The Economy Feels Weaker
The economic sentiment out in the world of business is beginning to sort of lull in our opinion again. Well it’s not like things have gotten worse overnight and we are well aware of the grander picture on things, but with rising gas prices and volatile gold markets, the menstrual cycle of the economy can simply throw people in a funk. As we’ve pointed out time and time again, thoughts and emotions are what drives markets, not always supply and demand, specifically in the “intangible” paper markets.
News of the Week
Employees who have been laid off and rehired are accepting an average of 17.5% less compensation, and most of the jobs being added are lower-tier positions, economists say. The millions of unemployed people competing for jobs reduces the “bargaining power” of employees seeking better wages, says Heidi Shierholz of the Economic Policy Institute. It is so common now to talk with people who are for one not working, and also many who are working jobs that they have not been trained and specialized in because of lack of options.
Housing prices are at 9 year lows. The Standard & Poor’s/Case-Shiller Home Price index sank in December to its lowest since 2002, suggesting the housing market remains a threat to the economic recovery. The index dropped 4% compared with December 2010.
Keep in mind this is happening with interest rates still near 0%. The threat of the inevitable interest rate hike will be a wildcard for the housing market that will most likely drive prices down even further.
This week, we saw the volatility of gold and silver. In the beginning of the week, futures rose as the U.S. dollar fell and the euro strengthened. Gold futures for April delivery advanced 0.8% on Tuesday, settling at $1,788.40 per ounce on the New York Mercantile Exchange. Silver futures for March delivery rose 4.6%, to settle at $37.14.
Yesterday there was a bit of a short panic
and a sell off in the paper prices of metals. By Wednesday, Gold futures fell as much as $100 to below $1,700 an ounce on signs that the Federal Reserve will refrain from offering more monetary stimulus to bolster the U.S. economy. In testimony before Congress, Fed Chairman Ben Bernanke gave no signal that the central bank will take new steps to boost liquidity.
This sent a panic into the paper markets, but we are confident that gold and silver will snap back in the near future.
Experts are expecting average gas prices to rise to $5 dollars per gallon across the country. With tension rising in the Middle East and China’s demand for energy growing, the possibility that Americans will soon pay $5 a gallon for gas is steadily becoming reality, experts said. The national average Wednesday was $3.73 a gallon, according to AAA’s Daily Fuel Gauge Report. For some readers, $5 dollars per gallon doesn’t seem that far off considering the average price in California’s average is $4.32. Common sense reasoning would predict a collapse in demand as gas rises past $5 dollars per gallon effectively crushing the cost of oil per barrel. CrushTheStreet.com believes that inflation is what is going to keep the prices high.
Even in the positive light, the Fed continues to shine on the forecasts that are coming out, Bernanke even conceded that gas prices rising are likely to slow the growth potential of the economy, which most likely means depression if he’s willing to call it a slowdown.
This week the European Central Bank will throw a lot more money at the very painful problem of the eurozone’s debt and banking crisis. The ECB on Wednesday has offered banks, for the second time, an unlimited volume of cheap three-year loans. This will likely offer some form of stability for the short-term, but will probably buy less time than anyone would have hoped.
The truth on the facts of the economy are slowly getting around to those around the world. GATA refers the lack of interest that people have in the global affairs and economic matters as cognitive dissonance. It can be compared to the house wife who has no interest or concern for who won the Superbowl this year. The only difference between sports and real world matters is that much of the things that we are talking about will have a direct impact on all of society. The good news is that more and more people are waking up to the possibility of serious disruptions to our system. Something that caught our eyes as we were watching TV is a new show on National Geographic called “Doomsday Preppers.” Four years ago, this would have been some show on a obscure youtube channel put on by a guy in a tin foil hat as far as the view from the greater portion of the population. Just the fact that this show is on prime time on a popular channel and the possibilities are being discussed, gives us hope that people are waking up and that real change will be demanded from those who can make a difference. If we are going to have a mobocracy, we might as well have it work for the greater good of America.
Ron Paul Asks Bernanke If He Does His Own Grocery Shopping
It’s always of great interest to CrushTheStreet.com when Ron Paul directs his comments and addresses Ben Bernanke directly. We’ve posted this video on our front page for our members to views. You can visit CrushTheStreet.com or use this image link below to watch.
|Financial Services Hearing Highlights Feb 29 2012|
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