Economic Woes Could Boost Precious Metal Prices

While some politicians are trying to pretend that the U.S. economy is recovering or strong, there is a lot of data coming out showing otherwise.

To measure the impact of the pandemic lockdowns, the Census Bureau began taking the Household Pulse Survey in 2020. The Aug. 7, 2023, survey results are dismaying:

• In January 2021, the survey reported that 80.53 million Americans found it “somewhat” or “very” difficult to pay their household expenses. In the August 2023 survey, that number had grown to 86.92 million people.

• The August 2023 survey found that in the prior month, 85.46 million Americans had turned to credit cards, personal loans, and other forms of debt to meet spending needs within the past seven days. In the August 2022 survey for July 2022, that number of people was just 74.89 million.

• Credit card delinquency rates – which measures the proportion of credit customers who have fallen behind on their bills – have increased for seven consecutive quarters and are now higher than before the pandemic lockdowns. Auto loan delinquencies in the second quarter of 2023 also were higher than before the pandemic.

Two weeks ago, the U.S. Bureau of Labor Statistics (BLS) released its annual Consumer Expenditures Report for 2022. From the end of 2020 to the end of 2022, the average income per consumer unit rose 11.4 percent. While that might sound good in some circumstances, it was dwarfed by the 19.0 percent rise in consumer unit expenditures. Income less expenditures fell by $1,984 per consumer unit.

Last week’s BLS monthly reports on the Consumer Price Index showed a sharp increase in consumer prices. Similarly, last week’s Producer Price Index and the Import and Export Prices Indexes also showed comparable increases, which portend continuing accelerated consumer prices going forward.

Also last week, the U.S. Census Bureau issued a news release that last year real income in America declined, and the poverty rate increased:

• As measured in 2022 dollars, median household income in 2022 was 2.3 percent lower than in 2021. As this was happening, the cost of living rose at the third highest rate over the past 42 years.

• The official U.S. government poverty rate was virtually unchanged from the prior year. However, the Census Bureau admitted in the news release that this figure is not correct because it only considers money income without any consideration of rising prices or higher taxes. It only analyzes pre-tax income. But, the news release went on to disclose that the Supplemental Poverty Measure (SPM), established 12 years ago to more accurately reflect poverty (it starts with pre-tax income, adds stimulus payments, tax credits, and other poverty transfers, then subtracts income taxes paid) jumped from 7.8% of the population in 2020 to 12.4% in 2022. That means 15 million more people are impoverished now than they were two years earlier.

The current federal budget deficit is soaring again this year, partly from the higher interest rates being paid to borrow ever more debt, now over $33 trillion. The federal government’s interest costs for the current fiscal year are approaching $1 trillion, up 50 percent from the previous fiscal year.

What is not being reported in the monthly jobs and unemployment reports is that the number of part-time jobs has been increasing this year as the number of full-time (“bread-winner”) jobs has been declining.

Data like this helps explain why the U.S. government’s increase in its expansion of the money supply, spending, and budget deficits are accelerating the decline in the purchasing power of the U.S. dollar. This happened during President Carter’s administration, when gold and silver prices reached $800 and $50, respectively, in January 1980. It again happened during and after the Great Recession, where the Levy Economics Institute 2011 working paper found that the federal government had extended $29.6 trillion in subsidies, loans, and bailouts (posted here), resulting in silver soaring to $50 at the end of April 2011 and gold reaching over $1,900 in September that year.

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Even though a silver supply squeeze was averted a month ago, the massive amount of government spending in recent years looks to me like gold and silver prices will once again soar as the value of the dollar continues to fall. Already, the price of gold has recently reached all-time high levels as measured in Chinese yuan and Saudi Arabian riyals. Within the past two weeks, the spot price of gold in China has been as much as $120 higher than in London; the silver price in China has been as much as $2 per ounce higher than the London market. How soon will soaring gold and silver prices again show up versus the U.S. dollar?

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Answer to the Previous Trivia Question

Last week, I asked: The American Numismatic Association’s longtime lamp of knowledge logo is similar to what central device on the seal of which major university? The answer is the University of Michigan.

This Week’s Trivia Question

This week’s trivia question: How much more valuable in the marketplace was the scrip issued by Clark, Gruber & Co. during the Civil War, which was redeemable on demand for physical gold, compared to the U.S. government “Greenbacks,” which were not redeemable for gold or silver? Come back next week for the answer.

Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award, and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including in 2021 for Best Investment Newsletter), the Professional Numismatists Guild, the Industry Council for Tangible Assets, and the Michigan State Numismatic Society. He is the communications officer of 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 the Liberty Coin Service website. Some of his radio commentaries titled “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 archives.