After The Gold Rush II – Kentucky Coal and Japanese Stocks

I’m sure the parrots at CNBC Squawk Box are remarkably charming this fine and wonderful morning. And Jim Cramer has probably exploded and totally made a mess all over the set at “Mad Money.” However, you can get the same level of news content and far more entertainment by watching this Alien’s clip linked here. What staggers the mind is that all of this is caused by US Federal Reserve Chairman Ben Bernanke dropping hints that he might choose to reduce the rate at which he hands out free money to banking institutions via QE.

This begs a fundamental question that we as conservatives must now pound the table and ask loudly. Why are we asking daddy for free QE money instead of making that cash ourselves? Why must we fear the reaper each and every time the Fed threatens to remove the punchbowl? The answer may well lie in a place far, far away from the grandiose canyons of rich and vital Manhattan. It’s a good day and half’s drive from the posh eateries and bars of K Street.

The coal fields of Kentucky* may well hold the explanation for why we have such a tendency to live and die by what the Fed Chair says about the equities markets and how a panicked electronic herd of yield pigs then reacts. Bill Estep writes of how the industry declines in

The number of coal jobs in Kentucky has dropped to the lowest level recorded since the state started keeping count in 1950, according to the Kentucky Energy and Environment Cabinet. An average of 13,109 people worked at coal mines and related facilities in the first quarter of 2013, a drop of 990 people since the end of 2012, the cabinet said in a report completed this month. The pace of the continued slide was slower than in 2012, when more than 4,000 miners in Eastern Kentucky lost their jobs, but that was little consolation.

These coal fields in Kentucky, like the old smokestack industries that no longer produce in America have been a bulwark and defense. They are a national reserve that protects America against the vicissitudes of fate, fortune, The Fed and The Nikkei 225. When we produce solid, valuable, useful things, America does not rely on anyone’s Electronic Herd.

As I wrote when Gold crashed and burned last month; commodity fetishism isn’t going to feed the children. Yet we see no sense of urgency from our current presidential administration to fix this imbalance. The House of Representatives finally rose in disgust to force President Obama to approve The Keystone Pipeline. Republican legislators describe their frustrations below.

“This is the most studied pipeline in the history of mankind,” said Rep. Lee Terry, R-Neb., the bill’s sponsor. “When is enough enough?” added Rep. Jeff Denham, R-Calif. “Five years? Six years? Ten years?”

Meanwhile, away from the imaginary world of The Beltway, real people attempt to solve these problems in Street Level Reality. A recent study found that states that minimize regulatory burdens and create attractive features for business and industry also enjoy greater job creation and safety from the perils of our globalized and frequently dysfunctional economy. Details follow below.

In fact, of the 10 states that had the best economic performance over the past decade, all but two — Nevada and Washington — are solid red states, based on the past four presidential elections. Other top economic performers include Utah, Wyoming, North Dakota, Idaho and Arizona. At the other end of the spectrum, all but two of the worst-performing states are solidly blue. In addition to Michigan, bottom-dwelling states include New Jersey, Illinois, Connecticut and Massachusetts. The only non-blue states in the bottom 10 were Ohio and Missouri. “States with lower taxes and less regulation outperform those that pursue Keynesian-style public policies,” said study co-author Jonathan Williams, who is director of ALEC’s Center for State Fiscal Reform. “And people are voting with their feet in favor of these states.”

This demonstrates that we cannot expect The Fed, The Federal Government or The biggest and most powerful banks to get together and save us. We will be saved when we save ourselves. All of the prosperity, all the glory and all the pomp these traditional and hallowed institutions enjoy are mined from the sweat of hard-working laborers. The Coal Fields of Kentucky* are to Wall Street what the Valley of Ashes was to East and West Egg in F. Scott Fitzgerald’s The Great Gatsby.

These coal fields aren’t sexy. They produce a product that leads to air pollution and woodland blight. This product also prevents 45% of America from freezing to death in the winter. It also keeps the air conditioning on in Congress when the Senators and Representatives gripe about how awful The Keystone Pipeline would be.

I can’t make even myself totally like coal. I’d personally prefer my electrical power from Unobtainium.** But Unobtainium, like the value underlying all those shares of stocks ramped up by Ben Bernanke’s QE, doesn’t really exist. Coal does, and despite its manifold negative externalities, it does useful and vital things for the health of the nation. We’re better off as a nation when we base our prosperity on that which is tangible and that which serves a useful, quantifiable purpose. I hope the political leadership in The White House and in The US Senate will ponder that thought when the Keystone Pipeline Approval decision flows in each of their directions.


Gold Is Getting Slammed Now

However, it didn’t take long for everything to head back down in the other direction when the question was put to Bernanke: could the Federal Reserve begin tapering back its bond purchases by Labor Day?

Bernanke didn’t rule it out as a possibility as long as there was enough improvement in the economic data to warrant such action.

This isn’t inconsistent with anything that the Fed has said before – bond buying will scale back when the Fed thinks the economy can finally handle less monetary stimulus – but markets took this as an opportunity to sell off.

And gold keeps heading lower. It just edged down a bit more with the release of the minutes from the FOMC‘s April 30-May 1 monetary policy meeting.

Now, the shiny yellow metal is trading 1.5% lower on the day, at levels around $1357.

Jim Grant On Gold’s Recent Drop: “Confidence In Bernanke Is Utterly Misplaced”

“Inflation is a state of affairs in which there is too much money,” Jim Grant notes in this Bloomberg TV interview, however, “It’s not too much money chasing too few goods,” he corrects the misnomer, “the thing this money chases is variable.” Whether it is Iowa farmland, housing, stocks, or bonds, central banks are stuffing us with it. Yes, equities are high, but Grant explains, “beneath the surface of things or not so far beneath the surface of things,” it is not at all good, adding that, “Central bank ‘original sin’,” is akin to Revolutionary France, and he shows no concerns over Gold’s recent dip, noting “a general fatigue animus towards gold,” that seems predicated on more confidence in central bankers; to Grant, “that confidence is utterly misplaced!”

On Inflation:

Inflation is a state of affairs in which there is too much money. It’s not too much money chasing too few goods. It’s too much money, the thing that this money chases is variable. And in this particular cycle and for some time, it has chased commercial real estate, bonds, stocks, financial assets of all kinds. Iowa farm land. There is a huge excess of liquidity in the world. Central banks furnish this, they stuff us with it. In the interest of levitating markets that will, they think

On the Equity rally:

Yes there are terrific companies generating terrific cash flows. That is certainly true. But beneath the surface of things or not so far beneath the surface of things, as far as central banks, practicing not original policies but original sin. This is these policies are not so original. They go back to the time of Revolutionary France. You know the idea of creating currency with which to create human happiness is as old as the hills.

On Gold:

Gold has been in a bull market for 12 years. Gold is this rare thing in which you can be bullish and yet contrary and also with the trend. There is I think a general fatigue animus towards gold. The gold prices are reciprocal of the world’s view of the competence of central banks. The greater the world’s confidence in the Ben Bernanke’s of the world, the weaker the gold market. The less the world holds confidence in the institution of managed currencies, the stronger the gold market. And to me the confidence is utterly misplaced,