A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. The working title of the book will be 'Just a Melman Minute!"   November 6, 2009   Well, there it is, front and center.  Just a while ago gold hit the $1,100 U.S. mark for the first time in history and one thing continues to be apparent.  At least for the short term, every attempt to sell gold down has been met with renewed strong buying and the duration of these sell offs keeps getting shorter and shorter.  Clearly, gold's upward momentum continues to gather strength. One of the latest reasons offered by the media for gold's powerful move is that the Federal Reserve Board has made it clear that they will not be raising interest rates any time soon.  Many observers, including this website, believe that this Fed statement can be interpreted that the recent wave of "Quantitative Easing" whereby the Fed creates funds, presumably out of thin air, to buy existing and newly-issued government debt, will continue unabated.  That policy implies, to us and others, that the threat of long-term inflation, and perhaps even hyperinflation, remains a matter of serious concern. There are other reasons that we can suggest for holding to the belief that this rally in gold could be only the fore-runner of much more powerful future outbreaks of gold fever, and one unique story regarding the City of Detroit appears to us to indicate the incredible seriousness of America's problems.  We are referring to an article relating to the "dumping" of a dump-truck from a fourth-story location in a Detroit building. The building, not surprisingly, is an abandoned factory which was once operated by Packard, the now defunct auto manufacturing company.  The plant closed in 1957, but has since been rejuvenated as a warehousing building or as a retail establishment through the years, but since the late 1990's, it has been utterly abandoned.  What makes this article interesting is that it includes the information that there are now, incredibly, eighty thousand such lots and buildings in the Detroit area, including, "...old housing projects, homes, strip malls and even high-rise buildings..."  These abandoned properties have become the playground of vandals, prostitutes, drug pushers, vagrants and simply adventurers who are delighted to wander through these relics of a more prosperous age. We would also note that while Detroit is perhaps the most glaring example of inner-city deterioration in America, many other urban areas such as Cleveland, Toledo, Philadelphia, Akron face similar situations - and solutions to such embedded infrastructure problems cannot come cheaply.  Therefore, they add to the expectation of a continuing flow of expensive government projects, the cost of which will be piled upon the mountains of government debt which already exist. There is yet another facet to the overall situation which raises further questions regarding America's economic and political future, and I can relate this to my personal history. As I approach my 68th birthday, it has been truly a wonderful learning experience to have lived almost exactly half my life in Canada and the other half in the United States with the latter period coming from 1962 to 1996.  During my years in the USA, one particular feature of life in that great country appealed to me above all others - and that was an abiding love for liberty.  Thanks to the experiences over those years, combined with abundant reading from the Founding Fathers and other champions of individual freedom, I came to the conclusion that when all is said and done, Americans may listen to the siren call of government solutions to problems from time to time, but, on balance, they will always revert to the concept of freedom when they are pushed far enough. That is the belief which, in your editor's opinion, is now becoming a strong driving force once again in American politics, and one which we believe has been seriously misunderstood and underestimated by the Obama Administration. In our preceding "Melman Minute", we pointed out strong gains made by Republicans in this past week's elections which took place in several states.  In analyzing those gains, WSJ opinion writer Kimberly Strassel referred this morning to a "Tipping Point" which she believes the Democratic-led Congress has now passed and which is re-awakening Americans' concerns regarding limited government and individual liberty. Our observation is that it is not only the number of laws which are being brought forward in such profusion over the past few months, but their incredible complexity that is now turning many Americans against the Obama Administration, and a perfect example can be found in the new bill relating to medical insurance in particular and health care in general.  Like the environmental act of earlier this year which increased from about 700 pages to nearly 2,000 during its progression through the halls of Congress, "HR 3200" has shown similar growth and now stands at close to 2,300 pages!  One can only wonder just what is contained within such a massive document and why it has to be so large.  Many Americans are beginning to wonder as well; and perhaps that kind of questioning is an underlying reason why the Republicans made strong gains in these recent elections. It is also worth pointing out that such complexity of law flies in the face of American tradition.  One of America's earliest and most prominent Presidents, James Madison, wrote these words in "The Federalist", a collection of political commentaries written near the time when the U.S. Constitution was being adopted: "It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow." It is that last commentary that we believe is a vital consideration.  If laws are changing swiftly, particularly if they are as complex as those put forward so far this year, then business cannot plan ahead with any certainty - and that would spell further serious trouble for America's productive economy. To summarize, uncertainty about the direction and leadership of America is growing, and rising uncertainty has been one of the past handmaidens of golden bull markets. ............. Financial markets this morning have made several moves both up and down and as of 10:20 AM PST, both the Dow Industrials and Canada's TSX are very slightly higher, ahead by about 10 and 40 points respectively.  Gold has held on to most of its gain, but silver is down slightly and the base metals have retreated quite sharply.  Both major mining share indexes remain about two percent higher, crude oil is down by over $2.00 per barrel and the U.S. Dollar is close to unchanged in currency trading. - - - - - All quotes US$ unless otherwise noted. Next Melman Minute scheduled for Monday, November 9, 2009.           ◄  Previous Minute                                                                                                        Next Minute  ►
		DISCLAIMER The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed.  Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only. Any investment decisions should be made only following consultation with registered investment professionals.