Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Unemployment, A Boon for Silver

Commodities / Gold and Silver 2010 Jan 12, 2010 - 06:08 PM GMT

By: Dr_Jeff_Lewis

Commodities

Best Financial Markets Analysis ArticleThere isn't a single commodity, equity, or security that escapes the influence of the unemployment rate.  Typically, unemployment has lasting implications on investments, but for metals, it may be positive rather than negative.


Employment History

Every decade from 1940 – 2000 has experienced employment gains greater than 20%.  A strong manufacturing sector during the middle of the 20th century demanded so much labor that it was able to absorb an entire baby-boom generation following the end of World War II.  In fact, disregarding the 40% employment gain during the war period, the 1950s added an additional 25%, soaking up all of the then laid off combat troops.  The 1960s then saw another huge gain in employment at 33%, and each subsequent decade all posted 20% growth in employment. 

However, when you turn to the first decade of the 21st century, you find that the growth in employment was just about 1%, or 20 times less than the decade before.

Employment and Microeconomics

Employment has a dramatic impact on the micro view of economics.  When employment is growing and scores of workers are being hired rather than fired, the economy can withhold greater amounts of government intervention than is typical.  One of these thwarted interventions is inflation.  When velocity of money is high and there is healthy circulation of money, inflation is often negated.  However, in times when productivity and employment are weak, inflation has a greater impact on consumer prices. 

Think back to the high inflation rates during the 1970s (a period during which employment actually expanded when evaluating the entire decade).   The central bank, in an effort to soak up excess credit, sent interest rates to their highest point in history.  However, it didn't negatively affect the economy.  Future homeowners were still borrowing, the American auto industry was still buzzing along, and as a whole, the outlook remained positive.

Fast Forward 40 Years

Forty years after the inflationary 1970s, we are in a deep recession with higher inflation on the horizon.  The slack in labor suggests that the government and central bank cannot immediately cease spending or inflating, creating an environment in which absorbing extra credit would break the system.  Instead of calling back all the extra credit, the government will have to continue to inflate to replace job losses in the private sector in an effort to achieve the Keynesian desire for 100% employment.

What Unemployment Means for Metals

Commodities, particularly precious metals, are one of the few assets that will increase in value as the economy sours.  Since the government is currently between a rock and a hard place, unable to curb inflation without destroying the labor market, inflation is assured. 

A perfect storm of private and public sector debt issuance will likely prompt the Fed to keep rates low, and in fact, the Fed will possibly continue its plan to quantitatively ease the credit markets.  With all the stars aligning and unemployment rising, there has never been a better time to buy silver as a hedge against inflation.  Those who own physical metals are ahead of the curve.

By Dr. Jeff Lewis

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Len
13 Jan 10, 16:57
inflation and employment

I have to disagree with this part of the article-

"When employment is growing and scores of workers are being hired rather than fired, the economy can withhold greater amounts of government intervention than is typical. One of these thwarted interventions is inflation. When velocity of money is high and there is healthy circulation of money, inflation is often negated."

From 1945-1969 there was indeed inflation going on. The price of goods and services increased from 1945-1969, long before stagflation occurred.

All one need do is look at the buying power of thed dollar from 1945-1970 and you will see that indeed there was inflation going on at the time.

1945-buying power of the US Dollar was .97 3/4 cents

1969-buying power of the US Dollar was .47 1/4 cents.

Inflation, simply defined, is too many dollars chasing after too few goods. Inflation is a monetary event, not an employment event.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules