code – but found that Washington has little interest in making things better; even with the supposed “new tone”.
So he went on an African safari accompanied by a real Irishman, only to confirm his worst suspicions about how aid grants are mostly wasted or stolen. He spoke about the dollar now and again, not really clued in to how mere words can make Japanese exporters foam at the mouth. So the dollar was weak and then strong for the sake of appearances. All the while, O’Neill was just being honest; the dollar was coming down and there was little he could do to change it.
O’Neill’s is getting a bad rap. It’s wrong. He was a great Treasurer because he stayed out of sight and spoke frankly about the real world. No New York corner office at Citi for this guy.
Lindsey; well, he was somewhat fat as was SEC chairman Harvey Pitt. Perhaps it’s just a Bush war against sedentary markets. More seriously, Lindsey was the apparent architect of the tax cuts but failed to understand how they really work, which is on the margins. Instead, we heard Bush parroting his Keynesian recidivism which has turned the Republican Party into a tax and spend fiefdom, with government growing dangerously large and ever more intrusive.
No Cambridge corner office at Harvard for this guy.
So what do the conspiracists say now? Did O’Neill and Lindsey walk because they failed to run the gold cabal properly? Not likely, the gold price has been rising since May 2001, when the supposed arch cabalistas were well entrenched, but thinking of a grand send-off. Perhaps there was another conspiracy to allow gold to rise under a Republican government since the last time that happened Jimmy Carter got kicked out of office. Gold up, new administration.
Perhaps this is a shuffling of deck chairs? Also not likely. The cabal has been short of ammunition for years now, yet there has been no JP Morgan snapping rally. All we see is a steady progression to higher prices in keeping with a weaker global economy and gold being a good reciprocal of the broader markets, which were badly over-priced. Companies and consumers are heavily indebted, pension funds are a black hole, more people are out of work.
Don’t ascribe Friday’s brief run through $328 to anything more than the professionals playing another game based on the Iraq deadline. O’Neill and Lindsey are not big news to the gold price – they were never big news to anything.
We remain confident there will be no war with Iraq, at least not in the way people are expecting. The deadline will come and go, the UN will wail about the injustice of threatening a tyrant and the circus will continue. There will be softening up air strikes throughout Iraq, but a large land force is not going in – the winter window that allows comfortable fighting is being closed.
Just be glad for a continued rising trend in the gold price.
