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*Monday, August 9, 2010
Why All the Double-Dip
Talk Is Pure B.S. ...*
by Larry Edelson<http://www.gliq.com/cgi-bin/click?weiss_uwd+48302-4+UWD483>
Dear Helen,
[image: Larry Edelson]
If the recent slew of bad economic news coming out of the U.S. hasn't
convinced you that the economy stinks, then it's time to wake up and smell
the coffee. Because ...
*All the recent talk about a double-dip*
*recession is nothing more than pure B.S. *
Why? Because the U.S. economy ...
A. Never emerged from a recession. Period.
Quite to the contrary, in reality ...
B. The economy is already in a depression.
The problem is that no one wants to admit it. Certainly not in Washington.
Not on Wall Street either. And, unfortunately, not even on Main Street.
But the fact of the matter is that *in real terms, the U.S. economy has
already contracted more than it did during the Great Depression. *
I'll prove it to you in a minute. But before I do, here are a few simple
facts that also show you that the economy is either rivaling the depths of
the 1930s, or is already in worse shape ...
*First, the true unemployment rate in this country is at least 22%*. Not the
9.5% mythical figure Washington is reporting.
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You see, Washington plays with the unemployment number. The figure they
report every month is what they call the "official" unemployment rate. But
it includes only those ages 16 or older who are not currently employed, but
are able and available to work, and "actively seeking work."
The problem: Washington conveniently leaves out people who are working
part-time, people whose hours have been dramatically cut, and "discouraged"
workers — those who are ready, willing and able to work — but have
essentially given up looking for a job because they can't find one.
Add these workers into the mix and you have an unemployment rate of 22.7% —
more than double the so-called official number and almost as bad as the
Great Depression of the 1930s.
And that's just a nationwide average. In places like Detroit, Los Angeles,
Allentown, Pa. and other urban areas, the real unemployment rate is as high
as 40%, far worse than during the Great Depression.
[image: If you include part-time and 'discouraged' workers, the actual
national unemployment rate is 22.7% — almost as bad as the Great
Depression.] If you include part-time and "discouraged" workers, the actual
national unemployment rate is 22.7% — almost as bad as the Great Depression.
*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 31% 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 380%, and growing.
Put another way, it now takes $3.80 to produce $1 of GDP, compared to $2.90
during the Great Depression. I don't know about you, but to me, that's not
real economic growth. It's debt-riddled growth.
Moreover, when debt is growing so rapidly, there is simply no way the
economy can produce the same amount of *unencumbered *goods and services
than it did just a decade ago.
*Fourth,* U.S. high-yield corporate bond default rates last year hit their
highest level since the Great Depression. And although they've come down a
bit since then, there's no doubt in my mind that corporate bond default
rates are going to surge dramatically higher in the months ahead.
*Fifth, *total corporate and personal bankruptcy filings each year in the
U.S. are now more than double the number of filings that occurred during the
entire decade of the Great Depression.
Sure, bankruptcy laws have changed dramatically, making it far easier for
individual and corporations to stave off creditors, with far less stigma.
But is that a good thing? Or does it merely make things look better on the
surface?
Either way, I repeat, we're talking bankruptcy filings in a single year that
are now more than double the filings that occurred in the entire Great
Depression.
*Now, for the real proof the economy*
*is already in a Depression.*
Back in the 1930s — and all the way through 1971 — the U.S. monetary system
was on a gold standard. In 1933, for instance, $1 of GDP was equal to 1/35
of an ounce of gold.
In 1971, it was equal to about 1/42 of an ounce of gold. Then, Richard Nixon
severed the link between the dollar and gold once and for all.
Don't get me wrong. I do not advocate a gold standard. Never have, never
will. But you simply must understand that just because the world is no
longer functioning on a gold standard — doesn't mean you cannot — or should
not measure values in terms of gold.
As a matter of fact, you should. Measuring values in terms of an asset that
represents the real value of money is the only real way to measure anything
today. That's even truer these days than ever before because paper
currencies are so fickle and volatile in nature.
So now, let's take a look at our country's GDP in terms of the amount of
gold it can buy.
And let's do a simple comparison of 1932, the depths of the Great Depression
... with 1971, just before the gold standard was abolished ... the year
2000, the peak of the tech bubble ... the year 2007, the real estate peak
... and the latest GDP data.
Let's see what's really happening — in terms of how much gold the country's
GDP can purchase at those different points in time.
[image: U.S. GDP In Terms Of Gold Purchasing Power]
Here's the summary, and a chart to go along with it ...
[image: arrow] In 1932, our country's GDP was worth 2.8 billion ounces of
gold.
[image: arrow] In 1971, it was worth 27.74 billion ounces of gold. Put
another way, our country's GDP was almost ten times what it was in 1932.
[image: arrow] In 2000, our country's GDP would purchase 34.54 billion
ounces of gold.
[image: arrow] At year-end 2007, it was worth only 16.87 billion ounces of
gold.
[image: arrow] As of March 31, 2010, our country's GDP would purchase a mere
13.08 billion ounces of gold.
That's a 22.47% decline in three years, since the peak of the housing bubble
... and a whopping 62.13% decline since the end of the year 2000.
If that's not a contraction, if that's not a depression in real terms,
I don't know what is.
Of course, almost everyone will argue with me about the above analysis,
their main objection being: I'm just viewing the economy in terms of gold,
and that the contraction I speak of is merely because the price of gold has
gone through the roof.
But I ask you the following questions, and I'll let you answer them ...
If gold isn't real money, then what is? Paper money?
If so, then why does paper money — in almost all cases — buy you less than
it did a couple of years ago ... five years ago ... ten years ago ... fifty
years ago?
Why does a barrel of oil cost nearly eight times more than it did just ten
years ago, when in gold terms, the price of oil is the same?
For the economy's current GDP to equal the same gold purchasing power it had
in the year 2000 — 34.54 billion ounces of gold — the price of gold would
have to plummet by more than 64.5%. **
What are the chances that's going to happen, when the Federal Reserve
recently stated it would print as much as $5 trillion more in funny money to
try and turn the economy around, by
papering over the mess?
Folks, the U.S. economy is already in a depression. Deep in a depression.
And as I said at the outset, almost no one realizes it.
Hopefully, you do. And hopefully, you're taking the steps necessary to
protect your wealth, so that it does not suffer the same devastating losses
in real terms.
And further, so that you have a solid plan to profit from what almost no one
else recognizes.
Best wishes,
Larry
P.S. Stay ahead of the curve with all my analysis, all of my
recommendations, all of my flash alerts, strategies to protect and grow your
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