There should be panic on the Street and yet all the volatility seems isolated to the gold market.

August 29, 2011 – There should be panic on the Street and yet all the volatility seems isolated to the gold market. That’s rather strange with the economy’s lynchpin – the housing market – still deep in recession. But all it seems to take these days is one encouraging sign floating alone in an ocean of depressing statistics.

There are two very sure signs of panic, however. The first is a strong surge in the M1 money supply, which is now at historic levels. People – and corporations – don’t hoard cash when the future looks rosy. The second is a strong downturn in mortgage applications, which despite the state of the market had been climbing thanks to low interest rates. Folks clearly aren’t interested in playing along with the Fed’s program to gets us back to living beyond our means.

Never before has the chasm between Wall Street and Main Street been this obvious, but the government still doesn’t get it. While the people clamor for fiscally responsible government, the government keeps trying to restore fiscal irresponsibility among its citizens. That pot is about to boil over when the government closes out its fiscal year next month.

Americans, along with the rest of the global community, would love nothing more than to see Congress fulfill its duty and come up with a serious budget that all could agree is in the best interest of our economic recovery. And we would like to see it done before the deadline passes. Sadly, however, that is far out of reach for the most infantile leadership in this country’s history.

There is no reason to expect anything different from the debt ceiling fiasco that made a laughingstock out of our government. If even a trace of confidence remains somewhere, it surely will not survive the looming budget battle.

Shortly before the deadline, however, comes the vaunted two-day Fed meeting amid mounting pressure for the central bank to do something – anything – to breathe some life into the economy. Eventually Bernanke will have to yield even though he has been dropping hints left and right that it’s Congress’ turn and there is precious little he can do. Whatever he comes up with will certainly be aimed only at appeasing the stock market and will likely do more harm than good to the economy.

So we plod along getting nowhere while the machinery spins another spate of indicators into a glorious tapestry of good times that lie ahead, just around the bend. But it’s getting hard to lure customers into the sideshow. The midway crowd has thinned – the smart ones are leaving to buy gold coins.

Kevin Johnson

Senior Staff Writer –

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