1-866-646-8465
CHARTS
0

Your Cart:

Subtotal: $0.00

The Dog Days of Economic Growth

dollar sign growing out of a pot like a plant with a hand holding the pot against a sunny sky background

The Dog Days of Economic Growth

dollar sign growing out of a pot like a plant with a hand holding the pot against a sunny sky background

The summer solstice describes the moment when the sun is the highest in the sky. Its rays are angled directly overhead and are at the pinnacle of power. It also represents the turning of the wheel of the year. It’s a tipping point and in the Dog Days of 2017, things have started to topple.

It has not been a “summer of love” for the U.S. dollar. The greenback declined against most major currencies in the first half of 2017 and on Friday, slumped to a 10-month low. So far this year, the USD is down 8% against the surging Euro and an astonishing 13% against the Mexican peso. After rising on the prospects of tax reform and infrastructure spending, the dollar has succumbed to the reality of political partisanship and a distracted White House.

And then there is the curious case of the Fed. Citing concerns about stubbornly low inflation, Fed Chair Janet Yellen is sounding oddly dovish. In her testimony to Congress last week, she seemed to dial back expectations for stepped-up monetary tightening:

“We continue to anticipate that it will be appropriate to raise the target range for the federal funds rate when the Committee has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

The persistent weakness in inflation has suddenly undermined the case for hawkishness and undercut the argument for aggressive monetary tightening. For most Fed watchers, this has all but taken a September rate hike off the table.

While soft inflation data seems to have surprised the Fed, the dip in retail sales has surprised everyone else. Spending at department stores, supermarkets, service stations, and sporting goods outlets fell in June for a second straight month. Americans also spent less at bars and restaurants. U.S. shoppers are simply not parting with their money and since consumer spending makes up more than 70% of the economy, this clearly sets off alarm bells.

Spending and consumer confidence are by far the most important catalysts of economic growth. If they slow too much, a recession could follow.

Several theories have been put forward to explain the pullback in spending, including low-wage growth, overly cautious baby-boomers, lingering financial stress, delayed deflationary buying, and the online shopping explosion. While all of these are viable, what’s perhaps more worrisome is that spending typically contracts during times of economic and political uncertainty which brings us to the stymied and stonewalled Trump agenda.

Despite promises to fix Obamacare—now besieged by folding co-ops, fleeing insurance providers, and double-digit premium increases—no legislation has been passed into law. After campaigning on comprehensive tax reform to slash rates, stimulate business activity, and jump start economic growth—no tax plan has been put forth by the new administration.

Obamacare in its current form has resulted in higher costs, higher deductibles, higher premiums, and fewer choices for millions of Americans. Since healthcare spending makes up 20% of the U.S. economy, without a solution, we risk decimating the American consumer and undermining the economy. Likewise, the United States has the third highest corporate tax rate in the world. Taxes are crushing small businesses which, according to the Small Business Administration, provide 55% of all jobs and account for 66% of all net new jobs since the 1970s. Without comprehensive tax reform, America’s job engine could stall.

It’s hard to see how the economy moves forward without a healthcare fix and a tax relief plan. And the endless disruptions, distractions, and delays coming out of Washington do not bode well for either agenda item.

True to its safe haven attributes, gold thrives in environments like this. It is highly resilient in the face of a weak dollar, a dovish Fed, reduced spending, a wary consumer, and a dysfunctional government. While red-tape and rigmarole continue to reign in D.C., gold has stepped up to provide a safe haven in the face of fiscal uncertainty and on-going political paralysis.

So, in this summer of stagnant growth and partisan deadlock—the solstice continues to be a symbol of renewal. It is a celebration of strength, a release of old patterns, and a definitive call to action. Likewise, gold persists as the quintessential hedge. It is a lasting store of wealth, a powerful diversification tool, and a timeless protector of savings.

 

 

Recent Articles

Gold’s Path to $4,000/oz. Looks Clear

Gold’s Path to $4,000/oz. Looks Clear

Gold shattered another record last weekend, climbing past $3,100/oz. for the first time in history. This milestone comes just weeks after gold broke through $3,000/oz., highlighting the growing momentum behind this historic rally. I’m not surprised. The forces driving...

The Current Market Meltdown and What Comes Next

The Current Market Meltdown and What Comes Next

As I write this, consumer and business confidence is plunging as the tech-heavy Nasdaq and broader-market S&P 500 stock indexes have fallen into correction territory, defined as a price decline of 10% off a peak, which for both indexes came only a month ago. The...

Gold’s Climb Past $3,000 Signals More to Come

Gold’s Climb Past $3,000 Signals More to Come

Last Friday, gold made history by breaking through the $3,000/oz. barrier for the first time ever. While this milestone is significant, if you think gold’s rally is over, think again. It’s very likely this is just another step in gold’s long-term climb. Gold’s latest...

Rising Debt Levels Point to Higher Gold Prices

Rising Debt Levels Point to Higher Gold Prices

What are we to make of gold’s recent price fluctuations? I’m not concerned. Gold needs a little time to consolidate above $2,800/oz. before making an assault on $3,000/oz. That has been the pattern over the last year or so. First, it was $2,000/oz., then $2,300, then...

How Shifting Consumer Sentiment Points to Gold’s Resilience

How Shifting Consumer Sentiment Points to Gold’s Resilience

If you’ve been paying attention to the news lately, you’ve probably noticed a lot of uncertainty about the economy. Inflation is still a concern, the job market is showing signs of weakness, and according to the latest Consumer Confidence Survey, Americans are feeling...

Banks Are Betting on Higher Gold Prices

Banks Are Betting on Higher Gold Prices

Gold has been on a relentless climb, breaking through record highs with ease. Just a few weeks ago, I was writing about how gold prices had broken above $2,800/oz.—then, just one week later, they topped $2,900/oz. As I write this, gold prices are closing in on the...

Start diversifying today

   1-866-646-8465

As one of the largest distributors of precious metals in the nation, U.S. Money Reserve gives you access to our highly-trained team.

U.S. Money Reserve Gold Kit and Global Gold Forecast Special Report Thumbnail
The Ultimate Guide

Free Gold Information Kit

Sign up now to receive the ultimate guide to gold ownership, unlock special offers, and more.