The business channels were all aglow last week when the Bureau of Economic Analysis (BEA) reported that the Gross Domestic Product grew by 3.2% in the 1st quarter. Trump supporters were ecstatic.
However, yesterday GDPNow, an analysis based a methodology similar to the one used by the BEA, posted a projected increase of only 1.2% this quarter.
GDPNow is maintained by the Federal Reserve Bank of Atlanta and is a running estimate of real GDP growth based on latest available data for the current measured quarter. As the quarter progresses, the estimate should come closer to what the BEA reports, which is always after the fact.
If the GDP shrinks to a number anywhere near 1.2%, you can expect the Fed to revert to a loose monetary policy, possibly even more quantitative easing. Fed Chair Powell has already hinted at it, after having hiked rates four times in 2018. Further, President Trump is demanding lower interest rates.
At the first sign of the Fed returning to a loose monetary policy, gold and silver should see strong moves to the upside. Besides, a return to printing is basically a game plan developed during the French Revolution that has been used many times in many countries.
The government prints, and business booms for a while, then it slows. There are cries for more printing, and the government obliges, and the economy picks up. But eventually, and not so long thereafter, it slows and with it comes more demands that still more money be printed. Over time, the purchasing power of the currency is destroyed.
We’re now seeing the same reasoning, and eventually the dollar is a dead currency; it’s only a matter of time.
[On May 3, GDPNow was revised to 1.7%, still a far cry from the the 3.2% posted for the 1st quarter.]