Gold Can Unify Us Across the Great Political Divide
There is one thing Republicans and Democrats should agree about – buy gold.
But like everything else, the yellow metal has become politicized. If you believe the stereotype, only people on the right buy gold. A recent article by Martin Tiller at Nasdaq.com highlighted the phenomenon.
During the Obama Presidency, gold somehow became politicized. Glenn Beck, for one, seemed to suggest to viewers that Obama’s election foreshadowed the end of the world as we know it, then popped up in the commercial breaks urging viewers to buy gold. As these things tend to go, the fact that gold was therefore appealing to many on the right made it despised by those on the left.”
This is understandable in these hyper-politicized, overly polarized times, but it really doesn’t make sense. The reasons to own gold are economic, not political. Sure, politics has an impact on the economy. But recessions, geopolitical shocks, stock market crashes, national debt – these things all happen no matter which party is in control.
The latest political brouhaha revolves around the Republican tax plan. It’s looking increasingly likely the GOP may actually get something done. That has the stock market all juiced up. As we’ve pointed out, the optimism may be unwarranted. Peter Schiff called the plan “government on a credit card.” And it’s true. While the plan will certainly reduce the tax burden – at least on some people temporarily – it does nothing to actually shrink the size and scope of government. As long as the federal behemoth is growing and spending money, we’re going to have to pay for it – if not today, tomorrow.
Nevertheless, those Republicans who have traditionally bought gold are sinking their money into stocks because they are optimistic about the Trump economy. Peter has said this is a mistake.
The people who typically buy gold in America voted for Trump, and they’re no longer worried about the economy. So they’re not buying gold. They’re buying stocks instead, and I think they’re making a big mistake. They should be selling their stocks and buying even more gold.”
But again – it really doesn’t matter whether you’re a Republican or a Democrat. The economic impact of a policy doesn’t care about the politics of those who implement it.
Of course, your politics will probably influence how you perceive the impact of a given policy. But according to Tiller, passage of the tax plan is a good reason to buy gold no matter how you view the politics.
There are two schools of thought about the tax cuts in that bill; they can be regarded as either pro-growth or deficit busting, depending largely on one’s political affiliations. If either of those proves to be true, however, a case can be made that an investment in gold will pay off.”
The Republicans claim their tax cuts will spur investment, grow the economy and create lots of jobs. Conventional wisdom holds that this would be bad for gold. But consider this. Unemployment is already at a low level. That has some interesting ramifications, as Tiller explains.
With an unemployment rate around 4% and signs of some upward pressure on wages in the second half of this year, it will certainly add to fears of inflation taking hold. Gold is used by traders as a hedge against inflation, so if Republicans are right and we get a big boost to growth, gold buyers win.”
On the other side of the political aisle, Democrats are embracing the doom and gloom Republicans wallowed in for the eight Obama years. They believe the rich will simply hoard their tax cut money in off-shore accounts and the promised economic growth will never materialize. That will add to an already out of control national debt. (Yes, it is weird hearing people on the left fret over deficits – but it is what it is.) That scenario is also good for gold.
The yellow metal is, in addition to a hedge against inflation, a safe-haven play used by traders when they fear disruption, and there is nothing I can think of that would be more disruptive to the global economy that even a hint of a bankrupt America. So, if Democrats are right, gold buyers win.”
So, you see, gold really can unify us across the great political divide.
The two sides may have completely different expectations from the tax cuts and therefore different reasons for doing so, but whoever turns out to be right the effects on the economy will probably be such that both will end up in profit. Making money, it seems, is one of the few things left that has no partisan slant.”
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