Every day brings more bad news about America’s financial health and the future of the economy. Americans find themselves in a difficult spot with inflation still high and the Fed continuing to tighten its monetary policy. 2008 could look easy due to the coming recession.
So it shouldn’t surprise that Americans are making more efforts to improve their financial well-being. Many people are looking to purchase gold to protect their hard-earned money. They are aware of what is coming and don’t like it.
Consumer spending drives the U.S. economy, but that spending is starting to slow down. As consumers stay home and keep their wallets shut, retailers are sitting on huge amounts of inventory. As Americans expect to be unable to spend as much as they used to, household spending expectations are declining.
This is not good news for either households or businesses and could lead to difficult months ahead.
Real Income Is Shrinking
Real disposable income growth is a negative factor in shrinking household spending.
Inflation adjusted, the majority of Americans are losing their purchasing power every year. This makes it harder for them to maintain the standard living standards they have come to expect.
It doesn’t matter if Americans tighten their belts or not. To get them back to spending, it will take more than just a few stimulus checks.
Many people believe that the housing market will not collapse like it did in 2008. However, this is not true. The market is currently contracting as it hasn’t been in over a decade.
The mortgage rates have risen above seven percent since 2008, making it the most expensive mortgage application. Many American households are losing their wealth as housing prices fall.
The supply of houses is expected shrink and home affordability is at its lowest point in many decades. Many Americans are having to postpone their plans to purchase a house in the future, despite their desire to do so.
The Rent is Too Expensive
Americans are renting more often as a result. Rent is also rising. According to some estimates, rents have increased by up to 30% since the outbreak of the pandemic. This kind of rent rise takes a large chunk of people’s disposable income.
This makes it harder for younger Americans to save for retirement and build enough money to pay down a downpayment. The outlook for the future was already grim for millennials, with the housing market turning topsy-turvy and rents rising, as well as the financial crisis.
The Labor Market Could Go Bust
As if that wasn’t enough, the Biden administration has taken steps to destroy the gig economy. To help them grow, companies like Uber, DoorDash and Amazon have relied upon independent contractors. The Biden administration has proposed a rule that would allow more contractors to be considered employees.
This rule would have a major impact on the business models of many companies that are growing, and increase their costs of doing business. These costs could be passed on to consumers which could lead to a reduction in spending, which would further hurt these companies’ bottom line.
Many gig economy jobs could be lost in the worst case. The rosy labor market we have seen even during recession could crumble as millions of Americans lose their jobs, whether they are part-time or temporary.
Biden vs. IMF
Biden believes that there is very little chance of recession despite all this. With the election just a week away, you would expect him saying this. With everything going on in the economy, it’s hard to believe that he isn’t doing more to damage his reputation by trying not to acknowledge the obvious to those already suffering from inflation and facing even greater consequences if recession strikes.
Compare that to the International Monetary Fund, which supports central bank efforts to combat inflation and has warned that fiscal policies shouldn’t interfere with existing budgets already in crisis.
While governments want to spend, central banks must tighten their belts. If central banks fail to act and end up monetizing government debt, the inflation fight is over.
It doesn’t matter how you look at it, the economic and financial situation are deteriorating. Companies, households, and governments are all drowning in debt, while also feeling the pinch from higher inflation. Many people are struggling to find ways to cope with inflation that is at its highest level in 40 years.
Protect yourself against inflation
Investing in precious metals such as gold and silver is a time-tested way to help protect against inflation. Since centuries, these precious metals have been used as hedges against inflation or value loss.
The U.S. last experienced sustained high inflation in the 1970s. During the stagflation, silver and gold both saw annualized growth rates exceeding 30 percent during that decade. Americans have become complacent after Paul Volcker ended that inflation in early ’80s. Today’s majority of Americans don’t remember what stagflation was like in previous generations, or how silver and gold performed during that time.
However, enough people are still able to recall how well silver and gold performed during 2008’s financial crisis. As a result, demand for these metals has risen. Physical gold and silver coins are scarce and prices are increasing. However, now is a good time to invest in gold and silver to preserve your wealth.
An IRA that is gold-based allows you to rollover or transfer your existing retirement assets tax-free into physical gold and/or silver. Your gold and silver investments will enjoy the same tax-free appreciation that any other IRA account. You only pay taxes when your distributions are taken.
