The average person's way of life appears to become worsening, conforming to Doug Casey's preferred definition of a depression: a period of time in which the average person's standard of living decreases. What is somewhat surprising is the fact that Mr. Marketplace appears to have realized that last Friday, and that might be substantial going forward. Learn more about GOLD >>> http://www.priceofgoldperounce.us
Regardless of some positive information, the international economy is displaying indicators of slowing, a outstanding improvement in itself whenever you think about all of the cash printing and deficit spending that is transpired over the previous few years. According to the IMF's overview, international development was less than anticipated in the first quarter of 2013, at just over 3%, that is roughly exactly the same as 2012. The lower-than-expected figures had been driven by considerably weaker domestic demand and slower development in emerging-market economies, a deeper recession in the euro region, along with a slower US expansion than anticipated. The report concludes that the prospects for the globe economy stay subdued.
Many investors think about a weak economy to become a bearish atmosphere for commodities, such as gold. Doug Casey says we have entered into what will turn out to be recognized because the Higher Depression. That is as bearish because it gets, so should we anticipate gold to decline when the bears are right?
One of the rockiest financial periods in contemporary times was the late 1970s. For all those who do not keep in mind, the period was characterized by:
Unexpected jumps in oil prices, top to soaring gasoline prices and rationing
A falling dollar
High and accelerating inflation
Record interest rates
Wars, such as the Iranian Revolution (1978), the Iran-Iraq war (1979), the Russian invasion of Afghanistan (1979), and also the Iranian hostage crisis (November 4, 1979 to January 20, 1981).
Outside of the Great Depression, it is hard to determine more tempting financial situations.
Here's a closer look in the three-year period from 1977 through 1979. In the following chart, we looked in the financial indicators that impacted citizens and investors probably the most, displaying which had been getting better and which, worse. These elements would all have impacted marketplace sentiment and also the appetite to invest in gold in the time...
You are able to see that by the time 1979 hit, inflation was increasing, gas prices had been soaring, incomes had been dropping, and mortgage rates had been climbing. The S&P was increasing, but not so much in real terms. GDP development was high, however it was clearly not a rosy time for consumers or workers. Key points:
Nominal GDP in 1979 increased 10% year over year, however it was 4.5 percentage points less than in 1978, when the economy expanded a whopping 14.5%. Real GDP changes didn't reach these highs but kept to the trend: in 1978 the development was 5.6%, while during 1979 the economy expanded only 3.1%, notably slowing down. Learn more about GOLD >>> http://www.sellmygold.us
Inflation was dramatically accelerating. The '70s was a hard time for the dollar, much of it connected to the energy crisis. Annual inflation grew from 5.7% in 1976 to 7.6% in 1978, and accelerated to 11.2% in 1979. Prices had been up considerably, especially these that had energy costs associated with them, squeezing the average American budget tighter and tighter.
Gasoline prices rose almost 37% in 1979. This obviously impacted spendable income. It would be the equivalent of national gasoline prices hitting $4.54/gallon by December after starting the year at $3.32.
Real disposable personal income slowed in 1979, growing only 1.2%, compared to a 3.5% development rate just a year earlier.
Mortgage rates had been already high-and then shot higher. The interest rate to mortgage a home went from 8.8% in 1978 to 11.2% in 1979. Home values had been increasing dramatically due to inflation, though rate increases cooled the pace, as values slowed to a 14.7% rate in 1979 vs. 15.3% in 1978.
Real manufacturing and trade sales (listed as Real Trade Sales in the chart) weakened from 7% in 1977 to 2.4% in 1979. This is a broad indicator that includes manufacturing, merchant wholesalers, and retail sales. The likely culprit for the drop was falling personal incomes as prices had been increasing.
The S&P 500 went from negative territory in 1977 to logging a 12.3% gain in 1979. As inflation rose, so did nominal stock prices, however the real gain was a mere 1.1%.
Unemployment was decreasing during this period, from 7.1% in 1977 to 5.8% in 1979. This may seem at odds with a slowing economy, but labor looked cheap since prices had been growing faster than wages. Also, unemployment is a lagging indicator-and it sharply worsened later, when another recession hit in 1980.
So how did gold perform during this challenging financial atmosphere?
The gold price rose 23% in 1977 and 37% in 1978, both of which are considered financial expansion years. But as things worsened in 1979, the price accelerated and went into a mania, ending the year with an incredible 127% return.
While there are many variables at play and no two financial time periods will be exactly the same, this history lesson signals that a sluggish economy is not necessarily an obstacle for gold doing well. Indeed, some of these elements directly contributed to the rush to gold that is not just a commodity, however the single best tool for storing and transferring wealth (cash) ever devised.
In short, there is no contradiction between Doug Casey's gloomy international financial outlook and his bullishness on gold. In our view, the former is the reason for the latter, along with a very good reason to buy. When the history of the current bull cycle for precious metals even slightly rhymes with what happened in the 1970s, the marketplace mania that lies ahead should bring us the biggest and fastest gains on our investments to date. Now is a great time to buy gold while the prices are inexpensive. Learn more about GOLD >>> http://priceofgoldperounce.us