Gold price interest confirms recession outlook says The Economist
Posted on 04 September 2011 with 8 comments from readers
The latest issue of the extremely popular magazine The Economist drums up a long-list of unlikely recession indicators. But the most curious was a correlation between searches on Google for the gold price and past recessions.
Without infringing copyright we cannot reproduce the graph but the correlation between a surge in searches on the Google Internet search engine for ‘gold price’ and periods of recession was pretty much spot-on. Needless to say there was a massive surge in these searches in August.
Gold antipathy
However, commentators like The Economist still do not understand gold. Every article they have written on the yellow metal over the past decade has contained wholly wrong conclusions about the price! It has gone up and up, and none of the downs has been more than transitory.
The reason for this gross error is that The Economist has a fixation on gold as an indicator of market sentiment rather than as an alternative currency. They flagged this up again this week with the Google search indicator, and ignored the bigger picture on precious metals that they ought to understand better as leading global economists.
What you should be comparing the gold price to is the inflation of monetary aggregates. Think of the $16 trillion pumped into the global economy by the Fed over the past three years. Where did it go? What did that mean for the total volume of money in circulation?
Did the supply of gold and silver rise by the same amount? Of course not, and neither did the available supply of many industrial commodities and that is one reason why we have experienced rising prices in a recessionary slump.
Gold endgame
The endgame for gold and silver only comes at very much higher prices once you understand this background. The money printing is not about to stop, or if it does this will only be a pause before a recession shocks the central banks to print even more, so the gold price will go up.
But what happens then? Eventually the bond markets of the world will be swamped by new money and crash, and then the value of paper money will really plummet. That is when you will really want to be holding gold and especially silver which is even rarer.
The Economist really needs to rethink its approach to precious metals and become a convert to real money as the only one with a future. Many of its readers have already got it.
8 Comments posted by readers:
This is the Economist article:
http://www.economist.com/blogs/dailychart/2011/08/us-confidence-indicators
To follow the Editor’s theme, here is an Economist article from July 2011. Impeccably written, cogently argued, and completely missing the point.
http://www.economist.com/node/16536800
You will see the same kind of stuff at the FT.
Perhaps if The Economist was not run by it’s largest shareholders, The Rothschilds, they might be more inclined to call the emperor’s new clothes out.
The Economist must have inspired Gordon Brown some years ago…..hahahaha
Sadly, the Economist is stuck in the rut of Keynesian thinking, refuses to admit that gold and silver are “truth tellers”, and refuses to see that they are the only “real” currencies.
Footnote: They are probably owned by the Power Elite . . .
Don’t knock the Economist Gold Buy signal, how would we know when to buy Gold if The Economist didn’t tell us not to.
I blogged on this in May and on the Australian version.
http://ausbullion.blogspot.com/2011/05/pascoe-buy-signal-flashes-for-silver.html
@ Tears:
Excellent read on the Pascoe “Buy Signal”.
I suspect that the Rothchilds now will order their cronies at the Economist to “double down” on the number of their negative commentaries regarding gold and silver.
@Obewon:
Thanks, you were right the establishment has come out batting for the short side.
This article was re-published in the main broadsheet newspaper in Sydney on Tuesday this week, what a shocker:
http://www.smh.com.au/business/dump-your-gold-in-favour-of-shares-20110906-1jvl5.html
Ed Note: 10-15 years out equities may well show the best return but over the next 1-2 years gold and silver will shine while stocks will tank, and then tank some more. Same for real estate and then finally the bond market. Then interest rates are reset, savers return to investing and the whole up cycle can start again (for the survivors).
@ Tears and @ Peter, the Ed.:
I just read the article you referenced, and while I believe physical gold and silver are headed much higher, I strongly believe, as Peter has stated, that the Big Bad Bear will suppress all stocks, including gold mining stocks for the next year, at least. So I can’t quite agree with the gist of that referenced commentary. Of course, there are exceptions here; high quality gold mining exploration firms could see significant capital appreciation for their stock offerings over the next few years.
And Then There’s Manipulation of Mining Stocks:
Without a doubt, the world now has a massive amount of solid evidence that proves the big banks (including European banks such as DB) are acting in concert with their masters (i.e. their governments) to suppress the price of gold.
Stock Market Money to Head into Mining Stocks?
These corrupt banks know their history; they know what happened in the 1930s, subsequent to the 1929 crash (i.e. gold mining stocks surged, while the general market tanked for many years!). Do we believe for a second, that governments want a repeat performance like that? Nope.
So what’s to prevent these crooks from suppressing the gold and silver mining stocks, in order to restrict the flow of money out of stocks and bonds? They’ve already been doing it on a small scale this year, and they’ve found that it’s far easier to manipulate the mining stocks than to suppress gold/silver on the COMEX.
In sum, western banks and western governments certainly do not want a large percentage of stock market or bond market money going into gold/ silver mining stocks. That would present another nightmare for them.