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Will collectors save America?

While the popular media reported on multiple record high closings for the Dow Jones Industrial Average and S&P 500 Index last week, did you realize that the spot price of silver outperformed both last week?

Or did you realize that the spot price of gold outperformed the U.S. Dollar Index last week?

The headlines don’t necessarily tell you what is really going on in the economy. Instead, the media headlines report what someone wants people to think or they just repeat announcements without bothering to dig into the real story behind the headlines.

Last Friday’s announcement of 217,000 net new American jobs was another example of a misleading headline. Had you read the full 200 pages of accompanying data from the Bureau of Labor Statistics, you would have seen that the headline figure included 205,000 jobs that were double counted by means of the BLS Birth/Death adjustment. If you exclude those, the corrected data is terrible news.

There were also three other significant economic developments last week that should have people worried. First, the interest rate on U.S. 10-year Treasury debt started to recover from its recent decline.  The higher this interest rate goes, the more financial difficulty the U.S. government will suffer as it debt service costs climb.

Second, the European Central Bank went from paying a positive interest rate on overnight funds that banks would park with it to charging 0.1 percent interest on such deposits. That’s right, banks that deposit such funds overnight will get back less than they put in. I have heard lots of people complain over the years that one of the drawbacks of gold and silver is that they “don’t pay interest or dividends.”  With the ECB’s negative interest rate, gold and silver just became a more desirable alternative.

Third, as I had predicted, the U.S. government revised its report on the first quarter 2014 Gross Domestic Product from an increase of a meager 0.1 percent to an actual contraction of 1.0 percent.  This news is bad enough even though it did not take into account the increase in consumer prices. Had this impact been factored into the pronouncement, the report would have been even worse.

In my opinion, there are a lot of coin collectors who, because they own gold and silver coins, will fare better financially in the coming turbulent economic times than people who don’t own precious metals. Can numismatists save America?  No, but they I expect they will derive some positive benefits – whether or not that was part of the reason they became a collector. They also are more likely to be ready to face whatever comes.

 

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com.  Other commentaries are available at Coin Week (http://www.coinweek.com and http://www.coininfo.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly” (http://www.lansingbusinessmonthly.com/articles/department-columns).His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).

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