Gold prices have been used as a store of wealth for centuries. Naturally, prior to the modern period, the monetary system was quite basic and rudimentary. Gold prices can be quite erratic and have a history of massive swings. One issue with gold prices is that supply can and does come back into the market. Unlike other commodities that are used up, such as oil, when gold prices move up, people can sell their holdings, which can be melted down and added to the world supply again. High gold prices are usually a sign of a lack of faith in paper money, usually due to inflation, which erodes the value of fiat money.
As most of you know, the consumer represents the largest part of our economy. The key to getting our economic recovery moving forward is to ensure that consumer confidence continues rising. The only problem: consumer confidence isn’t rising—in fact, it’s dropping sharply.
One of the few reports available on recent consumer confidence (due to the government shutdown) is the Bloomberg Consumer Comfort Index, which showed a significant drop from -9 in September to -31 in October. This latest reading is now the lowest level of consumer confidence since November of 2011. (Source: “Consumers’ Outlook for U.S. Economy Plunges to Two-Year Low,” Bloomberg, October 17, 2013.)
Now, I know what you’re thinking: consumer confidence naturally took a hit when all of the shenanigans in Washington began, culminating in the U.S. government shutdown.
That is true. A big part of the drop in consumer confidence was directly due to the ridiculous position that Washington imposed on all of us. And I’m sure when we begin to see the economic releases flowing out of government agencies again, the news will be that the economic recovery has stalled due to the impact of the shutdown.
However, there are two points that still bother me.
The first is that prior to the government shutdown, the level of consumer confidence, at least from the Bloomberg Consumer Comfort Index, was still very low. It’s not as if consumer confidence and the economic recovery were barreling full steam ahead, and then all of a sudden the government shutdown let down the anchor.
The truth is that both the economic recovery and consumer confidence were far below optimal levels … Read More