Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

U.S. Economic Recovery Reality Bites

Economics / US Economy Jun 02, 2012 - 04:07 PM GMT

By: Peter_Schiff

Economics

Many people became convinced that data releases earlier this year indicated that "recovery" in the U.S. was imminent. But as I have been saying for months, this evidence would ultimately be shown to be as reliable as sightings of Bigfoot. Lots of people claim to say they have seen it, some even produce plaster footprints, but in the end all we have is a guy in an ape suit. The economic recovery, that has been discussed so loudly and often in recent months, will be shown to be similarly mythical.


A torrent of recent economic data now reveals weakness, and investors are beginning to take notice. Today's release of the May jobs report showed a paltry 69,000 jobs created during the month, far below consensus estimates. Not only did the current month disappoint, but the June numbers were also revised down by 49,000. This release follows yesterday's downward revisions of first quarter GDP growth from 2.2% to 1.9%. Also lost in the headlines was that the savings rate dropped to 3.4% in April, the lowest rate since December 2007. This shows that Americans may need to deplete their already meager savings just to keep their heads above water as the U.S. economy sinks back into recession.

The bad news sent stocks swooning. The latest sell off brings the S&P 500 down close to 10% from its levels in early April. On the other hand, bonds have reached record highs as investors seek safety in treasuries. However, I believe that treasuries will turn out to be the Facebook of safe havens. Before Facebook went public everyone wanted a piece of the action. But once the allure wore off, and people realized they owned shares of an overhyped company with unreliable earnings and a sky high valuation, the shares quickly lost a good deal of their appeal. Despite the best efforts of the media to declare the end of gold's appeal, the metal continues to shine. Today's reportalso sent gold up nearly 4 per cent. Gold is now down just 3 per cent from May 1, a period that has been horrific for other asset classes.

Oil prices continue to slide as traders brace for a fall-off in global demand that will come from the return of a global recession. What these traders fail to understand is that the recession will likely be resisted by central banks around the world with massive money printing. Such action will be much more likely to push oil prices back up to levels higher than those seen before the recent downturn. Yes recession means consumers will use a lot less oil, but inflation created by the central banks means that they will likely pay a lot more to purchase it.

In recent months as turmoil bubbled across the debt markets of Europe, the United States had beckoned as a safe haven. But in truth, the problems are as bad, if not worse, on this side of the Atlantic. Ironically, America has not had to deal with its day of reckoning because lesser problems surfaced first in Europe. But when Europe comes to some modest resolution of its problems, or when bond investors realize they have jumped from the frying pan into the fire, there will be no hiding from the unresolved problems here.

As the intoxicating effects of Fed stimulus wear off, the hangover is setting in. To delay the pain, I believe that there can be little doubt that the Fed will unleash its next round of stimulus, in the form of QE3. My guess is the Fed has always known more QE was needed but it has been waiting for the most politically palatable time to announce it. That "stunner" can't be far off with the data so bad and the elections so near.

Eventually more people will figure out just how precarious America's fiscal position truly remains. That's when interest rates will finally rise in the U.S. There is no way to justify record low interest rates in this country given our atrocious fiscal position. I believe interest rates here should approach levels comparable to the more indebted European countries. Once it becomes obvious just how many dollars the Fed is prepared to print to stave off recession, people running into treasuries today will likely suffer buyer's remorse. When they rethink their assumptions, as buyers of the Facebook IPO clearly have, the Fed will then become not just the buyer of last resort, but the buyer of only resort. Then the Real Crash may finally be upon us.

To save 35% on Peter Schiff's new book, The Real Crash: America's Coming Bankruptcy - How to Save Yourself and Your Country, pre-order your copy today.

For in-depth analysis of this and other investment topics, subscribe to Peter Schiff's Global Investor newsletter. CLICK HERE for your free subscription.

Peter Schiff

Euro Pacific Capital
http://www.europac.net/

Peter Schiff Archive

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


Post Comment

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

6 Critical Money Making Rules