sovereignman: As we slide into the end of yet another year in which the nominal price of gold has posted a positive return, I thought it would be interesting to take a look back on history to get a better understanding of where we are today.
It’s obvious that, for many reasons, the size of the global economy is far greater than it was decades ago. We learn in any basic economics course that, over the long run, enhanced productivity and increased technology drive long-term production gains.
Certainly, an economy can produce more widgets if you’re a lean, mean, automated machine… as opposed to a blacksmith with a hammer and forge.
But there are other factors as well. Population growth. Accounting standards. And of course, the continued inflation of the currency. $1 today buys a whole lot less today than it did a century ago, so when comparing, it’s important to find a better standard of measurement.
There are a number of pricing yardsticks we could use… like the cost of a New York City cinema ticket (25 cents in 1935, $20 today). But it would be awkard to calculate GDP in terms of billions of cinema tickets.
Gold is a much more appropriate (though still imperfect) long-term standard of pricing, with its history as a store of value dating back to the ancients.
With this in mind, I collected the appropriate data on gold prices, population, and GDP in the United States since 1791 and plotted GDP per capita denominated in ounces of gold.
Everywhere from FoxNews.com to CNBC.com, I suddenly see commentators warning of pending doom, economic collapse, and a new Great Depression. Welcome to my club. Perhaps America’s politicians and economists should have paid attention to an entrepreneur and small businessman that has been warning of economic collapse and a new Great Depression publicly for over two years.
More importantly, none of the current commentaries mention the “why’s” of this slow motion economic collapse…beyond the obvious — mountains of deficit and debt. None of them mention the dysfunctional structure of the current U.S. economy and the massive changes in the work ethic and mindset of the average American.
I am a successful small businessman and a patriot who loves America and always sees its greatness. I am also an optimistic, positive thinker who always sees the glass half full.
But not this time.
This time we are in such deep trouble, the only solution is a radical restructuring of the politicians, the economy, and the way we view personal responsibility versus government handouts. If those changes don’t come then we are facing a long decline and the eventual end of America.
This time the results are going to be dramatically worse than 1929. This time we are facing The Greatest Depression ever.
Why? Because The Great Depression had NONE of the structural, economic, and social problems, nor the massive obligations we are now facing. Read the facts:
In 1929 America was not $16 trillion in debt, plus facing over $100 trillion in unfunded liabilities. That’s over $360,000 in debt per citizen.
In 1929, most of our states were not bankrupt, insolvent and dependent on federal government handouts to survive. One county (Cook County which includes Chicago, Illinois) now owes over $108 billion in debt (the biggest part of it in unfunded government employee pensions).
In 1929, we did not have 21 million government employees with bloated salaries, obscene pensions, and free health care for life. Today 1 out of 5 federal employees earn over $100,000.
Today, 77,000 federal employees earn more than the governors of their states.
Due to the “dysfunction and polarization” in Washington the U.S. economy faces a prolonged weak outlook, Pimco’s Mohamed El-Erian told CNBC.
With the country just hours away from going over the “fiscal cliff” of steep tax increases and spending cuts, the co-CEO of bond giant Pimco gave a dour outlook of what lies ahead.
“The new normal is a stagnant economy with an overlay of political polarization and dysfunction,” El-Erian said in a “Squawk Box” interview. (Read More: Hours From ‘Fiscal Cliff,’ Washington Still Awaits Deal)
El-Erian first coined the “new normal” term during the financial crisis to describe a period of weak growth then that was supposed to have waned by now.
With globalization, technological and demographic changes restricting growth, investors should seek returns from commodities such as oil and gold
Money manager John Hussman, chairman of Hussman Funds, is among those who think it is. “We continue to believe that the U.S. economy joined a global economic downturn during the third quarter of the year,” he wrote to investors recently.
He notes that most of the forward-looking indicators, including “industrial production, capacity utilization, real disposable income, real personal consumption, real sales, retail and food service sales, and real manufacturing and trades sales” are all pointing down.
The Economic Cycle Research Institute agrees, and recently announced that a recession may have begun as long ago as July. The combined economic signal coming from industrial production and personal income, noted ECRI in a recent report, “has never occurred outside a recessionary context in over half a century – but it’s occurred in every recession.”
Walk around the mall this week: You’ll see a lot of terrific sales, and probably not that many customers. Retailers have been forced to slash prices to unload their inventory after what looks like a weak Christmas.
MasterCard reports that holiday spending was up just 0.7% this year, a fraction of the 4.1% predicted by the National Retail Federation. MasterCard’s report, based on spending on its cards, is only the first on the topic and it is not the final word, but it is ominous.
No wonder retail stocks on Wall Street are rolling over. Stocks like Target and Macy’s have fallen about 10% since the week before Thanksgiving. Tiffany & Co. has lost 15% since the start of November.
The holiday season is vital to the economy: 70% of the U.S. economy is based around personal consumption….
Remember the Great Recession that began in December, 2007? The economists at the National Bureau of Economic Research, who are basically the official scorekeepers of recessions, didn’t discover the recession until December, 2008 – a year late, and only a few months before the episode (officially) ended.
Indeed I distinctly remember any number of economists, financial gurus and money managers during the first half of 2008 telling me (and every other reporter) that we were already “past the worst” and that the economy was going to pick up in the second half of the year.
The previous recession began in March, 2001 – but the NBER didn’t call it a recession until November 26 of that year. By amazing coincidence, that was actually the month it ended (as they told us many months later).
The recession that began in July, 1990 wasn’t called until April the following year. The recession that began in July, 1981 wasn’t recognized until January of 1982. And so it goes.
Economists, it seems, are like the old joke about husbands. They’re always the last to know.
The U.S. population is on track for its slowest decade of growth since the Great Depression….
The slow rate of growth during the first part of the decade indicates the U.S. continues to emerge slowly from the worst economic downturn since the 1930s. The nation’s birth rate and immigration fell in the aftermath of the 2007-09 recession. Between 2000 and 2010, the Census Bureau reported the nation’s population grew by 9.7 percent.
Reuters via AOL: Planned layoffs at U.S. firms rose for the third month in a row in November, partly driven by the bankruptcy of Hostess Brands, a report showed on Thursday.
Employers announced 57,081 job cuts last month, the highest level since May and up nearly 20 percent from 47,724 in October, according to the report from consultants Challenger, Gray & Christmas, Inc.
November’s job cuts were also up 34.4 percent from the 42,474 seen a year ago.
Employers have announced 490,806 cuts in 2012, lower than 2011’s total of 606,082 layoffs.
The recent surge in layoffs is at least partly attributed to the bankruptcy of Twinkies maker Hostess in November. That accounted for 18,500 of the jobs lost. The computer industry, which has led layoffs for the year, cut 3,313 jobs last month.
“Job cuts this year have really been driven by a handful of large-scale cuts,” Rick Cobb, executive vice president of Challenger, Gray & Christmas, said in a statement.
The Christmas holidays does not necessarily offer respite, Cobb said, pointing to the 11,000 job cuts that Citigroup announced as an example.
The Citigroup job cuts were part of a larger bloodbath taking place on Wall Street in 2011 and 2012. According to Bloomberg Businessweek, Wall Street eliminated some 300,000 financial services jobs in the last two years. And experts predict that more layoffs on Wall Street will be coming in 2013.
“The knives are sharpened and ready,” Jason Kennedy, chief executive officer of London-based search firm Kennedy Group, told Businessweek. “…Unless the markets pick up, there will be more cuts in the first half.”
The Challenger report comes a day ahead of the key U.S. jobs report, which is forecast to show job growth slowed sharply in November in the wake of superstorm Sandy….
RON PAUL’S NEW YEARS RESOLUTIONS FOR CONGRESS: STOP THE DEBT, SPENDING, & WARS, START FOLLOWING THE CONSTITUTION & BILL OF RIGHTS!
By Ron Paul:
As I prepare to retire from Congress, I’d like to suggest a few New Year’s resolutions for my colleagues to consider. For the sake of liberty, peace, and prosperity I certainly hope more members of Congress consider the strict libertarian constitutional approach to government in 2013.
In just a few days, Congress will solemnly swear to support and defend the Constitution of the United States against ALL enemies, foreign and domestic. They should reread Article 1 Section 8 and the Bill of Rights before taking such a serious oath. Most legislation violates key provisions of the Constitution in very basic ways, and if members can’t bring themselves to say no in the face of pressure from special interests, they have broken trust with their constituents and violated their oaths. Congress does not exist to serve special interests, it exists to protect the rule of law.
I also urge my colleagues to end unconstitutional wars overseas. Stop the drone strikes; stop the covert activities and meddling in the internal affairs of other nations. Strive to observe “good faith and justice towards all Nations” as George Washington admonished. We are only making more enemies, wasting lives, and bankrupting ourselves with the neoconservative, interventionist mindset that endorses pre-emptive war that now dominates both parties….
“I think that if we don’t go over the full fiscal cliff, because we will go over some sort of a cliff even if you only raise the rates on the high-bracket people, and even if you cut back on the sequester, there still will be jolts to the economy,” Ross said.
“So the question isn’t whether or not we go over a cliff, it’s just how steep is the cliff.”