I’ve reported the weekly changes in the same nine economic indicators (gold, silver, platinum, palladium, Dow, NASDAQ, NYSE, USDX, and Crude Oil) since April of A.D. 2008. Usually, at least one or two of those indicators run contrary to the remainder. I.e., if seven or eight are up, one or two are down—or vice versa.
The week of November 6th through 13th is the first time I can recall when all nine of those indicators were down in the same week. Is that coincidence a “harbinger of doom”—or merely a curious anomaly?
The three pure commodities (platinum, palladium and crude oil) in my list of indicators were down an average of 10% each between November 6th to 13th. Ten per cent?!! In one week?!! Damn.
Historically, falling commodity prices signal an economic depression.
In the same week, the three equity market indicators (DJIA, NASDAQ, and the NYSE) fell by an average of 3.8% each. In just one week. That decline isn’t unprecedented, but it’s nevertheless noteworthy.
Falling stock prices are another indication of economic recession or depression.
Silver, which is primarily an industrial metal (commodity) but also, to a lesser extent, a monetary metal, fell by 3.1%. It did better than the commodity and equity indicators.
Gold—primarily a monetary metal and to a lesser extent a commodity—fell by 0.5%.
As measured on the USDX, the value of the dollar (a monetary device) fell by only 0.4%.
Those indicators that were partially or completely commodities and/or equities fell by a minimum of three percent from November 6th-13th. The two indicators that were most purely “monetary” (physical gold and US dollars) fell by half of a percent or less. Relatively speaking, it was a good week for monetary investments. They lost a little while commodities and equities lost a much more
One week’s data proves nothing. Those changes could be mere statistical flukes. Next week’s data could reverse any implication we might imagine in last week’s data.
Still, it’s hard to completely ignore the “coincidence” that while commodities appear to be collapsing (a hallmark for economic depression), and stocks are declining (another indicator of depression), the best performers for the week were the “monetary” indicators: USDX, gold, and to a lesser extent silver.
Some readers may recall that during the Great Depression (A.D. 1929-1939) it was common knowledge that “cash” (a monetary instrument) was deemed to be “king” because its value (purchasing power) was constantly rising.
So, it’s at least interesting that, while commodity and equity price declines hinted at the approach of an economic depression, the investment vehicles that were “king” (performed the best compared to the others) were the quasi-monetary instrument (silver; down 3.1%) and the monetary instruments—US dollars and gold (down 0.5% or less).
Note also that throughout the Great Depression, the paper “cash” that seemed to be “king” was all backed by either gold or silver. Thus, the real “cash” that was “king” during the Great Depression was gold (until A.D. 1933) and silver throughout.
Most people agree that, in the event of another Great Depression, “cash” will again be “king”.
But, I’ve also argued that the “cash” that will ultimately be “king” during the next Depression will not be paper, fiat dollars, but will again be the monetary metals (gold and/or silver).
If there’s going to be a Greater Depression, the world may first holler for paper dollars. But after the paper dollars are understood to be intrinsically worthless, the world will scream—and pay dearly—for the monetary metal gold and, to a lesser extent, for the industrial/monetary metal silver.
If the next depression is anything like the last, “cash will be king” but that “cash” won’t be fiat, paper dollars but will, once again, be physical gold or silver.