July 12, 2024

Nine Reasons Why You Should Absolutely Not Own Gold

As the mainstream press becomes more aware of gold’s decade long advance, the chorus of reasons for not owning gold seems to become louder ever day.   What if the conventional thinkers are correct?  Is gold an over owned and over priced asset that was run up by uninformed investors who are now on the verge of incurring steep losses?

With an open mind, this writer decided to dispassionately review the reasons for NOT owning gold.  I read numerous articles detailing why gold is a bad investment, why it should not have increased in price and why it is certain to disappoint investors.   At the conclusion of my reading exercise, it became obvious that there are, in fact, reasons why gold should be avoided.

I have listed, in no particular order, nine sound reasons for not owning gold.  If you believe that the following events will occur, there is absolutely no reason to own gold, other than perhaps an occasional jewelry purchase.

  1. The Federal Reserve and other central banks worldwide will institute sound money policies that eliminate inflation and maintain the purchasing power of their currencies.
  2. The world economy is on the verge of a golden era of long term, uninterrupted real economic growth.
  3. The risk of default by over indebted nations, businesses and consumers will disappear as the world economy enters a period of high growth.
  4. The return on competing assets such as real estate, bank savings, stocks and bonds will all exceed the return available from holding gold, a non income producing asset.
  5. The rate of inflation will remain minimal.
  6. The benefit of gold’s negative correlation in a portfolio will become unnecessary due to the elimination of black swan events by world governments.
  7. The price of oil and other commodities will remain stable due to abundant and uninterrupted supplies.
  8. The central banks and other large gold holders will liquidate gold positions to redeploy assets into higher return paper assets.
  9. The belief  that gold has intrinsic value, a concept dating from the dawn of human civilization, will gradually disappear as the glow of world prosperity ushers in a new era of  intellectual enlightenment.

Newmont Mining – Getting Ready For A Price Explosion

Newmont Mining (NEM) has been a frustrating stock for many investors over the past 14 years.

As the price of gold moved from the $390 range in May 1996 to $1200 today, Newmont’s stock price is only $3 above the all time high of $59 reached in May 1996.  Long term Newmont shareholders are certainly justified in wondering when the price explosion in gold will be reflected in Newmont’s stock price.

Based on recent relative price performance and fundamentals, Newmont shareholders should finally be looking forward to an explosive move upward in the price of the shares.

During the recent price correction in gold, Newmont’s shares have shown a strong relative price performance compared to other large major gold producers.  Short term price pullbacks in Newmont were quickly recovered, indicating eager buyers at lower prices.



The fundamentals on Newmont are exceptional and do not seem to be fully factored into the stock price.  Newmont sells at a forward price earnings ratio of only 15 times earnings, has had quarterly revenue growth of 46%, enjoys a 17% return on equity, has had quarterly earnings growth of 188%,  is sitting on $3.4 billion in cash ($7 per share) and the stock price has recently hit an all time high.


Based on the trend in fundamentals and strong relative price performance, look for a blowout earnings announcement by Newmont on July 28th.

Disclosures: Long NEM

Time Tested Indicator Predicts Huge Gains For Gold Stocks

K-Ratio Flashing Major Buy Signal

The increase in gold prices over the last five years has outperformed virtually every other asset class.   From the low $400 range in 2005, gold has soared almost 300% to over $1200 per ounce.

5 Year Gold - Courtesy Kitco.com

5 Year Gold - Courtesy Kitco.com

Although many gold stocks have seen substantial gains since 2005, the overall price gains of gold stocks has underperformed the price appreciation of the metal as can be seen by viewing the PHLX Gold&Silver Index, comprised of 16 major gold and silver producers.  While the price of gold has appreciated almost 200%, the XAU has lagged considerably with a gain of 96%.



While the reasons for the price disconnect between gold and individual gold stocks are in many cases company specific, the question on most investors minds is where do we go from here?  Will the large increase in gold prices eventually translate into major gains for the gold producing stocks?   The emphatic prediction, according to the K-Ratio, a time tested method for timing the purchase of gold stocks, is telling us to stay long and accumulate gold stocks.

The K-Ratio is computed by dividing the value of Barron’s Gold Mining Index (GMI) by the Handy and Harmon price of gold.  The index reflects the relative value of the price of gold stocks to the price of the underlying metal.  When the ratio of the price of gold stocks to the price of gold is low, it is a bullish signal.  Conversely, if the price ratio of the gold stocks relative to the metal is excessive, it is usually a good signal to sell the gold stocks.

The K-Ratio works best at extremes.  The rule of thumb based on past history tells us that a K-Ratio at 1.20 or lower indicates that gold is cheap compared to the price of bullion.  A K-Ratio reading of 1.90 or higher is extremely bearish and indicates extreme overvaluation of the gold stocks.

The latest weekly reading on the K-Ratio shows a very bullish reading of .96 (Barron’s Gold Mining Index of 1158.99 divided by the Handy and Harmon Gold Price of $1203.50).   Since 1975, readings at or below 1.15 on the K-Ratio have resulted in gold stock gains 90% of the time over the next 12 months with an average gain of 40%. Lending anecdotal support to a large rally in the gold stocks is the overwhelming number of bearish articles on gold by the mainstream press.   From a fundamental perspective, of course, it does not hurt that logical minds are beginning to question the value of paper currencies of numerous sovereign nations.

Accumulation of high quality gold stocks such as NEM, GOLD, GG, KGC and AUY seems warranted, especially on price pullbacks.  Based on the technical and fundamental factors, the bull market in gold stocks has a long way to run.

Courtesy yahoo.com

Courtesy yahoo.com

Courtesy: yahoo.com

Courtesy: yahoo.com

Courtesy: yahoo.com

Courtesy: yahoo.com

Courtesy: yahoo.com

Courtesy: yahoo.com

Courtesy: yahoo.com

Courtesy: yahoo.com

Disclosures: Long NEM, GOLD, GG, KGC, AUY

K-Ratio Indicates Gold Stocks Still Cheap

K-Ratio Predicts Higher Gold Stock Prices

Based on the recent large rally in the gold stocks, it is time to sell and take profits?  The K-Ratio, a time tested method for timing the purchase and sale of gold stocks is telling us to stay long gold.

The K-Ratio is computed by dividing the value of Barron’s Gold Mining Index (GMI) by the Handy and Harmon price of gold.  The index reflects the relative value of the price of gold stocks to the price of the underlying metal.  When the ratio of the price of gold stocks to the price of gold is low, it is a bullish signal.  Conversely, if the price ratio of the gold stocks relative to the metal is excessive, it is usually a good signal to sell the gold stocks.

The K-Ratio works best at extremes.  The rule of thumb based on past history tells us that a K-Ratio at 1.20 or lower indicates that gold is cheap compared to the price of bullion.  A K-Ratio reading of 1.90 or higher is extremely bearish and indicates extreme overvaluation of the gold stocks.

Bullish On Gold Stocks

When last reviewed on April 24, 2009, the K-Ratio was at .90 and flashing a major buy signal.  Since that time, the Gold Bugs Index (^HUI)  has advanced by 39%.  What should be of extreme interest to gold stock investors at this point is that, despite the large gains in the gold stocks, the K-Ratio has increased only modestly and presently stands at 1.15,  still in solidly bullish territory.  (K-Ratio = Barron’s Gold Mining Index of 1159.20 divided by the Handy & Harmon Gold Price of $1008.25).

Since 1975, readings at or below 1.15 on the K-Ratio have resulted in gold stock gains 90% of the time over the next 12 months with the average gain a very profitable 40%.

There are no absolutes in investing and gold stocks are likely to fluctuate, but based on the time tested K-Ratio, it is way too early to be taking profits in the gold stocks.






Disclosures: Long GOLD, KGC, GG

The K-Ratio is still flashing bullish at 1.03.   As is typical when the bullion price retreats, the gold stocks react in a more volatile manner,  resulting in greater price declines in the gold stocks than in the price of the bullion.   From the recent high in late 2009, the price of gold bullion has retreated by 11%, while the price of major gold stocks such as Goldcorp (GG) and Randgold (GOLD) are down by 20%.   Accumulation of gold shares still seems warranted based on technical and fundamental factors.

US Treasury-Owned Gold – What Would It Buy?

Some Thoughts On The Value Of  US Owned Gold

The United States Treasury Department recently issued a report on the total amount of US Treasury-Owned Gold. As of April 30, 2009 the US Treasury held a total of 261.5 million fine troy ounces of gold. The Treasury report uses a book value of $42.22 per troy ounce to calculate the total value of gold held at approximately $11 billion.   Based on the current market price, total gold holdings of the US Treasury amount to approximately $238.5 billion.

Department of the Treasury
Financial Management Service
April 30, 2009
Summary Fine Troy Ounces Book Value


Fine Troy Ounces

Book Value

Gold Bullion



Gold Coins, Blanks, Miscellaneous



Total – Treasury-Owned Gold



It is interesting to note that although the US dollar used to be a  gold-linked currency, the current market value of gold held by the US Treasury is now nothing more than pocket change on the Federal balance sheet.  In today’s new financial world,  here’s a short list of what the U.S. government could buy with the entire U.S. gold stockpile of $238 billion.

  • cover the interest due on $9 trillion of government debt for one year.
  • buy General Electric, American Express and McDonalds
  • cover 40% of the $599 billion in bank losses expected by the US Government over the next year
  • pay for 6.6% of next year’s $3.6 trillion dollar US spending budget
  • cover less than half the cost of the TARP program
  • pay for 35% of the 2010 U.S. defense budget
  • cover less than two years of war costs in Iraq and Afghanistan
  • cover the cost of a stimulus check of around $800 for each American

The value of the nation’s gold supply is a rounding error on the Federal balance sheet and irrelevant to overall governmental finances.  Maintaining a stockpile of gold as a store of value  to back a nation’s financial system seems little more than  a relic of past history.  Citi commodity analyst Alan Heap recently stated that gold is “a crowded trade and fundamentals are not supportive”.

All of the above factors would seem to represent a contrarian dream.  As the economies of the world continue to create trillions of  new paper money,  gold appears to be on the cusp of a multi year price breakout above $1,000 and the K-Ratio is still screaming to buy the gold stocks.  In addition, China is calling for the establishment of a new gold linked reserve currency and the approximate market value of the fifteen biggest gold producers is only $135 billion.

Adding to gold stocks at this point as part of a diversified investment portfolio would seem to carry a good risk/reward ratio.   The time to sell gold will be when there is a “crowded trade” in analysts telling us to buy.

Although Kinross Gold (KGC), Goldcorp (GG) and Randgold (GOLD) have all appreciated since last discussed, these are my favorite long term gold stock positions and merit additional purchases on price pullbacks.   Newmont Mining (NEM) and Yamana Gold (AUY) round out the gold stock portfolio and should also continue to perform well.

Gold Chart

Gold Chart

Disclosures:  Holding positions in KGC, GG, GOLD, AUY, NEM

K-Ratio Flashing Major Buy Signal For Gold Stocks

Gold Stock Buy Signal

One reliable  indicator that I have followed over the years to time the purchase of gold stocks is the K-Ratio.  At the present time, the K-Ratio is giving a strongly bullish signal.  The K-Ratio is computed by dividing the value of  Barron’s Gold Mining Index (GMI) by the Handy & Harmon gold price.  Using data from the latest issue of Barron’s, the K-Ratio is now at .90 and flashing a very strong buy signal.

The last extremely bullish reading was registered in late October of last year when the K-Ratio recorded an all time low reading.  Since last October gold mining stocks have advanced strongly with the XAU recording a 100% gain from the October bottom to its recent high of 140.

XAU Gold & Silver Index Courtesy StockCharts.com

K-Ratio Forecasting Major Up Move for Gold Stocks

The K-Ratio works best at extreme readings when the GMI is below the price of gold, which is the case now.  The old rule of thumb is that an extreme bullish reading occurs when the K-Ratio is at 1.20 or lower indicating that gold stocks are cheap compared to the price of gold bullion.  In the past,  a sub 1.20  K-Ratio has triggered gold stock advances of over 50% and bullion advances of over 25% within 6 months.

K-Ratio Courtesy:   Kaeppel’s Corner

Some major gold producers that usually perform well in a rising gold market are KGC, GG and GOLD.   I would look for all of these issues to show major gains in line with the performance of the XAU over the next six months.

More On This Topic

Gold, Silver – An Important Alert!
The Gold Direction Indicator is flashing another buy signal.  This indicates that the pull-back that started late February is probably finished.  A new rally is about to start.



Where Is The Physical Gold And Why Does US Restrict Gold Purchases? Does The GLD Have Any Gold?

Strange Situation In The Gold Market

Two recent articles seem to suggest that there is a large physical shortage of gold.

Is the physical shortage of gold the reason for the large restriction in US Mint gold coin sales?   If there is no physical shortage, then why would the US government be severely restricting the ability of its citizens to own physical gold?

Furthermore, if there is a physical gold shortage, how is it possible for the ETF GLD to purchase 45 tons of gold last month?  Do the gold ETF’s really hold physical gold?

Gold Coin Sales Further Restricted By US Mint

US Mint Suspends Production of More Gold and Silver Coins

March 14, 2009 | Filed Under US Mint | 11 Comments

The United States Mint has officially announced the suspension of another slate of gold and silver products. The affected products are 2009 dated American Gold and Silver Eagle coins produced for collectors. These coins are considered collectible versions of the bullion coins.

Although these are collectible coins, they represent a sizable amount of precious metals sales and represent a method of gold and silver investment for many individuals. Last year, the US Mint sold 1,157,911 ounces of silver in the form of Silver Eagle coins minted for collectors. They also sold 155,740 ounces of gold in the form of Gold Eagle and Gold Buffalo coins minted for collectors.

The following message was posted on the US Mint’s website in the space where the collectible Gold Eagle coins typically appear. The proof coins has been offered uninterrupted since 1986. The uncirculated version has been offered since 2006.

Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins.

This adds to the lengthy list of 2009 dated precious metals products that have been “temporarily delayed” or suspended by the US Mint. In my previous post Actions of the US Mint Discourage Gold Ownership, I mentioned the delayed release of 2009 Gold Eagle fractional coins, 2009 Gold Buffalo coins, and all 2009 Platinum Eagle coins. The delay, which was first announced in November 2008, continues with no further explanation provided.

That makes a total of 38 precious metals products which have been delayed, suspended, or discontinued by the US Mint.

As it currently stands, investors or collectors looking to purchase newly minted American Eagle or American Buffalo precious metals products have only two options available. These are the 2009 1 oz. American Gold Eagle and the 2009 1 oz. American Silver Eagle. Both of these products continue to be subject to rationing.

Did The ETF Fund GLD Really Purchase 45 Tons Of Gold Last Month And If So, Where Did It Come From?

Where Do All The Gold ETFs Get Their Bullion From?

Don’t you think it is about time GLD and all the other popular international gold ETFs told its owners exactly what kind of gold they claim to own?

Can you imagine a situation where a person buys a gold ETF to own “non-gold” but finds out that they in reality own OTC derivatives on gold? That would be an investment in the same type of financial instrument (not gold) that one owns gold bullion to protect against.

The failure to unearth the Madoff scandal becomes incredible when one understands that the returns from the market claimed on the size of the hedge fund were logically impossible.

The exact same reasoning screams bloody murder when applied to the many Gold EFTs in terms of what it is they really own.

This begs one major question: From where did all the gold claimed to be owned by all the gold ETFs come from?

Where did funds such as GLD get their additional 45 tons in the last month?

We certainly can forget about that gold coming from the Comex. 12 deliveries would stand out like a sore thumb.

This concept and record keeping eliminates all exchanges around the globe as the source of bullion delivery in any size to all Gold ETFs.

The physical market is so tight that coin minting has all but closed down compared to what it was one year ago. It is hard to accept that the Gold EFTs can buy what the mints can’t.

Like so many other surprises of the last two years the Gold ETF shareholder may actually have no gold at all.

A perfect Ponzi scheme would allow you to surrender shares for bullion. You need only think about it.

Is There A Safe Place To Put Your Money?

Stanford Financial, with as much as $50 billion in customer assets,  was accused by the SEC of defrauding its investors.  Where does one put his money today, without worrying that it may not be there tomorrow?

Stanford Lured Clients With ‘No Worry’ Promise on Top of Rates

Feb. 19 (Bloomberg) — Stanford International Bank Ltd., accused by U.S. regulators of defrauding investors, relied on more than high interest payments to sell $8 billion of what it called certificates of deposit.

The Antigua bank, founded by Stanford Group Co. Chairman R. Allen Stanford, attracted clients with assurances that its CDs were as safe as U.S. government-insured accounts, if not safer, investors said.

“Security was the key aspect,” said Pedro, a 62-year-old software engineer in Mexico City who invested $150,000 in CDs issued by Stanford International.

“They told me that they had insurance. The broker told me not to worry and that the bank was safe,” said Pedro, who asked that his last name not be used because he didn’t want to anger bank officials.

Most U.S. certificates of deposit are insured for as much as $250,000 by the Federal Deposit Insurance Corp. CDs issued by Stanford International, a foreign company, aren’t FDIC-protected.

A Stanford International training manual obtained by Bloomberg instructed financial advisers to tell clients that “the FDIC provides relatively weak protection.”

The U.S. Securities and Exchange Commission on Feb. 17 said that Stanford, 58, ran a “massive, ongoing fraud” through his group of companies and lured investors with “improbable if not impossible” claims about investment returns. Stanford Group, Stanford International and Stanford Capital Management LLC were named in the SEC complaint.

Beware The Experts

By the time this financial crisis is resolved, the winners will be those who can keep what they have.   Any investor not doing his investment homework is severely at risk.   I have followed Ray Dalio, chief investment officer of Bridgewater Associates, for years.   Mr Dalio has been warning of an economic crisis due to excessive leverage since early 2007 and in 2008 produced returns of over 8% for his clients.  Definitely someone to pay attention to.  Mr. Dalio recently gave an interview to Barrons and it is well worth the read.

AN INTERVIEW WITH RAY DALIO: This pro sees a long and painful depression.

Dalio: Let’s call it a “D-process,” which is different than a recession, and the only reason that people really don’t understand this process is because it happens rarely. Everybody should, at this point, try to understand the depression process by reading about the Great Depression or the Latin American debt crisis or the Japanese experience so that it becomes part of their frame of reference. Most people didn’t live through any of those experiences, and what they have gotten used to is the recession dynamic, and so they are quick to presume the recession dynamic. It is very clear to me that we are in a D-process.

Basically what happens is that after a period of time, economies go through a long-term debt cycle — a dynamic that is self-reinforcing, in which people finance their spending by borrowing and debts rise relative to incomes and, more accurately, debt-service payments rise relative to incomes. At cycle peaks, assets are bought on leverage at high-enough prices that the cash flows they produce aren’t adequate to service the debt. The incomes aren’t adequate to service the debt. Then begins the reversal process, and that becomes self-reinforcing, too. In the simplest sense, the country reaches the point when it needs a debt restructuring. General Motors is a metaphor for the United States.

We will go through a giant debt-restructuring, because we either have to bring debt-service payments down so they are low relative to incomes — the cash flows that are being produced to service them — or we are going to have to raise incomes by printing a lot of money.

I can easily imagine at some point I’m going to hate bonds and want to be short bonds, but, for now, a portfolio that is a mixture of Treasury bonds and gold is going to be a very good portfolio, because I imagine gold could go up a whole lot and Treasury bonds won’t go down a whole lot, at first.

Definitely worth considering is that Mr. Dalio’s preferred choice of investments at this point are gold and treasury bonds.

Notable Links – Gold’s Tipping Point, US Follows Japan’s Failed Strategy

Some Clear Thinking On Credit And Government Policies

Confidence More Important Than Gold

by Axel Merk | February 11, 2009

In a rare interview with Western media, Wen Jiabao, the Chinese premier, told the Financial Times (see http://www.ft.com/wen),

‘Confidence is the most important thing, more important than gold or currency’

Why is it that such wisdom comes from the leader of China, but is absent from the leaders of other countries? Do other presidents and prime ministers intentionally play a backstage role, letting their Treasury secretaries or finance ministers communicate with the public to avert blame when policies fail? That suggests that the leadership may not have all that much confidence in the programs they are promoting; or more likely, the leadership does not understand the issues.

Investors and entrepreneurs take risks in search of profit opportunities. In contrast, in times of crisis, many avoid risks and hoard cash in an effort not to lose money. Except, of course, if your bank or the currency you hold the cash in goes down the drain. When confidence even in cash erodes, gold thrives. The slogan for crisis investing so dreaded by governments is:

‘Gold is the most important thing, more important than confidence or currency’

Governments dread investors flocking to gold because it shows a lack of confidence in riskier alternatives available. Gold’s attraction is that its value cannot go to zero; that it has no counter-party risk; gold over the millennia has shown to be a store of value. But economies do not grow when gold is hoarded: capitalism requires risk seekers.

But what about all those folks who need to have a bailout? Something obviously went wrong as individuals and businesses took on too much credit. The solution, however, is not to prop up a broken system by stuffing even more credit down the throat of those who couldn’t handle the credit in the first place. The solution is to allow an orderly write off of investments and loans that have gone wrong. Most mortgages are non-recourse loans, meaning homeowners could simply hand over the keys to their homes and walk away from their debt. As a result, financial institutions would think twice before making a loan to such borrowers in the future.

What it comes down to is that just about all policies proposed deal with propping up a broken system rather than initiating the reforms necessary. Credit plays an important role in modern economies, but throwing more credit at those who are over-extended is not the solution. Quite

Present government policies are aimed at coercing the public into taking risky investments so that they don’t lose the purchasing power of their hard earned cash. The reason that’s done is so that all the debt can be served. We can do better than that. If we had less debt, we would be more concerned about preservation of purchasing power. But because the government also has tremendous debt, the interests of governments and savers are not aligned.

The U.S. economy has attracted investment for so long because it has been a fair place to conduct business in. Gaining the confidence of investors takes decades to build, but is easily destroyed. The U.S. must focus on reform to avoid some of the excesses from happening again; not simply prop up a broken system. So far, all we see is governments throwing money at the problem. We may be able to sum up our current policies as

‘We don’t know what we are doing, but we are doing a lot of it…’

This article is well worth a full reading.

Politicians do what they do to stay elected whether it makes sense or not.  We tell ourselves that we are not making the same mistakes as Japan did with its economy but we are deluding ourselves.   We are employing the same failed policies that the Japanese politicians tried.  Instead of letting free market forces work, the government is attempting to keep an over leveraged system functional by providing more credit to those who have shown no particular ability to repay what they owe already.  This strategy does nothing to build a strong economic system going forward.  The president is predicting a “lost decade”.   We will be fortunate indeed if a real turnaround comes that soon.  Japan is now close to starting  its third “lost decade”.

Courtesy Yahoo Finance

More Thoughts On Gold

Is the gold market telling us that an economic catastrophe is imminent?

It certainly might seem as though it is. By late morning Eastern time Wednesday, an ounce of the yellow metal was ahead by more than $30 from where it closed Tuesday.
But it doesn’t take much of a historical memory to appreciate that gold’s message is far more inscrutable.
Consider, for example, that gold traded for nearly $1,000 per ounce last July, compared with the $945 level at which bullion was trading Wednesday morning. That’s a very telling contrast: Though things weren’t all brightness and light last summer,
Even so, gold was higher then than now. Why?
This question becomes even more pertinent upon realizing the federal government’s actions since last July have been a textbook illustration of the inflationary behavior for which Ben Bernanke earned his nickname of “Helicopter Ben.” Yet, curiously, gold — the ultimate inflation hedge — is lower today than then.

A good point is made as to why gold is not higher than it was a year ago.  Every market price implies an equilibrium of buyers and sellers.  Despite the obvious bad news reasons why gold should be higher, in theory, it is not.  Perhaps investors are still in the denial stage from an economic perspective, preferring to believe that this is another routine recession.  There will be a tipping point where denial turns to loss of confidence and gold will be avidly sought as a refuge for capital.  At this juncture, the buyers will vastly outnumber the sellers.

Welcome To Washington Mr.Geithner – More Evidence of “We don’t know what we are doing, but we are doing a lot of it”

Feb. 11 (Bloomberg) — That’s it? That’s all Geithner had to offer?

It is amazing that this far into the financial crisis, we are still stumbling along, still so reluctant to tackle the problems facing the financial system and the economy.

Rather than offer the kind of comprehensive solution he had promised, Treasury Secretary Timothy Geithner yesterday served up a plan for banks and the financial system that was long on platitudes and short on specifics.

And that’s being kind. There were no specifics. There were only vague promises of programs and details to come.

And the specifics? “We are not going to put out details until we have the right structure,” Geithner said.

If that’s the case, it’s not clear why Geithner bothered to speak yesterday. If his goal was to calm markets, it didn’t work, especially since investors were hoping that he would simply agree to take all the bad assets from banks and reflate the financial system in one fell swoop.

And what of the herd of ailing banks that pose systemic risks to the global financial system? Rather than euthanize those that can’t survive, Geithner plans to continue coddling them.

This is the sort of float-all-boats thinking that led to Congress’s misguided stimulus package. It represents a false hope that there is still a way for the country to muddle through this crisis without having to accept a new norm in terms of asset prices, lifestyles and expectations.

That’s not likely to happen. And it’s why the Obama administration’s first, grand effort to fix the nation’s economic ills probably won’t be its last.

Any future economic recovery will be despite the government’s actions.