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Coordinated spending called for at G-20 Summit

As noted in G-20 talks up more deficit spending; Deutsche Bank recommends gold, there were loud cries at the Shanghai G-20 Summit for “a worldwide coordinated effort” to head off global recession.  Here are a few more details about the G-20 discussions.

Proponents of more intervention wanted fiscal spending instituted by governments to supplement the low (some places negative) interest rate and quantitative easing policies of central banks.  The United States and Germany objected.

A “senior U.S. Treasury official” retorted: “. . .there’s not a crisis and it would not be reasonable to expect a crisis response.”

However, there are many indicators that suggest a global crisis is at hand.

“World trade is back to crisis levels as emerging markets demand slides,” says the Financial Times, February 24, 2016.  The article goes on to say that 2015 was the worst for world trade since the aftermath of the global financial crisis.

World trade fell last year 13.8 percent, for the first contraction since 2009, and 2016 is “shaping up to be fraught, with more dangers to the global economy than previously expected.”

As for emerging markets demand declines, consider Latin America’s largest economy, Brazil, which is facing its worst recession in more than a century.  Exports from China to Brazil fell 60 percent in January from a year earlier, and Brazil is not the exception.  Total volume of imports via containers into all Latin America is down.

The Baltic Dry Index, a measure of the trade in bulk commodities, is touching historic lows.  China, which in 2014 overtook the US as the biggest trading nation, reported for January double-digit falls in both exports and imports.  Any wonder China’s stock markets has suffer so heavily over the last twelve months?

Christine Lagarde, head of the IMF, has long lamented US policies regarding raising rates and at the Shanghai Summit called for “leading economies to do more to boost growth.”

“Doing more” to Keynesian economists, which dominate economic thinking worldwide, means loose money on all fronts: low interest rates, quantitative easing, deficit spending and possibly even “helicopter drops”  of money into “every adult’s checking account.”

Inherently, investors see what’s coming, and that’s why gold and silver prices have enjoyed such nice rises this year. Gold and silver remain priced at levels that should encourage still more buying.

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