It’s hard to believe that the world as we once knew it completely changed just two short years ago. And it’s hard to believe sometimes that that was only two years ago, as it feels like a lifetime ago already. But while much of the Western world has decided to move on and live with COVID, China is sticking to its COVID-zero policies, reintroducing lockdowns and hearkening back to early 2020. The effects of continuing those policies could be devastating.
Thinking Back to 2020
It’s important to remember just what was going on back then in 2020. President Trump was still pushing the Chinese government to increase its purchases of US goods, as the US was in the midst of a trade war with China. But China had already begun locking down significant portions of major cities like Wuhan due to the spread (or feared potential spread) of COVID.
Pretty soon much of China was locked down tight, and economic activity plummeted. There was a great fear that that decrease in economic production from China would end up reverberating throughout the West.
Unfortunately, we never got to see exactly what the effects would have looked like, as much of the Western world followed China into lockdown, forcing all but “essential” businesses to close for weeks or even months.
What was happening in the US economy at the time? Remember that in late 2019 we had seen signs of growing weakness in the US economy as overnight repo markets nearly froze. The Federal Reserve had to intervene in a big way, providing funding to keep liquidity flowing through those markets. It even resorted to a stealth round of quantitative easing, known by some as QE4, in order to reassure markets.
But once lockdowns came, so did recession. What followed was a short but extremely severe recession that rivaled the worst depths of the Great Depression. The economy rebounded somewhat once restrictions were relaxed, but the economy didn’t get back to 100% anytime soon.
Still, that short, sharp recession took a little bit of the air out of the asset bubble that had been building up, possibly forestalling what could have been an even worse recession in 2020. But then the Fed started laying the groundwork for a doozy of a recession.
Recession, Response, and Inflation
The federal government decided to respond to the lockdown-induced recession by engaging in fiscal stimulus of a magnitude that the world had never seen before. It spent trillions of dollars that it didn’t have in order to try to stimulate consumer spending and therefore the US economy.
The Fed didn’t have much of a choice but to monetize that debt and create money out of thin air in order to keep it from hitting debt markets. The odds of debt markets being able to soak up trillions of dollars of newly issued US Treasury securities was slim, coming right in the middle of a worldwide recession. Had the Fed not stepped in, there’s a good chance that the US government wouldn’t have been able to sell that much debt, or at least not at prevailing low interest rates.
So the Fed aided and abetted the federal government in its spending in order to keep government funding costs low. But by doing so, the Fed started sowing the seeds for the high inflation we’re seeing today.
Compared to two years ago, the US economy is in far worse condition today, with asset bubbles blown even higher than they were before, with far more indebtedness all around, with more people out of work, and with inflation that’s higher than it’s been for 40 years. And in the face of all of the that, the Fed is now deciding to tighten monetary policy by increasing interest rates and reducing the size of its balance sheet.
Against that already scary backdrop, we have the fact that China has returned to lockdowns. It’s like we’re back to 2020 all over again, with images of Chinese people being harassed in the streets by authorities or crying from their apartments that they’re starving.
Aside from the humanitarian issues that result from the lockdowns, there’s the fact that the lockdowns will also reduce China’s economic production, just like they did in 2020. And if China enhances its lockdowns, or spreads them to even more cities, there’s no telling how bad that could stress global supply chains that are still reeling from 2020 and that have the additional stress of the war in Ukraine to contend with.
This is a perfect storm of pressure being placed on world markets and international trade right now. Prices of raw materials, food, energy, and finished goods are climbing every day. No one knows from one day to the next when the next price increases are going to show up, we just know that they’ll come at some point.
Against an already bleak outlook for the future, we’re faced with the prospect of China shutting down its trade for some undetermined amount of time, something that could further roil international trade. Is it any wonder that people are worried about the future and looking to do something to protect themselves?
Protect Your Wealth With Gold
One of the most time-honored means of protecting wealth is through owning gold. For centuries, governments, investors, and ordinary people have trusted in the ability of gold to see them through tough times.
Whether it was the hyperinflation of Weimar Germany, the stagflation of the 1970s, or the collapse of the housing bubble in 2008, those who owned gold often saw themselves better protected than those who placed their trust in stock markets, bank accounts, or government promises. Many who saw their savings wiped out in 2008 saw how gold nearly tripled in price in the aftermath of the crisis, while stocks struggled to regain their footing. And that’s why many people are choosing today to place their trust in gold to protect their wealth.
If you’ve been saving for decades for retirement, you can’t afford to see your hard-earned investments disappear into thin air. And the closer you are to retirement, the more dangerous it can be to lose assets, as you won’t have time to make up for those lost gains before you retire.
Whether you have assets in a 401(k), 403(b), TSP, IRA, or similar retirement account that you want to protect with a gold IRA, or whether you have cash holdings or bank accounts that you want to use to buy gold coins, there is a gold buying option out there for you. All you have to do is educate yourself on the options in order to figure out which one works best for you.
Goldco’s representatives have worked for more than a decade to help thousands of people learn more about gold and benefit from owning it. If you want to learn more about how gold can help you weather the coming crisis, call Goldco today.