Almighty Dollar

Now Or Never

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Double-Dip Baloney …

Larry Edelson | September 12, 2011

Not for nothing, but in my view all this talk about a double-dip recession in the U.S. is a bunch of baloney that misses the real issue …

A. The United States economy never even came out of its recession in the first place. And …

B. Our economy is already in a depression, one that’s about to get a whole lot worse.

First, the true unemployment rate in this country is at least 22%. Not the 9.1% mythical figure Washington is reporting.

Second, from its 1925 peak, the median home price in the U.S. fell 12.57% into a bottom in 1932. Compare that to the 32% decline since the property peak in 2007.

Third, in 1929, total U.S. debt as a percent of GDP stood at roughly 290%. Today, it’s approaching 1,000%, and growing. That’s equal to 10 times our country’s economic output!

Fourth, U.S. high-yield corporate bond default rates last year hit their highest level since the Great Depression.

Fifth, there are at least half a dozen more stats I can cite that are already worse than those seen in the Great Depression. From durable goods production and sales, things like autos, etc., to the number of families requiring public assistance, to the number and rate of children that are now homeless.

So no matter how I look at it, our country is not heading into another recession. It’s already in a depression. In fact …

 

In real terms, the U.S. economy has
already contracted more than it did
during the Great Depression.

 

In today’s world of floating fiat currencies, it’s very difficult to measure changes in the value of anything without a benchmark, since the dollar itself floats in value.

That’s why I often prefer to use honest money — the price of gold — as a value-measuring yardstick, because over time, gold always holds its purchasing power.

.  .  .  back in the 1930s — and all the way through 1971 — the U.S. monetary system was on a gold standard. In 1932, for instance, just before President Roosevelt devalued the dollar, $1 was equal to roughly 1/20 of an ounce of gold.

.  .  .  today, one dollar is worth roughly 1/1865 an ounce of gold.

So now, let’s take a look at our country’s GDP in terms of the amount of gold it can buy.

 In 1932, our country’s GDP was worth 2.8 billion ounces of gold.

 In 1971, it was worth 27.74 billion ounces of gold. Put another way, our country’s GDP was almost 10 times what it was in 1932. So over that 39-year period, the purchasing power equivalent of our country’s GDP grew almost 1,000%.

In 2000, the purchasing power of our country’s GDP continued to appreciate and would purchase 34.54 billion ounces of gold, a 24.5% increase.

But at year-end 2007, it was worth only 16.87 billion ounces of gold. A whopping 51% CONTRACTION in the purchasing power of our country’s GDP!

Think that’s bad? As of July 31, 2011 — latest GDP data — our country’s GDP would purchase a mere 7.72 billion ounces of gold.

That’s a 54.2% decline since the peak of the housing bubble in 2007 …

And a whopping 77.65% decline in GDP since the end of the year 2000.

If that’s not a contraction, if that’s not a depression in real honest money terms, I don’t know what is.

Of course, almost everyone will argue with me about the above analysis, the main objection being that I’m viewing the economy in terms of gold only, and that the contraction I speak of is merely because the price of gold has gone through the roof.

[But] if 5,000 years of gold holding its purchasing power doesn’t give it the right to be a measuring tool, then what tool would you use? Paper money?

Folks, the U.S. economy is already in a depression. Deep in a depression. Problem is, almost no one realizes it.

Read more here.

Filed under economics economy gold paper money unemployment rate double-dip depression recession GDP U.S. economy Federal Reserve

  1. bankerpigs posted this