We are not taking very seriously the run-up in gold these past two days, to $278 from $268, before losing a few dollars late this afternoon. Gold has run up before this year on pure speculation that it will stick at a higher level for some reason. Just as we have treated the previous jumps, we expect this one will also subside to the $265-270 range where it has traded all year -- until we see some reason from the Fed that it will shift gears away from the fed funds rate toward commodities. By the same token, there's still no reason to see a fundamental turn for equities.
I have made some calls on the rumor that Sen. Phil Gramm may be interested in replacing Alan Greenspan at the Fed, should the Maestro decide to retire before the end of the year. I'm advised Gramm is seriously planning on re-election next year. On the other hand, I'm also advised that heunderstands the deflation arguments we have been making and may be taking them more seriously than his colleagues. It turns out that as a college professor in Texas, before he ran for Congress, he wrote a serious academic study on the return to gold after the Civil War and its deflationary consequences. I'm getting the paper ASAP and will let you know what it reveals about his thinking. Gramm is one of the toughest cookies in the government, a pit bull, so if he does get interested and sink his teeth into it, he could make lots of waves that we would surely appreciate.
If you have access to Barron's, tomorrow's edition will publish a full-page editorial I wrote on what happened 30 years ago next week when President Nixon took us off the gold standard -- August 15, 1971. I've also been commissioned to write the cover story on deflation/gold for the American Spectator's September issue, out on 9/15. You may not know that the periodical recently has been acquired by George "Telecosm" Gilder and he is turning it into a platform for supply-siders and New Economy ideas. I highly, highly recommend you take a subscription, half price now... http://www.spectator.org It is hard copy and comes by snail mail. George also promises a lengthy interview with Carver Meade in the upcoming issue.