We received more sobering economic news today with the weaker than expected jobs report. The unemployment rate of 9.2% is the highest of the year, which is news to me since our economy “officially” came out of recession 2 years ago. Employment in government fell for the 8th straight month, which is all part of the inevitable collapse of the public sector. This is bad news for our economy since it is not easy to make the jump from the public to private sector, especially with such weakness in private sector hiring. As I’ve said before, unemployment will concentrate very heavily in the public sector, and this will likely lead to some form of civil unrest.
Our leaders have no credibility and it is imperative for people to follow their own logical reasoning and instincts. There is a real threat of our economy going into freefall because quantitative easing has ended. Our leaders know this, and I would be very surprised if some form of stimulus isn’t implemented by the end of the year. I believe the implementation of a new stimulus program that devalues the dollar will lead to the next monster rally in gold. Believe it or not, gold is still flying under the radar, which suggests to me that the next rally is going to be mind-boggling.
We should see increasing strain on municipal budgets in the second half of the year going into 2012. We must remember that states barely avoided a major crisis because of Federal government support that is now gone. The Federal government obviously has its own problems with a debt-to-GDP ratio approaching 100%. Economic studies have shown that growth slows considerably past a 90% debt-to-GDP ratio. If you look at the projections of our budget into the next decade, you’ll notice the government assumes an accelerating rate of economic growth. Tweaking growth assumptions just 1 or 2% leads to trillions of dollars in discrepancies since growth rates compound. Our leaders are not prepared for the approaching debt crisis because they choose to make unreasonable growth assumptions that mask our underlying problems. They have their heads in the sand.
Gold and silver may muddle through the next couple of months, but this just means the rocket launch is going to be even more dramatic when it arrives. Weak hands are selling and strong hands are adding, which is setting up for a rally in gold where no one is selling and weak hands are buying in a panic. This is when you see the parabolic moves. The truly epic debt crisis is on the horizon and it will take no prisoners. Who will survive with their retirements intact? It will be those who relinquish their faith in the government first and take full personal responsibility for their actions. This is a very obvious crisis that is approaching, so if you are caught sleeping when it arrives like a thief in the night, you have no one to blame but yourself.Follow