This past Friday, Rick appeared on The Korelin Economic Report. Rick and Al took a break from financial topics this time and instead discussed the November elections. (Rick’s segment is #6). Here is a transcript of that interview:
Al Korelin: Okay. I’m back with Rick Ackerman. I’m going to do a little bit of a political discussion here, because politics, in my opinion, does relate directly to investing. Okay?
Rick, I got a question for you. This deals with the current, with the Obama administration right now.You look at the numbers that are coming out right now. I want to start off with consumer sentiment. Consumer sentiment dropped 5.2 points down to 74.1, according to the Reuters/University of Michigan Sentiment Index that was announced on Friday. It went from 79.3 down to 74.1, okay? That is very, very negative. I think that is a major, major indication of obviously what’s going on in terms of people’s minds.
You look at the gold indexes, because I think gold is a very, very accurate sentiment of consumer confidence, as is the first number we brought out. Gold continues to stay above $1600 an ounce level, okay? In spite of the fact that people are calling for gold to drop because things are starting to look so damn good, which I don’t think they are.
Now in spite of this, the Dow Jones Industrial Average is not doing too bad. Now, given that scenario, how can the Obama administration possibly think that they can get re-elected?
You look at the unemployment numbers that came out yesterday, they were worse, okay? 386,000, if I’m not mistaken, or something like that.
Rick Ackerman: Well, I think Al that they can’t. You’ve got a trend that’s global right now, that simply wants to turn the incumbents out. No incumbent has been re-elected anywhere.
In the U.S., you have an ostensible reason for the polls to say, “Well, Obama’s electable because the economy’s doing okay.” But it’s not. In people’s everyday lives, they look around and they see that everybody is paddling just as hard as they can to stay afloat. It’s a very difficult economy.
The press manages to skirt the issue. I don’t know whether it’s out of political bias that they do this. But they skirt the issue by referring to the Great Recession… and whenever you see those two words, the Great Recession, it’s the press being ambivalent. They’re really trying to sort of say, even though The Economist officially ended the recession – I believe it was in 2009 – that there’s something bigger out there that’s still very much with us. It’s a difficult economy.
So just on the economic issues alone, people tend to vote their pocketbooks. When Obama gets out there and says that things are okay at the Main Street level, I think he stepped right on a fault line there. He’s pushing the point here, something that everybody knows.
Al: I think the one thing that they can point to, and I think this is a little erroneous, but if you look at the CPI, the consumer price index that was released back on the 14th, the CPI, less food and energy, only rose two-tenths of 1%. The CPI year-to-year change, less food and energy, only went up 2.3%.
I think there are those in power who are going to say, in spite of the fact that we are throwing myriads of dollars out there, a huge amount of new currency out there, “We’re doing the right thing because inflation is easily, easily under control.”
I disagree. I think those numbers are false. What do you think?
Rick: Well, they’ve thrown trillions and trillions and trillions of dollars at one problem, really. It’s the housing market.
All of this money has been put into the system, all this, let’s say, unactualized credit, to push the housing market up, because if the housing market is not doing well, then the economy is not doing well. So all those trillions of dollars, they’ve achieved nothing in the way of pushing housing prices up. They’ve simply pushed the price of a head of lettuce and wine. It’s what I call grocery stores inflation.
So the fact that inflation is tame from the political and economical standpoint, the attempt at inflating has been a complete failure, because it’s only hit people where it hurts and not where it helps, namely in the form of higher housing prices.
Al: Well, something that’s certainly going on, on an international level, because if you look at the price of gold, which is a great indication of how people think, we’ve had seven up days in a row. It’s just, people are very, very concerned right now.
Now, the argument right now, I think regarding gold, I think could very easily be, well of course gold is going up. It’s going up because people are concerned about the Greek election here in a couple of days. The Greek election, I think is, from what I understand, still polls have been released, is too close to call. There are numbers as high as $8 billion a day coming out of certain sectors of banks in the Eurozone right now.
So, I don’t know. I personally think that people are going to throw their hands up in the air and say, “Enough. We need to try a different course in the United States.” I think the same thing is going to happen in Europe.
I think this is going to be positive for precious metals. I think it’s going to be positive for people in general, if people can get their head out of the sand and vote in some folks who are going to make a change. I’m feeling that I think that people may be getting their head out of the sand, and they may vote in some folks who are truly going to make a change. There are others who would say, “No. It’s too late. That can’t happen.”
I had an interesting discussion with Lawrence Roulston. Laurence was saying, he thinks that that is in fact what’s going to happen. I think there’s a possibility, but I think that the danger coming from the black hole is, as Laurence called the situation that the world would get into, I think that’s a very, very possible scenario. What do you think?
Rick: Well, I wish I could believe that we were going to vote someone in, namely Romney, that could make a difference. But I don’t think he can. I think the problems are so deep and intractable that there’s no political solution.
We’re really going to have to kind of bear the pain to bring things around. That simply means that the housing market is going to have to be allowed to become a true market. It’s going to have to find, real estate will have to find a market price.
I don’t see any political remedy here. Certainly, there’s nothing Romney is saying that’s radically different from whatever Obama might do or try. The only candidate that really would have made a difference economically speaking, at least in theory, was Ron Paul.
Al: Right.
Rick: His platform was really different from everyone else’s. But I think to the extent that it was so different, including this idea of getting rid of the Fed, that all of his political ideas were nonstarters. I don’t think, I don’t believe he could have really done much in a practical way, much as we’d like to see the Fed done away with.
Al: Right.
Rick: So I think we’re going to have to organically grow our way out of our problems. One way people, I think that as far as that translates into a vote, people are going to vote against Obama, not so much for Romney.
Al: I’m waiting for the administration to pull something out of a hat, if that’s even plausible at this point in time. I think that people are realizing that we are in a terrible time right now, and there’s no way that that can be resolved on the current path, for lack of a better term.
Yeah, I am very sorry that Congressman Paul didn’t get farther than he did. I agree with you about the lack of a major difference between the apparent Republican candidate, Mitt Romney, and President Obama. I don’t see a major difference there.
I think, I have to tell you my friend, I have to disagree with Lawrence Roulston when he says we’re going to muddle through, in spite of the fact that survival is the strongest instinct of human nature. And boy, muddling through at this point in time, I don’t know if that’s even close to being economically possible.
Rick, I appreciate your time, buddy. Thanks.