From Peter Reagan at Birch Gold Group
Despite the evidence that the U.S. is already in an economic recession, the current administration is conveniently ignoring this fact before the midterms.
In fact, President Joe Biden recently told CNN’s Jake Tapper:
I don’t think there will be a recession. If it is, there will be a very slight recession. That is, we’ll move down slightly… It is possible. Look, it’s possible. I don’t anticipate it.
The optimistic perspective has to overlook two successive quarters of negative GDP growth, red-hot inflation at the producer price and consumer price levels, and a stagnating employment market struggling to replace millions of workers lost during the pandemic.
Not only that, the Dow Jones, S&P 500, NASDAQ, and the Russell 2000 have all plunged to confirmed bear market levels (despite several rallies). On top of that, the housing market could be heading for a crash on par with the Great Depression.
“Very slight recession,” really? I guess your perspective depends on your definition of reality…
I’m not alone here. The latest global forecasts from the International Monetary Fund (IMF) come to pass, the U.S. won’t be suffering alone.
Here’s why what happens “over there” still matters over here…
“Fears of a global recession are rising”
The International Monetary Fund “is an organization of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
You can think of them as the United Nations of banks – and, like the Federal Reserve, they serve as a “lender of last resort” to nations in economic crisis.
The IMF publishes a widely-followed quarterly economic outlook for the global economy. Their most-recent October analysis, alarmingly titled Countering the cost-of-living crisis, predicts that global growth will drop by nearly 1/6th next year (from 3.2% to 2.7%).
It’s not an uplifting or cheerful read! Probably the most-reported excerpt is:
The worst is yet to come, and for many people 2023 will feel like a recession.
CNBC says that particular quote is “echoing warnings from the United Nations, the World Bank and many global CEOs.”
Pierre-Olivier Gourinchas, the IMF’s chief economist, said: “Next year is going to feel painful, there’s going to be a lot of slowdown and economic pain.”
The IMF report also included a worldwide inflation forecast. Inflation that has already been running hot in the U.S. since June 2021 won’t subside much for the next two years at the global level:
Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024.
Bloomberg described the “crisis-like level” fragility of the worldwide financial markets:
Fears of a global recession are rising and the dangers of debt defaults are increasing as interest rates march higher.
Emerging markets face a multitude of hazards, from the strength of the dollar and high borrowing costs to stubbornly high inflation and volatile commodity markets, the IMF said.
In a severely adverse scenario, house prices in emerging markets could fall nearly 25% over the next three years, while those in advanced economies could drop by more than 10%, after taking account of inflation
Now, these are global predictions, so why should we even be considering them?
A few reasons. First and most obviously, the U.S. is the world’s #2 exporter of goods to the rest of the world. When the global economy is in recession, that reduces demand across a wide variety of domestic industries, from petroleum refiners to medical instrument manufacturers. Lower global demand means fewer jobs and lower economic growth in the U.S.
Second, global financial markets are highly interdependent. Any crisis “over there” has potentially crippling consequences over here. As the IMF stated:
The global economic outlook has deteriorated materially since the April 2022 [report].
The risk of monetary, fiscal, or financial policy miscalibration has risen sharply at a time when the world economy remains historically fragile and financial markets are showing signs of stress.
As we learned back in 2008, during a financial crisis, “systemically-important” or “too-big-to-fail” institutions worldwide will come begging for money to keep them, and their irreplaceable role in the global financial system, working. Barclays, Royal Bank of Scotland, Hongkong and Shanghai Banking Corporation (HSBC), France’s BNP Paribas, United Bank of Switzerland (UBS), Deutsche Bank, ING Groep of the Netherlands – any one of these institutions could, at any time, take down the entire world’s economy. (Today, Credit Suisse looks like the problem child.)
Remember what this did to the global economy during the Great Financial Crisis? If you’ve forgotten, the S&P500 needed six years to recover (even after all those failed banks and mortgage lenders were dropped from the index.)
So if you’re trying to save money and grow your retirement savings, the economic challenges in the U.S. and around the world are likely to make that more difficult than ever.
In a time of higher-than-ever risks and economic fragility, how can we reduce risk of loss without sacrificing hope of gains?
Growing your retirement savings with diversification
In the face of this mind-boggling range of economic challenges, you might be asking yourself “When should I start saving for retirement?” Because right now seems like the wrong answer…
If you haven’t already started saving for retirement, consider making it a priority.
If you have a retirement plan already, maybe it’s time to consider the word “savings.”
Our modern “savings” was derived from the Middle English word saven, which meant “to deliver from some danger; rescue from peril, bring to safety.” This descended from the Late Latin salvare, “make safe, secure.”
The whole point of “savings” is making your money “safe, secure,” to “rescue” it from peril! The markets sure look perilous right now. So what’s safe look like?
Gold is an insurance policy. Unless you’re into gold mining stocks, that’s a different kettle of fish. But the gold itself is an insurance policy. You don’t invest in it. You buy it and you hope you never have to use it in the sense that other things are done right, so your other assets grow. But it’s nice to have there, to know that when the authorities muck up, as they’ve been doing with frequency in recent years, you’ve got something that will go up when other things are going down.
If you want gold as an insurance policy, buy the tangible pieces of metal.
The only way to own “gold as an insurance policy” and “buy the tangible pieces of metal” as Forbes directs is with a Precious Metals IRA. Opening this unique retirement account lets you buy real physical gold with the retirement money you’ve already saved up – whether it’s currently invested in stocks, bonds, mutual funds or cash.
You can diversify your retirement savings with a real physical gold “insurance policy” without taking a single dollar out of your pocket.
If that sounds like a good idea to you, if you’re interested in moving some of your retirement savings out of the chaotic financial markets and into tangible assets, we can help. Get started with your free guide to Precious Metals IRAs.