Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Try The “Compounding Capital Gains” Strategy Today - 26th Oct 20
UK Coronavirus Broken Test and Trace System, 5 Days for Covid-19 Results! - 26th Oct 20
How the Coronavirus is Exacerbating Global Inequality, Hunger - 26th Oct 20
The Top Gold Stock for 2021 - 26th Oct 20
Corporate Earnings Season: Here's What Stock Investors Need to Know - 25th Oct 20
�� Halloween 2020 TESCO Supermarkes Shoppers Covid Panic Buying! �� - 25th Oct 20
Three Unstoppable Forces Set to Drive Silver Prices - 25th Oct 20
Car Insurance And Insurance Claims and Options - 25th Oct 20
Best Pressure Washer Review - Karcher K7 Full Control Unboxing - 25th Oct 20
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

An Economic Recovery Unto Death

Economics / Economic Recovery Jan 20, 2011 - 05:23 AM GMT

By: Clif_Droke


Best Financial Markets Analysis ArticleIn the Bible there is a reference to a “sin unto death.” In the realm of U.S. economic policy a situation is developing that could easily lead to a “death” of the current recovery. Ironically, this brewing economic destruction is springing from the same policies that are responsible for the recovery (call it a “recovery unto death”). These policies are supposed to lead the U.S. out of recession and into a “new tomorrow” but as we’ll discuss here, the end result is likely to be something far short of what policy leaders envision.

By now you’ve probably had your fill of the pronouncements in the media that the economic recovery is advancing and everything is “on the right track.” Articles which ballyhoo the recovery have been appearing with startling regularity in recent weeks, including a number of features in Time, Newsweek, Businessweek and other mainstream publications. Less talked about is the likelihood that 2011 will witness the apex of the recovery that began in March 2009, and the further possibility that the years 2012 through 2014 will see another recurrence of the financial turmoil of 2008.

An example of the bullish outlook that mainstream media reporters have embraced is found in a recent edition of Businessweek (“For the U.S., the Future Suddenly Feels Brighter”). BW spotlighted the Goldman Sachs 2011 forecast for the U.S. economy, which it lifted to 3.4 percent from 2 percent. This forecast is significant when you consider that Goldman Sachs economists have long been bearish on the country’s economic prospects.

The leading service sector companies which are most sensitive to changes in the business economy, including Fed-Ex, Amazon and Monster Worldwide among others, have collectively been forecasting an improvement in the U.S. retail economy for over a year. As recently as last week the New Economy Index (NEI), a composite of the leading retail and business sector stocks, reached a new recovery high as seen in the following chart.

Yet what’s good for the international “new” economy isn’t necessarily an accurate representation of the challenges faced by the everyday Main Street economy. Small and micro-cap businesses are still experiencing a hiring freeze and smaller independent companies haven’t fared nearly as well in the last two years compared to their larger multinational counterparts. To get an idea how the current small business outlook compared to that of the last recessions, in the first 12 months following the recession that ended in November 2001, small businesses added 81,000 workers. After the latest recession began, companies eliminated nearly 500,000 during a comparable time period, according to data from ADP Employer Services. In prior downturns, small firms have accounted for much of the initial job growth coming out of a recession. But this time around most of the recovery has been led by much larger companies which, despite cutting their employment rosters, have been able to increase productivity and exploit the efficiencies of technology combined with a smaller workforce.

Larger U.S. companies with an international presence aren’t the only ones which have benefited from the recovery -- a recovery which has been largely based on the loose money policy of the Federal Reserve. The Fed has embarked on its second round of “quantitative easing (QE) with plans to purchase $600 billion of long-term Treasury securities through June. The Fed’s QE program has unquestionably helped sustain the financial market recovery with some spillover effects into the retail economy. It has also had the unwanted effect of raising commodity prices, which is going to come back to haunt the U.S. and the global economy with a vengeance later this year.

As Rich Miller and Simon Kennedy observed, “The Fed’s actions are designed to make credit more available in the U.S. and stoke a recovery. Yet a chunk of that money will end up invested in emerging markets, which are struggling already to absorb billions in foreign capital, contain inflation, and keep their currencies competitive. The reluctance of China and other emerging-market economies to rein in growth too much is boosting demand for commodities and jacking up the cost of energy worldwide, including in the U.S.”

Yet in spite of the obvious dangers posed by rising consumer prices in what is by all accounts a fragile economic recovery, Miller and Kennedy observed, “In the U.S., sustained the economic momentum is the priority for now [among policy makers], not tamping down inflation.” This short-sighted obsession on economic “recovery” at all costs will eventually lead to a resumption of the same set of problems that brought us the financial crash of 2008. And the straw that broke the camel’s back at that time was rising energy costs.

For the better part of two years U.S. consumers and producers alike got a reprieve from the brutally high energy costs that dominated the economic landscape in 2007-2008. The runaway oil price of those years ultimately choked off economic growth and fed the financial fires of 2008. Hedge fund speculation was as much to blame as anything for the price spike but once again we find the usual suspects hard at work in the crude oil futures market. To be sure, they learned enough from the 2008 debacle to be more subdued with their speculative fervor. But with the Fed priming the pump in the past year, these interests have taken their cue and the speculative juices are starting to flow again. Indeed, a repeat of the oil price run-up appears imminent and many oil analysts are forecasting $100-a-barrel oil or higher this year.

The former president of Shell Oil has also made a high-profile prediction that the gasoline price will reach $5 a gallon by the end of this year. That’s more than $2 per gallon above the current average price of gas. The economic recovery will have a hard enough time surviving $4/gallon gasoline let alone $5/gallon. If this prediction comes close to being fulfilled the recovery will be dead by the year’s end.

While visiting a coffee shop recently I overheard a conversation between two customers which pretty much summarized the prevailing mood on Main Street about the recovery. Asked to give her opinion of the economy, one customer replied, “As soon as the economy gets better and we start making a little more money, prices start going up and we end up giving it all back.” Her ironic conclusion was that we would probably do just as well without a “recovery” in terms of the cost of living, a belief undoubtedly shared by many.

Some 2,200 years ago the Greco-Roman historian Polybius wrote, “What use is a [policy maker] if he is incapable of seeing how and why events begin, where their origins lie? It follows that there is nothing we should be more aware of, nothing we should try harder to discover, than the causes of every incident. For the most critical matters have trivial origins, and it is always easiest to correct impulses and remedy beliefs at the beginning.”

The Federal Reserve sets U.S. monetary policy and since the Great Depression, the official mandate of the U.S. central bank has been to keep prices stable and promote a level of output consistent with reasonably full employment. As Paul Seabright observed in his latest article in Foreign Policy, “The weight given to price stability increased in most countries over the postwar period, except in Germany, where it had already been high because of the memory of the Weimar hyperinflation. Price stability also came to be seen as the permanent goal of central banking, whereas maintaining output came to be considered a matter for occasional firefighting rather than permanent tinkering.”

It would be better for everyone concerned if the Fed’s policy was more in tune with the needs of productive, taxpaying Americans instead of the desires of big business. A monetary policy which tied the Fed funds interest rate to long-term yields and allowed inflation/deflation to takes its natural course instead of fighting both ends of the economic long wave would be far superior to the current policy. If policy makers think that the health of IBM, Coca Cola and the usual list of U.S. multinationals ultimately takes precedence over that of the millions of individual Americans which comprise the backbone of the economy, they are sadly mistaken. It’s the multitudes of productive, working class citizens whose decisions to buy or not to buy ultimately determine the strength or weakness of the U.S. domestic economy.

As it stands the Fed has committed itself to preventing the natural tendency toward deflation from manifesting itself. In doing so it is setting up a series of artificial price spikes in key commodities in the months ahead. If the dramatic price increases that many producers and analysts are predicting are realized, it would indeed be miraculous if the economy could absorb them without upsetting the recovery.

As one hedge fund manager has commented, “The stimulus and recovery of 2009-2011 has done little more than paper over the structural problems that led to the credit crisis in the first place.” His statement may yet prove to be prescient. As these structural problems haven’t yet been properly addressed, it remains for time (i.e. the cycles) to eventually reveal and correct these problems.

The toll that the Kress cycles will take on the financial markets, and by extension the economy, in 2012-2014 will come as a shock for the most optimistic observers. The final “hard down” phase of the extremely powerful 30-year, 40-year and 60-year cycles will begin to exert a distinctly negative impact against market prices across the board as we head closer to the end of this year. Indeed, the coming Kress Cycle Tsunami will most likely eclipse anything we’ve seen in the prior years of the credit crisis.

The months ahead and whatever remains of the recovery should be used to prepare for the final (and worst) part of the deflationary “winter” season.


The gold price recently violated its 60-day moving average and as of Jan. 19 is on top of its dominant interim 90-day moving average. Gold and silver stocks have been under intensive selling pressure lately and have born the brunt of the upcoming dominant short-term cycle bottom. If the gold price can establish support above the 90-day MA this week and close back above the 30-day MA we’ll have a confirmed bottom and a potential re-entry point for gold. Gold’s technical position will be updated in the next commentary.

Gold & Gold Stock Trading Simplified

With the long-term bull market in gold and mining stocks in full swing, there exist several fantastic opportunities for capturing profits and maximizing gains in the precious metals arena. Yet a common complaint is that small-to-medium sized traders have a hard time knowing when to buy and when to take profits. It doesn’t matter when so many pundits dispense conflicting advice in the financial media. This amounts to “analysis into paralysis” and results in the typical investor being unable to “pull the trigger” on a trade when the right time comes to buy.

Not surprisingly, many traders and investors are looking for a reliable and easy-to-follow system for participating in the precious metals bull market. They want a system that allows them to enter without guesswork and one that gets them out at the appropriate time and without any undue risks. They also want a system that automatically takes profits at precise points along the way while adjusting the stop loss continuously so as to lock in gains and minimize potential losses from whipsaws.

In my latest book, “Gold & Gold Stock Trading Simplified,” I remove the mystique behind gold and gold stock trading and reveal a completely simple and reliable system that allows the small-to-mid-size trader to profit from both up and down moves in the mining stock market. It’s the same system that I use each day in the Gold & Silver Stock Report – the same system which has consistently generated profits for my subscribers and has kept them on the correct side of the gold and mining stock market for years. You won’t find a more straight forward and easy-to-follow system that actually works than the one explained in “Gold & Gold Stock Trading Simplified.”

The technical trading system revealed in “Gold & Gold Stock Trading Simplified” by itself is worth its weight in gold. Additionally, the book reveals several useful indicators that will increase your chances of scoring big profits in the mining stock sector. You’ll learn when to use reliable leading indicators for predicting when the mining stocks are about o break out. After all, nothing beats being on the right side of a market move before the move gets underway.

The methods revealed in “Gold & Gold Stock Trading Simplified” are the product of several year’s worth of writing, research and real time market trading/testing. It also contains the benefit of my 14 years worth of experience as a professional in the precious metals and PM mining share sector. The trading techniques discussed in the book have been carefully calibrated to match today’s fast moving and volatile market environment. You won’t find a more timely and useful book than this for capturing profits in today’s gold and gold stock market.

The book is now available for sale at:

Order today to receive your autographed copy and a FREE 1-month trial subscription to the Gold Strategies Review newsletter. Published each week, the newsletter uses the method described in this book for making profitable trades among the actively traded gold mining shares.

By Clif Droke

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit

Clif Droke Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules