When Stimulus Dries Up

Last year stimulus was thrown at us like baseballs from a pitching machine in spring training.We had car buying credits, energy credits for new windows and appliances, home buying credits and a handful of niche credits all of which combined to create a sense that things were good and maybe getting better.

One statistic put the total stimulus dollars at $185 billion for 2009.When the stimulus was approved by Congress, we were asked to believe unemployment would drop to 8% - instead it rose to 10%.We were asked to believe it was the first step to economic recovery.We were asked to believe the increased debt burden could be repaid through economic growth.

Now, the cash for clunkers, windows, appliances and even homes has long been spent leaving us with no more jobs, really, than we had before.In fact maybe less jobs than we started with.The current unemployment rate is 9.7% per the Department of Labor. However, according to payroll statistics released today, an additional 23,000 jobs may have been lost in March, that in the face of expectations we may gain 40,000 jobs.Ouch!

Where once talk of recovery seemed to pervade every financial newscast, that now may all be called into question.Maybe recovery was temporary because the cash printed to stimulate recovery has run out.Do ya think?What's the answer?Two answers come to mind.More stimulus is one.Some will argue it did create jobs and of course without it we would have lost even more jobs.No more stimulus is the other.Here, some will argue it did not create enough jobs it only borrowed from our future and prolonged the agony.

What will we get?The original stimulus bill scheduled $185 billion of stimulus to the economy in 2009 and another $399 billion in 2010.If that holds up, get your snorkel and mask ready for a flood of freshly printed money.Oh Yea . . . Just in time for mid-term elections.

And, what results can we expect?Last time we got stimulated, inflation fears resurfaced and the price of a gold coin hit record highs.Gold supply and demand statistics zigzagged on and off the charts and the spot gold price reached $1225 an ounce or so and silver followed suit.Gold predictions of $1500 an ounce or even $2000 gold by the end of this year actually seem within reach.I think at Lear we are still in the $1500 camp but you can't help but think anything is possible.

But, lets be honest here.If the gold price rose its 17% or 18% average over the last 8 or 10 years, could you live with that?Where do you think the gold price will be when the next round of stimulus hits the streets?And if you actually get any of it what are you going to do with it?I say Buy Gold!