The Analogy That No One is Talking About

Following the Richard Nixon disgrace of a Presidency, a little known Georgia Govenor became the 39th U.S. President. Out of nowhere, Jimmy Carter came to power in 1976 with a mandate to reform and restore the country's reputation, and hope was seemingly restored.

Flash forward 4 years later. In 1980 the U.S. was in one of the worst recessions in history, interest rates were at 20%, and the economy barely had a heartbeat. Gold had its best bull market in history, hittting $850/ounce, for over a 1000% move higher (My father was smart enough to buy a bank CD that locked in a multi-year interest rate of 12% + but also bought gold right at the top, only to see it drop in price for the next 20 years).          

Obama and Carter were two relative nobodies just 18 months before the election. Both were democrats, both faced a terrible economy, both were untested newcomers. Carter was overwhlemed by the challenges and couldn't leave Washington soon enough. Obama is smart...really smart and he seems to be surrounding himself with smart people.....however...

Guess who one of these "smart people" is? None other than Paul Volcker, Carter's Federal Reserve Chairman. Volcker is on Obama's short list for the same position once again, this time almost 30 years later. Volcker gets great credit for turning the economy around in the 1980's, but he first took interest rates to 20% in order to subdue inflation and strengthen the dollar. Yes...it worked. But for 2+ years it sure didn't feel like it was working. Unemployment was at 11% and the average American felt that they they were experiencing a Depression. At the time, Carter blamed Volcker for his loss to Ronald Regan in 1980.

They say that history repeats, and that those that don't learn from it are destined to make the same mistakes. Is Obama being set up as a patsy for an economic environment similar to Carters? I hope not.

But....if interest rates begin to rise significantly....if the US dollar breaks to new all-time lows...if the economy continues to suffer...and if gold and silver continue to hit new highs....

If it walks like a duck and quacks like a duck, odds are its a duck.     

Kip