The global economy right now is striding through uncharted territory, to many, it may have become old hat, the talk of doom and gloom economic collapses, however, the reality is it’s overdue and inevitable.
Unlike the previous crashes over the past few decades where we have had bubbles in single isolated areas of the economy such as the real estate bubble of 2008 which led to the 2008 financial crisis, or the dot com bubble of the late 1990’s, this time the bubble encapsulates every aspect of the Worlds economy. We are in an Everything Bubble.
Since the 2008 financial crisis the economy has been super charged in the US and Europe with money printing becoming the new favourite pastime for central banks. The US has increased their money supply by approximately 500% since 2008, Europe has not been quite so aggressive but still have increased their supply by over 300%.
Baring in mind it took the US almost 100 years to merely double their supply this last decade has seen expansion of the dollar like never before.
With this we have seen the real estate market inflate dramatically, the stock markets have reached new all-time highs, credit lending has reached new all-time highs, leverage trading has reached new all-time highs, in fact, everything backed by fiat currency has seen more growth in the last 10 years than any decade that precedes it.
Precious Metals Were Not Invited to the Party
There was one asset class however which missed out on the action, precious metals. Gold and Silver have been in a major correction since mid 2011 and have mostly dismissed by major investors over the few years. However, with increasing uncertainty in the global economy these historically stable stores of value could be in for the their next reevaluation to the upside.
Which is why people like Billionaire real-estate investor Sam Zell is buying Gold for the first time:
“For the first time in my life, I bought gold because it is a good hedge,”Sam Zell.
Its also the reason Countries like China and Russia are buying up Gold right now:
‘Central banks around the world are increasing their gold reserves at an incredible pace. Over the last three months alone, they have purchased gold worth 5.82 billion dollars’ – Sputnik News
Humans obsession with Gold and Silver may seem irrational, however, there is a good reason for its historical use case as a store of value. The best forms of money are those that are finite in quantity and require large amounts of effort to produce.
Mining Gold is no easy task and even with the huge advancements in technology over the past century the rate at which it can be mined is still pretty small with profit margins getting ever thinner for miners.
If you are considering hedging some of your wealth into Gold or Silver you should always purchase the physical form. Gold and Silver backed derivatives are at best fraudulent, they are literally selling you IOU’s for silver and gold which can never be settled as they don’t hold the physical asset. Simply put, it’s a scam.
To finish off we’d like to share with you an excellent presentation from Mike Maloney which really breaks down why we are heading for economic disaster and the everything bubble that is behind it:
We’d love to hear your thoughts on where you think the Worlds Economy is heading, please leave your comments in the section below.