Do high gold prices reflect deficit worries?
There’s not a loss of confidence in the U.S. You’d see a much bigger increase in 10-year Treasurys if it were so. Gold reflects a general concern about uncertainty, as well as inflationary pressures in India and China, where people want to buy gold.
Third round of quantitative easing — possible?
QE2 has helped in the market, but unemployment remains high. It’s too early to tell on a third round. They’ll be careful about going too far. If employment stalls or goes backwards, you’ll see more innovative ideas.
Will Congress raise the debt ceiling?
They have to raise it. If they don’t, it would cause a major economic disruption, and whichever party was responsible for that would be out of power for 20 years. I don’t think anybody wants to be responsible for that.
So this plays right into the 2012 election.
What’s meaningful is the pending debate between what seems to be the Paul Ryan position, predominant for the GOP, and what seems to be Obama’s position, for the Democrats. That will be important for 2012. It’s a substantive, important debate.
How much will high gas prices affect economic growth?
The high price is certainly not helpful. If it goes much higher, it will be cause for concern. If prices go back to the level they were in summer 2007 — that was definitely not a good place to be.