Imprudent reactions and false hopes

Updated: Dec 10, 2020

I love imprudent reactions. In fact when it comes to silver bullion there have been plenty of days in which I have witnessed tremendous kneejerk reactions. In the past 48 months seemingly these kneejerk reactions have often been centered around, or appropriately spun in some sort of "goldilocks" framework, headlines about the US economy getting better and better.

From the mordant timbre of the first paragraph surely the reader knows by now where we are heading. That is to say that nobody can predict how long governments can get away with forged growth, fake money, false financial stability, bogus jobs growth, phoney inflation numbers and fake income growth. My feeling is that confidence, especially when it is unwarranted, is quite a thin veneer. When confidence is lost, that loss can be stark, impulsive and simultaneous across a number of markets and sectors. The International Monetary Fund (IMF) has put this into perspective.

The IMF now suggests that the global output per head will contract by 4.2% this year, vastly more than the 1.6% recorded in 2009, during the global financial crisis. 90% of all countries will experience negative real growth in terms of GDP per head this year versus only 62% in 2009 when China’s robust expansion helped to soften the blow.

Well the truth is that there has been little to no manufacturing resurgence, real career job opportunity growth, wage increase or overall organic economic growth to discuss as the Trump administration had hoped there might be in relation to most sectors that were boasted as being the best out there. With Covid now looking to interrupt at least part of if not all of 2021 this is an indication that low paying non career jobs will more than likely be at the forefront of many of those gutless job reports that are ultimately nothing but headline fodder.

There has been a growing number of economists, analysts and otherwise generally knowledgeable people who are now coming out of the closet to suggest that the US is now reaching a prolonged recessionary phase.

In fact official recession calls are actually the responsibility of the National Bureau of Economic Research (NBER) and more specifically the somewhat apropos named Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions.

In September of 2010 the NBER marked the moment officially called the end of the recession. So as far as they were concerned the US had been growing ever since well into the next big boom cycle. Other than this there is a definite lack of actual empirical data or updated information proving anything but that there are paper pushers and headline spinners being hired all over the world to put and keep the agenda of the elite in place as they continue to enslave the public with the idea of paper as the savior to their future.

There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:

  • Industrial Production

  • Real Personal Income (excluding Transfer Payments)

  • Nonfarm Employment

  • Real Retail Sales

None of these have been spectacular but numbers get changed, altered, manipulated and rearranged all the time. The overall picture of the US economy is one of painful reminders of steep and utter lack of resilience. We believe that without significant near-term improvement it will be very difficult to avoid rolling over into another historical long-term business cycle downturn.

When I consider this data it is easy to surmise the outcome for the next year. 2021 is going to be a year of uncertainty and perhaps without knowing the full details and having complete transparency there is nothing we can do but to protect our wealth with hard assets. The simple truth is that the world economy despite covid outbreak should have simply been better by this point in time.

It has become overwhelmingly clear that many governments have essentially given up and instead have moved to a non-transparent quantitative easing economic approach as opposed to using solid, fundamental policies to create sustainable, strong growth in output, incomes, innovation, entrepreneurship and good jobs.

For the first time in my history of 46 years, and I am certain for the first time in history, the world’s largest governments have essentially given up on policy to drive growth generation and instead have delegated the task to the central bankers.

The last piece of evidence that I would like to put forth for an argument of where the US economy stands pertains to the age cohort we refer to as the “Millennials”. These are individuals who currently fall under the age of 35.

If we are to witness a true rebound in terms of real economic growth, especially as it relates to the “Big Four” economic indicators, then we must see improvement in the upcoming age cohorts in terms of their economic stability and we are not.

I worry about the millennial population because quite frankly when you consider their juxtaposition of debt versus median net worth it is devastating to think that this age cohort will have less than us but it is more than likely they will. They will be inheriting more debt than ever before, using more debt to get themselves educated and attempting to enter a job force which is delving out fewer career positions than ever before in recent history.

This also comes at a time when, despite the last few months, they are now saving less than ever before. The turnabout in savings tendencies shows how the personal finances of millennials have become increasingly hazardous despite supposed years of economic growth and sustained job creation. A lack of savings increases the susceptibility of young workers in this falsehood economy, leaving many without a financial headrest for unexpected expenses, raising the difficulty of job evolutions and leaving them further away from goals like eventual homeownership, zero debt living and eventually retirement, the age of which will likely be much higher in their future.

Wealth has been built on the backs of savers. These are but a couple of examples for which myself or any other decent analyst could ramble on about ad nausea until the sky began to fall. Or we could just pick up a copy of the mainstream business magazines and read the headlines. I am sure those will put us at ease. Until the truth returns to the system and until we are all willing to take a big cut in our standard of living we continue to live on borrowed time. I will continue to own physical bullion in the form of gold and silver until that time comes.

Yours to the penny,

Darren V Long

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