The U.S. Economy Is In Trouble

As a follow-up to yesterday's post about the massive spike in the demand for physical gold and silver since the price hit, I wanted post some more evidence.  This is from an Arab newspaper about the spike in demand over in Saudi Arabia:

The crash in the prices of the yellow metal has sparked off a gold rush across Saudi Arabia.  In the last three days, gold souks in the Kingdom have come alive with buyers flocking to cash in on the sharp drop in gold prices. Most of the shop owners in the gold souk in Kandra said that their businesses have increased 50 percent in the last three days, whereas those in Balad said sales of 22-carat had gone up by more than 75 per cent and were expected to rise further.  LINK

Here's the headline from a Reuters article:   Slump in gold price releases years of pent-up retail demand  LINK   And here's an accounting from a colleague of mine who operates a cash-for-gold business in Florida and deals with one of the biggest coin dealers in Florida:

He's got nada.  A guy came in who had ordered and fixed the price on 300 silver eagles last week before the crash and my dealer couldn't tell him when he might get them.  My partner ordered three monster boxes last week and paid for them.  This week he was told delivery is at least 60 days out - and this dealer is a "hitter."

As I've told people who have asked me how long before the next move higher begins, no one can say for sure.  But if you run into people who tell you the bull market in gold/silver is over, ask them to sell you some 1 oz. gold/silver eagles.  And if they don't have any, ask them to go find some let you know where they can offer them to you.  Talk is cheap.  Talk does not make markets. 

Markets define "price" when a buyer and seller agree on a price and then make the exchange.  Paper markets like the Comex do not define price except in the short run.  All a paper futures contract and all an ETF represents is a "promise" to deliver something down the road if you put up the money now.  The market is not defined until the promised commodity paid for up front is physically delivered.  Given what we know about how corrupt banks are and the Government's unwillingness to prosecute this corruption (see Eric Holder's statement to Congress about a month ago), I would not trust the Comex banks or any of the ETF custodians (except Sprott) to make good on that "promise."

As for the economy, I wrote a piece yesterday for Seeking Alpha about more evidence I was seeing that the economy is headed quickly in the wrong direction:

About a week ago I wrote an article in which I postulated that, based on some recent company and economic reports, the economy is in worse condition than is being reported by the mainstream media and Wall Street.

You can read the entire article which includes hard data here:  The Economy Is In Trouble

After my article was written, the Philadelphia Fed released its manufacturing/index and it came in much lower than expected.  The employment sub-index went negative. In addition the leading indicators index was published by The Conference Board (formerly published by the Commerce Department) and it was -.1 vs the +.2% expected.   Also, the Fed's Balance sheet was released and it showed a $67 billion jump in size vs $12 billion the week before.  What's the Fed worried about if it needs to print money like this?

And today it looks like the Dell leveraged buyout deal may be falling through, as one of the big sponsors is worried about PC sales.  All the above tells me the U.S. economy is in trouble.  There's just no way the Government can cut back on spending, which means the debt ceiling debate that pops up in May will likely entail another round of kicking the can down the road, which means even more Treasury debt issuance to finance the deficit spending and even more money printing by the Fed.