Debt-to-GDP and Misdiagnosing a Bubble Economy’s Ills. Guest Post by Tim Iacono

A few economists seem to be catching on, but not nearly enough…

About a year ago, St. Louis Fed President James Bullard wondered whether too much faith was being placed in what models say economic growth should be but, as detailed in When Models Trump Common Sense, he was rebuffed by nearly the entire establishment (or at least “a small army of bloggers with PhDs in economics”).

Now, in a story at Project Syndicate, Raghuram Rajan, Professor of Finance at the University of Chicago Booth School of Business and the IMF’s youngest-ever chief economist tries to explain Why Stimulus Has Failed and, in doing so, questions whether the root cause of our current economic troubles is simply a lack of demand, casting himself as an Austrian sympathizer in the process: Read more…

About Tim:

Tim Iacono is the founder of the investment website ‘Iacono Research’ (http://iaconoresearch.com/), a subscription service providing market commentary and investment advisory services specializing in natural resources. He also writes a financial blog, formerly known as ‘The Mess That Greenspan Made’, a sometimes irreverent look at the many and varied after-effects of the Greenspan term at the Federal Reserve.

Disclaimer:

The views expressed in the posts and comments of this blog do not necessarily reflect APMEX Inc. They should be understood as the personal opinions of the author. No information on this blog will be understood as official.

 

Gold Dips- Jobless Claims Down

Analysts had expected an increase in jobless claims but the number of Americans filing for unemployment benefits fell to its lowest level since January 2008.  This is the second straight week of falling claims.  The unemployment rate held steady at 7.8 percent.  Although is appears many companies are not laying off workers as anticipated, they are adding new jobs at a slow rate. Some economists caution while interpreting these numbers, there is usually a lot of volatility this time of the year.

The Gold price fell overnight without breaking a key technical level.  For five days the Gold price has been just below $1,695 and ounce, an important level for Gold.  Additional pressure came against Gold as the U.S. House voted to suspend the nations borrowing limit until May 19 in effect pushing the debt ceiling threat down the road.

At 9 a.m. (EST), the APMEX Precious Metals spot prices were:

  • Gold, $1,674.70, Down $14.00.
  • Silver, $31.86, Down $0.62.
  • Platinum, $1,683.70, Up $8.10.
  • Palladium, $723.90, Down $3.30.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EST)! Or call us Fridays until 6 p.m. (EST)! If you have any questions about investing in precious metals or simply would prefer to place your order by telephone, we are here to help.

Gold Price Eyes U.S. Election

U.S. stock futures and Precious Metals are up across the board this morning, as Americans are slated to elect the next U.S. President.  The fact that both stocks and Metals are gaining seems to be foreshadowing the close race which is expected throughout the day and night, with recent reports saying that an Obama win would be bullish for Gold, while a Romney win would be bullish for stocks.  Analysts from Danske Research said in a note to investors, “The biggest concern in the financial market is that the Congress will not be able to agree on softening the impact from the fiscal cliff facing the U.S. next year.”

The managing director of Egan-Jones, a sovereign debt ratings firm, said that even if Congress is able to reach a deal on the fiscal cliff, downgrades are still likely to happen.  Sean Egan said, “The key measure on sovereign credit quality is debt-to-GDP, in the case of the U.S., it’s risen rather dramatically, from four years ago at 75 percent debt-to-GDP, to currently over 104 percent…  Regardless of who’s elected, either one is going to have to deal with a rather high deficit…”  Standard & Poor’s, another credit-ratings agency, downgraded the U.S. rating in 2011, which ignited a record run for the price of Gold.

At 9 a.m. (EST), the APMEX Precious Metals spot prices were:

  • Gold, $1,692.90, Up $8.20.
  • Silver, $31.37, Up $0.20.
  • Platinum, $1,543.50, Up $2.30.
  • Palladium, $617.70, Up $13.70.

Gold retains investor confidence

The markets for Gold and other commodities are going strong thanks to more economic issues in the United States and Europe. While the price of Gold has been steady, the stock market has been anything but. Menachem Brenner, a finance professor at New York University’s Stern School of Business, said, “People have lost confidence in nearly every other instrument, so they invest in Gold. Over the past 10 years, commodities have become a new asset class if you want to diversify beyond stocks. More institutional investors are coming in. This will be going on for years to come.”

Germany is going to be a major factor in the way Europe handles the financial crisis it faces. How the Germans factor into the equation will be a hot topic at the European Union summit on Thursday. The focus will be on which nations will lead the recovery efforts. However German Chancellor Angela Merkel says the focus needs to be more long term. “I say quite openly, when I think of the summit on Thursday, I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”

In the United States, the November elections are on the minds of Americans. The question may not be who will be elected, but what he will do once elected. In a recent poll, the answer to who will do the best job with the economy was “none of the above.” An Associated Press poll conducted from June 14 to 18 shows the majority of those asked said the winner will have “just some impact” to “no impact” on the economy. Not even one-third of the American voters polled said they think the economy will get better in the next year.

At 1 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,585.30, Up $17.90.
  • Silver, $27.58, Up $0.81.
  • Platinum, $1,441.20, Up $8.00.
  • Palladium, $607.50, Down $0.70.