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Life Goes On

Nearly half of American voters are disappointed by the election results. A slim majority of voters are reveling in the success of their candidate. Like it or not, Barack Obama is the president for the next four years. With the House of Representatives still under Republican control, Americans can look to more brinksmanship as the nation hurtles toward the fiscal cliff.

Without compromise and cooperation from both parties, the $600 billion package of spending cuts and tax increases will kick in early in the new year. If the media is to be relied upon, the American economy will instantly hurtle over a cliff when those measures come into effect.

Investors took the dire threats seriously, with American stock markets today posting the biggest losses in a year. Ironically, investors fled to the safe haven of US government debt. Among the big losers were defense contractors and suppliers, as investors see the fiscal cliff putting an end to the easy money that has been doled out to that sector.

Whatever happens over the coming weeks, it is abundantly clear that no feasible combination of “new revenue” nor spending cuts will eliminate next year’s budget deficit, let alone begin to reduce the $16 trillion debt load and the much larger bundle of unfunded liabilities.

It is a certainty that the dollar will continue to decline in value, being the only possible way out of the financial mess. With Europe, England and Japan also in a mess, it becomes a race to the bottom for the world’s major currencies. Gold and other hard assets will continue to appreciate in price, as measured in dollars or other currencies.

Junior resource companies are not high on any investor’s list of favored investments at this moment – which makes this a good time to buy them. Once the current mood washes through the system, people will again realize that quality companies, adding value to gold and other metal deposits, represent an excellent way to protect against currency devaluation and at the same time gain the prospect of real returns.

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