This one is about gold. I just heard on the news that gold hit $1800/t.oz. They did mention that back in the early '80s, the then high $800 price would inflation adjust to $2400, so it's not an all time high as such, but it's damn close. It was around $300/t.oz when I started paying attention. It didn't do much for a while, but did trend steadily up. Shortly into Bush's second term, it angled up fairly sharply. Prices fell again after Obama's election, but then took off even more steeply than before. Last week, I think the slope up is higher than it has ever been.
People buy gold when they think their reserve currency isn't going to hold value. The US$ is the reserve currency of choice. Many countries also peg their currency to the dollar - their exchange rate changes as ours does. Only the fact that there doesn't seem to be a strong contender for runner up reserve currency (yet) makes me think we'll be able to stick it out and squeak through the rest of the recession without falling from the top of the heap. We've toppled lots already, it's just that we've taken everyone else out with us, for the most part, so the relative positions aren't that different. So what the high gold price says to me is that people are dumping dollars for bars. This is not good news. Anyone holding gold will be able to jump into a different currency.
Another point in our favor is that we're currently "too big to fail". The countries with money pegged to our currency would prefer we don't fail. At this time, China doesn't want the top currency slot as it makes their goods too expensive (and for a million reasons I don't know). But people buying up gold, and perhaps deciding not to track our currency is bad news for us.
I'm still not totally clear on the ramifications of countries "defaulting". Iceland's banking economy crashed, but people still live there, in houses, and go to work like they always did so how is that different from any other place with high unemployment in this economy? I can't quite wrap my mind around it. But what is clear to me is that when the US economy tanks, there's significant collateral damage. And we have bullies in congress willing to throw our economy in the toilet to avoid asking people with money to part with some of it. It's a line that I don't think has ever been crossed before - willing to risk default at all, regardless of the stakes or conditions. And it's a batshit crazy thing to do.
By proving that we've got batshit crazy folks holding our economy hostage, especially to avoid taxing wealthy folks, we may have hit the tipping point in whether or not people are willing to ride this bad economy out with us to the "not so much" side of the equation. But lacking better options, they buy gold and hope someone grows up and starts talking sense. We can argue all day about what wealthy is or isn't, but for me it's someone who has a steady income that is substantially more than they need, and enough to get through several minor and a few major disasters. If you're one car accident or bad cold away from financial ruin, you're not wealthy. And given the lack of health care coverage, even for many "covered" folks, more of us are in that situation than not so probably some people reading this are thinking "I would really rather not pay more taxes right now" and I'm thinking you're not who I'd be taxing.
As I understand it, most known civilizations fall when they've either consumed all their protective resources (trees on Easter Island and Haiti) or the rich get so rich that they no longer give a damn what the peasants think. The strongest civilizations have a middle class that is educated and economically well off (although everyone can't be "wealthy") and enough resources to care for the truly poor and unfortunate. What I didn't even really ponder much until recently is that with the size and relatively recent mining of resources, the US isn't "great" just because we're "free". It's because we have so many natural resources that we haven't destroyed all our options yet and had to pare back. Surely the democracy thing isn't nothing, but we can't keep treating mining the country and expecting more to be around the next corner. Mining isn't like harvesting. Some stuff won't grow back.
And this ramble has gone a bit off topic because I'm out of practice with blogging coherently. At any rate, I look at the gold price and I'm pretty afraid of what it says. The only thing that keeps that fear in check is that we're too big to fail right now. That and burying my head in romance novels. Which is where my head is going right now. Feel free to school me in the comments. To quote a favored blogger, Ta-Nahisi Coates, talk to me like I'm stupid.
[Quote from Shimmer by The Throwing Muses which includes a line about being dressed in shiny gold. I can listen to that song as often as 3 year olds can watch The Lion King video.]