-- Posted 9 February, 2010 | | Discuss This Article - Comments:

This essay is based on the Premium Update posted on February 5th, 2010

Is America going to hell? It certainly seems that way if you read about the “post- American” world and listen to the television news programs that eulogize America’s position as the premier superpower. That is the reason why it was refreshing to read a reassuring article in latest issue of Atlantic Magazine.   

The writer, James Fallows, claims that if you look at the comforts and abundance of American life, even at a time of recession, you realize that America is still one of the best places in which to live.  Even if America is supposedly in a decline, it still has a standard of living that is the envy of most of the world.  The simplest measure of whether a culture is dominant is whether outsiders want to be part of it, he says. There are still plenty of people around the world for whom an American green card would be a dream come true. You don’t see many people clamoring to immigrate to China.

Fallows points out that there have always been periods during which it seemed that America was falling behind or falling apart --presidential resignations, assassinations, race riots, divisive wars, failing schools, failing industries, etc. In fact, America has a tradition of gloom and doom that goes all the way back to the first European colonists. Pick any decade in American history and you will notice the same cycle of despair and renewal that seems to be built into the American psyche. There have been other periods when it seemed that America was falling behind, as, for example, with Sputnik when Nikita Khrushchev said “Whether you like it or not, history is on our side and we will bury you.”  Later, there were the Japanese, the Germans and now China that serve as standards whose achievements dramatize American decline.

Barack Obama, while he was still campaigning, put this feeling into words.  

“The dream that so many generations fought for feels as if it’s slowly slipping away, and most of all, we’ve lost faith that our leaders can or will do anything about it,” he said during a campaign speech.

There are many reasons to believe in America’s resilience, says a historian that Fallows interviewed. There is the good luck of geography and resources, the First Amendment’s success in reducing religious friction, and the decentralization of power and culture. Racial relations, a major problem in American history, have never been better.

Fallows points out that China has about four times as many people as does America and that someday its economy will be larger. That is good for everyone because a business-minded China is likely to be more benign. Besides, China has plenty of reasons to worry about its own future. There is the issue of a looming environmental disaster due to the overly rapid development. Then there is the demographic legacy of the one-child policy, which will leave an aging population dependent on relatively fewer young workers. Politically, tensions between an open economy and a closed political system with constraints on free expression might cause instability.

America, he says, is likely to lead in the development of future industries and technologies that depend on a society that is flexible, open and inventive.

American society is perfectly positioned for such innovation. The American advantage depends on two pillars of American strength—continued openness to immigration and a continued concentration of excellent universities that people around the world wish to attend. Although there are troops of engineers and computer scientists marching out of Chinese universities, China lags behind in scientific discovery and technological innovation. Of the top 20 universities in the world ranked according to scientific research papers, 17 are American. Of the top 100 in the world, none are Chinese.

“What I’ve seen as I’ve looked at the rest of the world has generally made me more confident of America’s future, rather than the reverse,” writes Fallows.  “What is obvious from outside the country is how exceptional it is in its powers of renewal: America is always in decline, and is always about to bounce back.”

Fallows doesn’t ignore the problems facing America, which he sees mainly as a failing of the political system. He ends the article on a positive note.

“America has been strong because, despite its flawed system, people built towards the future in the 1840s, and the 1930s, and the 1950s. During just the time when Frederick Law Olmsted designed Central Park, when Theodore Roosevelt set aside land for the national Parks, when Dwight Eisenhower created the Pentagon research agency that ultimately gave rise to the Internet, the American system seemed broken too. They worked within its flaws and limits, which made all the difference. That is the bravest and best choice for us now.”     

The technical part of this essay is also encouraging, as precious metals have recently rallied strongly, even though the USD Index moved up as well. This week, we would like to provide you with additional comments on silver with emphasis on the cyclical tendencies present on this particular market (chart courtesy of http://stockcharts.com.)

Silver is currently right in the middle of the bottoming area, but please note that although there were times when bottoms/tops formed exactly as these tendencies suggested, it is not the main way of using this tool. It is designed to let one know more or less when the bottom / top is likely to form and what signals to look for during a given time-frame. For instance, during the bullish cycle, one can expect big moves to the upside and corrective small downswings. Naturally, the opposite is true during the bearish cycles - for instance right now. Either way, what we need to look for signs of the coming bottom and we currently expect them to materialize before the end of the month.

The point here is that we've seen such sign on Friday, when silver (here: SLV ETF) and other markets managed to rise even though the USD Index moved higher. Consequently, silver, and other markets ceased to respond to the bearish information (rising USD), which is one of the most bullish signs that one can see. Moreover, before it bounced back, silver moved very close to the rising blue support level, so we might expect it to rally from here at least for several days.

Summing up, although it may seem as another counter-trend rally in silver, gold, and PM stocks, the recent change in the situation on these markets was important enough for us to send a Market Alert to our Subscribers. It may be the case PMs move temporarily lower for a day or two, but it appears that the next short-term move will be up.

Thank you for reading. Have a great and profitable week!

P. Radomski

Editor

www.SunshineProfits.com

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