With fears of recession rising, and growing uncertainty over the future of the economy, it seems that more and more people are looking towards gold and silver as safe haven assets Both gold prices...
Many Americans reflexively trust experts when it comes to issues with which they don’t have much experience. Whether it’s doctors, lawyers, or economists, they trust that the experts are devoted to finding and spreading the truth. Unfortunately, many times those experts are anything but, and the trust that is placed in them is abused.
The realm of economics is an interesting one because it’s one in which not many people are really knowledgeable. Few people undertake a thorough study of economics in college, and even those who study economics very often are taught by practitioners of economic theories that place more emphasis on developing elaborate mathematical models than in actually observing the world around them.
It’s not surprising, therefore, that many economists get things wrong when predicting what will happen to the economy. And that has given rise to sayings like, “Ask five economists a question and you’ll get seven different answers.”
But while many Americans may evince a distrust for economists and their opinions, many others still believe them, especially when their predictions line up with their political views or their preconceived notions. With more and more economists today predicting that the US will avoid a catastrophic recession, are these economists right, or are they misleading the American people and giving rise to false hope?
What Economists Are Saying
In a recent survey of economists, fewer than 50% of them believed that there was a probability of recession within the next year. According to these economists, some of the reasons pointing away from recession were:
- Declining inflation;
- Strong labor market and economy; and
- No more rate hikes.
Of course, there are some problems with all of this.
1. First of all, inflation isn’t declining. It’s jumped up from 3% year on year to 3.7%. And while it’s remained steady since then, that’s still higher than the Fed’s 2% target rate.
Inflation may very well not have caught up to the Fed’s massive post-2020 monetary stimulus. After a 30% increase in the money supply, prices only rose about 18% according to official inflation figures. So while the Fed may be cutting the money supply, it may not be cutting it enough to where it’s actually going to drive inflation down to 2%.
2. Secondly, the labor market and economy are showing real signs of weakness. Every day brings new reports of companies shedding jobs to cut costs and realign with weakening spending and a slowing economy.
While the recent 4.9% GDP figures were shockingly high, there are two considerations that most people failed to consider. First, government spending is counted as part of GDP, and the federal government, which was expected to run a $1.4 trillion deficit as of February, is now projected to run about a $2 trillion deficit in Fiscal Year 2023.
Guess which quarter would have seen the bulk of that extra debt-fueled spending? The national debt increased nearly $900 billion just in the last month of the second quarter, after the debt limit was suspended. And all of that spending is included in GDP figures.
Then there’s consumer spending, another reason for the strong GDP numbers. Consumer spending is supposedly “strong” as well, as consumers are in fact spending more money. But that’s not because they actually have money, it’s because they’re driving up their credit card debt to the highest levels they’ve ever been.
Overall credit card debt is up nearly 27% since the beginning of 2022, and continues to climb. On a scary note, however, delinquency rates are up from 1.66% at the beginning of 2022 to 2.77% today.
3. Third, we don’t know that the Fed is actually done raising interest rates. With conflicting data coming in, and the press crowing about the “strong” and “hot” economy, there’s every reason for the Fed to raise rates at least once more, especially as inflation is still higher than the Fed would like.
Furthermore, it’s actually when the Fed begins to cut rates that we need to fear recession. Fed policymakers, like most economists, are backward-looking, and only diagnose recessions after the fact. So when the Fed begins to cut rates, that’s a sign that the economy is flailing and possibly falling into recession.
What’s Actually Happening
As is often the case, the media likes to create its own narrative. And many people who don’t know any better take that narrative at face value.
That’s the case for many economists too, unfortunately. The data that is coming out right now may seem to be rosy at first glance, especially if you don’t look under the hood. But under the hood things aren’t as good as they appear.
There’s also the fact that a lot of economic data is lagged. The time it takes for the data to be collected, processed, and published takes a lot of time. Then many figures, like those for GDP or jobs numbers, are then revised after the fact.
So sometimes really rosy figures that indicate massive job gains end up being revised after the fact to show job losses instead. Of course, by that time everyone has forgotten about the months-ago data and has moved on to the next shiny thing.
Everyone who is paying attention to what is going on throughout the economy, to what inflation has been doing, or to money supply growth, is understandably worried about the bubbles that have been created throughout the economy. We realize that interest rate hikes are impacting the economy and slowing things down.
We realize that the federal government is spending trillions of dollars that it doesn’t have, and that the monetization of that debt risks keeping inflation high. And with all of this staring us in the face, we still have media figures trying to gaslight us into thinking that all is well.
Time will tell just how wrong economists are when they predict that recession isn’t coming. Remember when Fed Chairman Ben Bernanke stated in January 2008 that the Fed wasn’t forecasting a recession? The joke was on him, because the economy was already in recession.
The next recession may be slow in coming, but it’s coming. And most people, even economists, won’t realize that it’s here until it’s blindingly obvious.
By that point, of course, it will be too late for many people to protect themselves from the negative impacts of recession.
Protect Against Recession With Gold
You don’t have to wait until recession is upon you to protect yourself against recession. During the 2008 financial crisis, markets lost over 50% of their value, destroying trillions of dollars in savings and investments in a matter of months.
Many people who lost big back then vowed that the next time around they wouldn’t suffer such losses. And one way they vowed to protect themselves was by buying gold.
The gold price gained 25% during the same time period that markets lost over 50% of their value (October 2007 to March 2009), and went on to set all-time highs a few years later. How many people kicked themselves after seeing that happen?
Many of those people undoubtedly learned their lessons from that experience, as gold demand has been quite strong over the past several years. From gold IRAs to direct cash purchases of gold, gold sales remain strong as Americans of all backgrounds look to protect their assets against recession.
With over $2 billion in precious metals placements, Goldco has helped thousands of Americans benefit from owning gold. And the more than 5,000 5-star reviews we’ve received speak volumes about our commitment to quality products and exceptional customer service.
If you’re worried about your financial well-being during the next recession, could gold help you safeguard your assets? Call Goldco today to learn more about the many benefits of owning gold.
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