Complimenting GATA, Peter Grandich jumps back into gold and silver

Section:

By Chris Powell
Journal Inquirer, Manchester, Connecticut
Tuesday, June 6, 2006

http://www.journalinquirer.com/site/news.cfm?
newsid=16744571&BRD=985&PAG=461&dept_id=565860&rfi=6

Connecticut's governor and attorney general and some of its members
of Congress have complained indignantly about gas and oil prices and
have demanded investigations of price "gouging" and the imposition
of excess profits taxes. But even a glance through the financial
press would disclose that the price problem has little to do with
gas and oil at all.

Yes, gas and oil prices have doubled in three years. But worldwide
demand for oil has increased sharply because growth in China and
India has far outpaced growth in oil production. (Even with gas at
$3 per gallon, government makes much more in taxes from each gallon
sold at retail than oil companies earn in profits. In Connecticut
the margin is about 57 cents in taxes to 18 cents in profits.)

Further, other commodities have risen far more than oil and gas in
three years. The prices of sugar and lead have tripled in three
years. Copper and zinc have quadrupled. Silver has risen 140
percent. Coffee, tin, and nickel have equaled the rise in oil and
gas. And gold, the monetary metal, is up 85 percent and would be up
far more except for the often surreptitious dishoarding of gold
reserves by Western central banks to deceive bond markets about
inflation.

So where are the complaints of Connecticut's politicians about the
copper and zinc profiteers and the robber barons of tin and nickel?
Who has subpoenaed Juan Valdez?

More importantly, what do Connecticut's politicians have to say
about the dramatic increase in the most vital commodity of all --
the cost of housing?

Nothing apparently, even though a coalition of housing groups,
banks, and business leaders tried to get Connecticut's attention the
other day by noting that housing price inflation has made home
ownership impossible in most towns for people of average incomes.

The coalition, HOMEConnecticut, reported that the median home price
in Connecticut has reached $300,000 and that housing costs in the
state rose almost 64 percent from 2000 to 2005, far exceeding income
growth. "This is no longer a Fairfield County issue," Connecticut
Business and Industry Association President John Rathgeber
remarked. "This is a statewide issue."

High housing prices are far more harmful to society than high gas
prices. People can curtail discretionary driving, switch to more
efficient cars, car-pool, or take the bus to work without suffering
much of a reduction in living standards. Housing is more basic; the
higher its cost, the more crowded and stressed people become, and
the less they are able to escape the anarchy zones of Connecticut's
cities, to which the failure of public policy and the indifference
of government confine so many of the poor.

So where are the politicians' calls for an investigation
of "gouging" in the housing market? Where are their calls for a
windfall profits tax on the unearned capital gains of residential
real estate, a tax whose proceeds could pay for less expensive
housing?

Of course there are no such calls, since the beneficiaries of the
real estate windfall are a majority of the politicians'
constituents, whereas the beneficiaries of the oil price windfall
are far less numerous, even as the same rules and phenomena of
economics are operating in both spheres.

The foremost phenomenon here is monetary inflation on a worldwide
scale, caused largely by U.S. government budget deficits that are
being turned into money by U.S. government borrowing as foreign
governments print huge amounts of their own currencies to buy U.S.
government bonds. That is, because of the profligacy of the United
States, the world is being flooded with money, and this money is
creating bubbles in hard assets.

This may be great for people who already own such assets, whether
they are oil wells, copper mines, or suburban houses, but it is
crushing the poor and those just starting out in life and preventing
them from getting ahead.

The poor and the young don't have enough knowledge, experience, and
resources to know better and complain to their elected officials.
But meanwhile the middle-aged have refinanced their houses or taken
out home-equity loans to convert their windfall real estate gains
into new cars, big-screen TVs, and vacations. The old folks -- the
most prosperous age group -- are getting free prescriptions
regardless of their income. And the whole country is getting a big
war for free. Tax cuts too.

For all that, three-dollar gasoline is a small price to pay.

---------

Chris Powell is managing editor of the Journal Inquirer in
Manchester, Conn.

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