Gold, Silver, Economy + More
By: Bob Chapman, The International Forecaster
Posted Sunday, 25 November 2007
The consumer started cutting back in February of 2006. That is when our recession began. It began to manifest itself a year ago as weakness showed up in manufacturing. That weakness is now more obvious. The recent consumer confidence figures tell us the real estate collapse, the lack of real estate equity cash out, the results of free trade, globalization, offshoring and outsourcing and the credit crisis are all simultaneously taking their toll. Next comes the stock market collapse. That tells you all you should be out of revolving debt and long gold and silver related assets.
This recession will not be sector by sector. It will be all encompassing simultaneously. Consumer spending and borrowing will not hold up this time, everything is going into the tank. Twenty-five years of ‘shop until you drop’ is over.
That 70 to 72 percent of GDP that came from consumption will drop to the long-term norm of 64.5% and will eventually drop much lower.
The fuel to keep consumerism on the march was easy, inexpensive credit. That game is over. We see the coming recession/depression as deep and long lasting, perhaps to 2012 or longer. This time it will be a replay of the 1930s and perhaps worse. Initially we see a minimum 20% decline in housing from here and a $400 billion reduction in spending over the next two years, or a reduction of 4% of income. This is the most conservative estimate possible.
The dollar will fall to 40 to 55 on the USDX, the dollar index. It is currently about 75. That will help exports, but it will only increase GDP about ˝% according to the B.I.S. Luxury purchases domestically will be hit, as well as autos and other big-ticket items as well as discretionary spending. It should be noted that import prices will rise 25% or more for a reduction of $200 billion in imported goods. Retailers will be hit hard. We are going to see five bad to very bad years and perhaps more. Get out of debt and get gold and silver related assets...