Without Sound Money, Economy Will Continue to Deteriorate

August 13, 2014 – Today’s report2057157132_7959e27bb3_z on retail sales was expected to show an increase. But to the market’s surprise, sales were flat. This gave a bit of a boost to gold.
The instant interpretation by the gold traders was that a weak economy will be enough incentive for the Fed to continue running the printing presses at full speed. This report for July sales was the lowest since January. It’s just another confusing statistic for the economic planners to digest in their effort to figure out just what is happening in the economy.
Bad sales numbers in a free market economy would be bad news for stocks, especially for retailers. But stocks shot upward as irrational exuberance returned to the financial markets. Those who are predicting sound economic growth resulting from the Fed’s massive creation of new credit and zero interest rates are kidding themselves. If that theory is sound, we would have seen a real recovery from the Great Recession about three or four years ago.
More money, more debt, more zero interest rates, more government spending works for just so long and cannot restore confidence in a shrinking economy. The politically unacceptable solution of allowing the needed correction to occur guarantees that the deterioration of the economy will continue. It will last until the day comes when foreigners get tired of taking our depreciating dollars in exchange for the goods and services they provide.