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
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

NO Economic Decoupling Instead Greater Interdependence - 2008: The Year of Reckoning ?

Economics / Global Financial System Jan 07, 2008 - 05:46 AM GMT

By: Brent_Harmes

Economics Best Financial Markets Analysis ArticleWhat lies dead ahead for our economy.- The main stream press is finally waking up to the economic realities that are starting to affect us here and now.  The January 7, 2008 Forbes magazine has an article by Ernest Zedillo, (former President of Mexico and current Director of The Yale Center for the study of Globalization) titled, 2008:  Year of Reckoning .  This article is written by a very studied and intelligent man that has seen first hand the effects of currency and borrowing problems.  He sees major problems dead ahead for the global economy and I think he absolutely hits the nail on the head with his analysis.  Here are a few quotes from that article along with my comments:

“The remarkable expansion in world output since 2003 has existed in tandem with so called global imbalances-huge current account deficits in the U.S. matched by surpluses practically everywhere else.”

Translation for non-economists:  Everybody is doing great now because other countries have been willing to sell us real products such as cars and plasma screen TV's in exchange for money that the US is just making out of thin air.  This has caused the global economy to boom as we massively consume and they have the” privilege” to massively produce stuff for us (in exchange for this blizzard of money we are making). 

“But for every apprehensive view of global imbalances, there have been one or more explanations of why those imbalances are not only good but sustainable.”

No one really wants this imbalance to end.  We enjoy the cheap goods and they are enjoying the opportunity to employ their people and build new factories and cities so we make up stories about “why it is different this time”.  The problem is that these imbalances are growing at an increasing rate.  It is just not sustainable forever, and it has already been going on for years.

“Recently, however, the basic assumption underlying this belief has been called into question, as market confidence in a wide array of assets offered in U.S. financial markets abruptly collapsed.  The meltdown of the subprime mortgage market, big banks moving huge exotic assets into their balance sheets and looking desperately (and expensively) for fresh capital, and the Federal Reserve cutting interest rates and seeking new ways to inject liquidity into markets are all part of the credit-crunch drama.”

In fact the end of “forever” might be now.  The whole unbalanced financial system is getting a test.  A very big test.   Here is a chart of the banking sector compared to the S&P 500 index.  It is comparing the performance of the banking sector to the overall market.

Since our entire economic system is based on debt don't expect any meaningful recovery until this is well on its way back up.  There is no sign of that yet, not even a hint.

“A slowdown in the U.S. economy for 2008 now appears inescapable.  And the probability of a serious recession cannot be ignored.”

The data sure backs this bad news up, but what can we do to protect ourselves?  I think the answer lies in the next paragraph.

“There's only so much that can be done with monetary policy without risking serious undesirable consequences, such as fueling inflationary expectations or creating severe moral hazard.”

In fact they are already using monetary policy too much, in fact that is what caused this bubble in the first place (too much currency being created).  I would argue the price of gold and silver are saying that “inflationary expectations” and “severe moral hazard” are already being anticipated, if not here already.  You see, in this environment there are very few financial “safe havens” to run to except the precious metals (which absolutely thrive in these environments). 

 Here is the chart of gold. 

Last year alone gold rose 32% in U.S. Dollars. 

And the chart of silver is also racing higher.

“The task will prove equally daunting in other places.  It is not true that other significant economies have been decoupled from the American economy.   In fact, thanks to globalization, national economies have become more interdependent.  This has been positive for growth but has also entailed downsides and has exacerbated policy challenges” [underlining added]

This is a huge point and I believe absolutely correct.  When we start running into economic problems (like now) and start dragging the rest of the world down with us, their economies will indeed be strongly affected and they will try to rescue their economies by also printing excess money and debasing their own currencies, in fact many are already doing this.  This will lead back to the “inflationary expectations” and “moral hazard” problem that gold is anticipating with our economy.  But with one MAJOR difference.  This time the whole world will be buying the precious metals because we will all be experiencing the same problems at the same time.  And it looks like that time could be starting soon .  Expect some major volatility in everything, including the precious metals, and hang on.  This time the precious metal bull is going to be absolutely massive, and it is just getting warmed up. 

By Brent Harmes

Subscribe or Manage Your Newsletter Subscription Here | Buy Gold and Silver Online

Copyright © 2008 Brent Harmes offers vault storage accounts at Brinks Security in Salt Lake City, Utah. The minimum investment required for vault storage account is 20 ounces of gold or 1,000 ounces of silver. For more information call us at: 702-799-9000

Disclaimer : All claims made by should be verified by the reader. Investing is not suitable for everyone and readers are urged to consult with their own independent financial advisors before making a decision. Past performance is not necessarily indicative of future results. will not be liable for any loss or damage caused by a reader's reliance on information obtained in any of our newsletters, special reports, email correspondence, or on our website. Our readers are solely responsible for their own investment decisions.

Brent Harmes 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