America: A new crisis around the corner?Blog added by Fred Greene on July 21, 2011
Atlas Precious Metals Exchange

Fred Greene

Boca Raton, FL

Joined: June 27, 2011

Most economists around the world believe the U.S. will eventually be in another recession. Almost every indicator in the country points to it.

The chances that the U.S. might slip into another recession are 25 percent - 30 percent, Alan Greenspan, reputable economist and former chairman of Federal Reserve said mid-last year. He added that the only possibility to reduce the double-dip recession probability was the recovery in asset base, in other words rising asset prices.

This was a couple of months after criticism against Wall Street analysts fearing the risk of inflation more than another recession. That the debt, and not rising inflation, was the real danger for the U.S. economy, was then confirmed by President Barack Obama who urged the Congress, in a pre-recorded interview broadcast by CBS News a week ago, to raise the debt ceiling before it hits its current limit.

And this was only seen as a solution to avoid a “worse recession,” Reuters quoted Obama as saying in an interview. It will probably be a difficult thing to do, if we think Republicans made it clear this debt ceiling decision is largely dependent on the deficit-reduction measures they proposed, focusing on spending cuts.

The problem is there could not be a worse time for America to cut spending. Robert Reich, former U.S. secretary of labor, currently a professor of public policy at UC Berkeley and the author of the new book, “Aftershock: The Next Economy and America’s Future,” wrote on his blog a couple of weeks ago:
    Over the long term, the budget deficit does have to be tackled. But not now. When job growth remains tepid, when wages are dropping, and when the value of most households’ major asset is declining, the government has to step in to maintain overall demand.
And the only way to prevent this is cut public spending or reduce money supply.

At the same time, the difficult economic situation in Europe will also be a source of distress for the U.S. economy. Europe has already started to cut its imports from the U.S. as it implements bailout policies. Moreover, Europe eventually will have to send out its export to the U.S. to extricate from the crisis.

To top it all, China’s economy is a matter of concern these days. If and when the bubble on the Chinese real estate market bursts, the government will most likely take measures to export its goods to the U.S. The warning is crystal clear and comes from Russian analysts: if governments do nothing but sit on their hands, the global economy will suffer from a third tremendous depression in recent 150 years.

The prices of precious metals will most probably soar because of these recent unofficial statistics pointing to a double-dip U.S. recession, the collapse of the bond market and hyperinflation and inducing panic into the precious metals’ market. And this is a good indicator for the economy, considering that when the price of precious metals (primarily gold) is high, the economy is usually either in crisis or inflation.

When the economy and the stock market are healthy, the gold prices are low. Hence, recent trends in precious metals can tell a lot about economic developments and investment opportunities.
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