80% of Americans Worse Off Than Pre-COVID: Are You One of Them?

According to recent data published by the Federal Reserve, over 80% of Americans are worse off now financially than they were before COVID. The top 20% of households are actually in slightly better shape, with more savings built up than before COVID, but the rest of the country isn’t so lucky.

On the one hand, this probably shouldn’t be surprising. Government handouts in the form of stimulus packages, combined with high inflation, have hit Americans with a double whammy, first getting them addicted to spending and then hitting them with higher prices for everyday goods.

The deterioration of savings among American households is worrying for a number of reasons, and not just for the families who are seeing their standard of living being eroded. Households who have fewer savings are also less likely to fare well in the event of recession, as job loss or investment losses can exacerbate an already precarious financial situation.

The 2020 Recession Was Different

One of the reasons we’re seeing this news reported is because this behavior is so different than other recessions. Normally after a recession starts, households start to tighten their purse strings and build up their savings.

That was the case in 2008, as household savings increased significantly. But savings increased even more significantly in 2020 and then once again unusually decreased significantly as well.

It’s puzzling that researchers find this puzzling, as the 2020 recession was unlike previous recessions. Previous recessions have been the result of economic forces acting in the aftermath of economic intervention by monetary authorities.

But the 2020 recession was a deliberate recession, one that was caused by governments that intentionally shut down their economies in an ill-conceived attempt to stop the spread of COVID. It was inevitable that mass shutdowns would result in a major recession.

The solution to the recession, however, was even more half-baked, with massive federal stimulus spending sending checks directly to American households. The Federal Reserve had to monetize the debt issued to fund that spending, which eventually resulted in massive inflation.

So the excess “savings” that occurred was really just American households getting free money from the government. And the drawdown in “savings” was just Americans spending that money as fast as they could.

Trying to analyze the 2020 recession and draw lessons from it is pointless if you don’t understand that it’s a one-off, and unlike any recession that we’ve ever had before. The one lesson that can be learned from it is that lockdowns don’t work and will sink your economy. Let’s hope our political leaders remember that the next time around.

The Suffering Is Real

Despite 2020 being different, the reality is that most American households are worse off than before COVID. They blew through the money that was given to them, and prices today have now risen so much that people are struggling to get by.

Rosy aggregate economic figures are the result of this dichotomy in the US, in which the wealthiest households keep getting richer and richer, while the vast majority of households get poorer and poorer.

The wealth gains of the rich outweigh those of the middle class and poor, and so from an aggregate perspective things look really great. Meanwhile, life for most of the country keeps getting worse and worse.

By now everyone is starting to realize that things aren’t really going that well. Savings rates are dropping, savings are being eroded, inflation continues to take a bite out of people’s wallets, credit card debt is the highest it’s ever been, and credit card delinquency is increasing.

This isn’t the sign of a strong economy, it’s the sign of one that’s slowly weakening. And if it falls into recession outright, millions of households are going to have a hard time weathering it.

How to Recession-Proof Yourself

The question for many people today is how they can try to improve their financial position ahead of a potential recession. Bond yields are starting to fall as markets expect an end to Fed rate hikes and see the potential for future rate cuts.

But inflation is still taking a sizable chunk out of people’s savings and investments, over 3% per year according to official calculations. And if the Fed returns to looser monetary policy, inflation could start rising again. So what can you do?

Many Americans have already started to try to recession-proof their savings and investments by buying precious metals like gold and silver. Gold and silver have a long history as safe haven assets and hedges against inflation.

While the US dollar has lost 87% of its purchasing power since 1971, the gold price has risen over 5,000% since then. And both gold and silver have a proven track record of performing well during times of high inflation.

During the stagflation of the 1970s, for instance, when inflation rates rose into double digits, gold and silver both grew at annualized rates of over 30% per year over the course of the decade, while their inflation-adjusted annualized growth rates were over 20% per year.

Gold and silver also both did well in the aftermath of the 2008 financial crisis, with gold nearly tripling and gold more than quintupling from their 2008 lows. With that kind of history, it’s no wonder so many Americans today are trying to protect themselves with gold and silver.

With so many available options to choose from, from direct cash purchases to gold and silver IRAs, demand for gold and silver remains strong. And Goldco has been at the forefront of helping get gold and silver into the hands and IRA accounts of thousands of Americans.

With over $2 billion in precious metals placements and thousands of satisfied customers, Goldco has helped numerous people benefit from owning gold and silver. If you’re looking to protect your financial assets against inflation, recession, or other financial calamity, call Goldco today to learn more about the gold and silver options available to you.