Gold in the Weak Economy

Oh, What a Tangled Web!

Let’s see.  The mainstream media has been wrong about almost everything!

So, why should we be surprised they are clueless about the economy? 

We’ll begin with the obvious.  Despite the Biden/Harris administration crowing non-stop about the great unemployment picture (and the lapdog press echoing their every word), In the last year, the economy has hemorrhaged 1.6 million full-time jobs, replacing them with 1.8 million part-time ones.

Is that good news?  

Now, we’re going to get into the weeds just a bit, but you will quickly see what is going on, that the health of the US economy is being misrepresented.  And that is just one more reason to protect yourself with gold and silver before someone points out that the King (Washington) isn’t wearing any clothes (it’s broke!).

Here’s the headline:  U.S. economy grew at a 2.8% pace in the second quarter, much more than expected.  That’s from CNBC.  

This kind of stuff is frustrating for people who know something about the economy.  Former US Budget Director David Stockman saw the same story reported on CNN.  You might want to see his take.  He is virtually at his wit’s end with this stuff.  That’s because the number that is getting all the attention distorts the true picture of US growth.  He writes:

It’s been obvious as hell for a long time that CNN is completely in the tank for the Democratic National Committee (DNC). But this AM they outdid themselves—rolling out some nincompoop economic weather-girl to claim that the Q2 GDP gain of 2.8% was “incredible” and a “high-five” for the Biden-Harris economy.

Stockman is at his wit’s end with this kind of reporting.  That’s because the numbers CNN is so excited about “doesn’t amount to a hill of beans.”

Stockman:

$71 billion or 44% of the allegedly awesome $260 billion increase in Q2 real GDP consisted of a large inventory stocking gain. Real GDP excluding the inventory swing rose by only $89 billion or a pretty limpid 1.6% at an annualized rate.

So it needs be recalled that the Commerce Department’s estimate of inventory gains and losses is one of the flakier components of the GDP in terms of its impact on the annualized headline number during any given quarter, yet its economic significance over any reasonable period of time is diminutive at best. That is to say, the impact of the inventory change figure on the headline number for quarterly GDP can be a big positive, a big negative, a nothing burger or anything in-between. Its impact on the longer-term rate of GDP growth, however, doesn’t amount to a hill of beans.

GDP numbers have plenty of other problems.  We have noted in this space for years that Washington likes to count government spending as part of GDP.  Stockman points to that as well, calling it “double-counting.”

So if you take out the double-counting that inflates GDP and inventory restocking, the economic growth picture is not something to rah-rah-rah about.

As it happened, the real government spending increase in Q2 2024 amounted to $30 billion or another 19% of the aforementioned $160 billion gain in headline real GDP. Again, therefore, if we remove the government double-count and the inventory restocking from the real GDP gain figures, the resulting increase in Q2 2024 is just +$59 billion.

That’s surely nothing to write home about. It represents just a 1.0% annualized gain from Q1 2024.

There’s more, including how the Commerce Department relies on unreliable inflation numbers in its GDP calculation.  We won’t go there because we’re already deep enough into the dismal science called economics.

However, the larger point is that the US economy isn’t what it was or should be.  Stockman points more dependable numbers that reflect the generational decline in America’s economic growth.

• Between 1953 and 1973 the economy grew at 4.0% per annum. 
• Between 1973 and 2001 the economy only grew at 3.1% per annum.  
• Between 2017 and 2024 the economy only grew at 2.28% per annum.  

And today the media is cheering about economic growth that without the rose-colored Washington eyeshades, is probably only 1 percent.  And that is nothing to cheer about.

Because a weak economy cannot sustain a reliable global currency, much less a $35 trillion debt load, you will want to protect yourself and your family with gold and silver.