Saturday, September 10, 2011

Obama`s 447 billion job plan - great news for gold and silver

President Obama announced a plan to create jobs by putting people to work in infrastructure projects.

While idea has potential to achieve some economic growth(similar measure was taken by Germany back in the 30s with some success), it doesn`t address the core issue. Same issue that made Solyndra solar company, backed by Obama with state funds, go into bankruptcy.

Core issue is lack of cheap labor of course. US should have drastically lowered the minium wage or have it removed altogether. No company will be tempted to hire US workers, when they can do it elsewhere for less than 1/4 the cost. In many places in China such as assembly lines, similar to ones creating Ipads and Ipods, workers get paid 0.5$/hour. Not to mention these people have no holidays and often work the weekends. Dark side some don`t even want to mention is that many such workers get on demand injections to sleep through the holiday, so that they can save money.
Most if not all US citizens will rather go on food stamps than endure such working conditions.

The only reason some companies still hire in the US, is that they`re forced to do so. They`re forced to hire locals in the service industries, such as hotels, fast food chains and retail outlets. However, in the heavy industrial sector(where the real money is) things are much different. Here no company is tempted to hire locally and government so far has totally failed to change that.

Currently China is appreciating its currency, the renminbi, but it`s not nearly enough to make US competitive in the international labor market. EU countries face similar problems which will only get worse.

While President wasn`t very specific on how he`ll be providing the financing for this 447 billion job plan, one thing is pretty sure given the previous track record.
This money will be created out of thin air one way or another. Plan includes Obama`s campaign promise from years ago to cut taxes on low income individuals and small business but increase taxes on the rich and big corporations.

Even if this tax plan is put to work, there`s no way in hell it could cover for 447 billion spending package. It will most likely be the result of money printing. Don`t expect US gov to sell military bases, planes and cruisers or anything like that.

Needless to say that any printing of such huge amounts of money is extremely bullish for gold and silver.

This is why I`m long: AGQ, UGL, DGP

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