from Birch Gold Group:
Even though Biden is touting a strong U.S. economy (it isn’t), the global economy is continuing its multiyear slide.
In fact, major institutions are shedding light on years of decline, high interest rates, lagging performance, and much more.
Let’s start with the World Bank, which has issued a report on what’s happening globally:
The global economy will slow in 2024 for the third straight year and appears headed for its weakest half-decade since the early 1990s, the World Bank will say Tuesday in its latest annual forecast.
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While higher interest rates appear to be bringing inflation under control without the serious financial crisis or soaring unemployment that many had feared, the global economy’s overall performance is lagging, said Indermit Gill, the bank’s top economist.
In the long run, slowing growth is a problem for advanced economies and middle-income countries alike. One reason for anemic growth in the latter is a sharp drop in investment spending, which is running at barely half the average rate seen in the past two decades.
At Davos, a major annual gathering of the wealthiest people on the planet who discuss the global situation and the future, they don’t like how things are playing out.
In fact, it appears like they are souring on the U.S. economy too:
The economists also turned more negative on the U.S.’s outlook. In the previous survey, 78% forecast moderate or higher growth this year, whereas the latest research sees that number fall to 56%.
About 87% expect recent geopolitical developments to stoke global economic volatility in the next three years, and eight out of ten expect it to heighten volatility in stock markets.
Of course, we already explained how this year has the potential to be volatile economically, but Davos attendees seem to be implying that a much longer period of turmoil is possible at the global scale.
And just like the U.S., deficits and debt at the global scale appear like they are getting out of control, according to this Bloomberg article:
Public debt across advanced economies has soared to more than 112% of GDP from about 75% two decades ago, data from the International Monetary Fund show, as governments ramped up borrowing to finance pandemic stimulus programs, health care and pensions for aging populations.
Remember two important things:
- “governments ramped up borrowing” leads to currency devaluation
- “aging populations” means fewer productive workers supporting a growing number of retirees
So where does that global outlook leave your retirement savings? The answer doesn’t inspire much confidence in our leaders.
Economic instability, government debt crush U.S. dollar’s purchasing power
Like we’ve mentioned before:
A strong currency can buy more goods and services than other currencies. But that’s not the case with the U.S. dollar.
In fact, the U.S. dollar is only “strong” in comparison to other currencies like the yen, euro, and pound. (The corporate media’s favorite comparison.)
But here’s the actual buying power of the U.S. dollar over time, your buying power, and unfortunately it isn’t pretty:
Now, it might be reasonable to think: “That decrease in dollar purchasing power happened over decades!”
But the truth is your dollar’s purchasing power has dropped much faster than you think!
A staggering 24% over the last 10 years alone, for example.
Can you imagine what you could have bought today if your dollar could buy 4 times more than it does? (Like it did back in 1930?)
Unfortunately, it doesn’t buy anything close to what it used to.
Whether a recession develops globally or inside the U.S., another bout of historic inflation would be possible.
So it’s best to heed today’s warning while you still can…
Your savings, and your retirement, are on the line
When a recession strikes, that generally crushes the value of any economically sensitive assets you might have in your portfolio.
That’s the first complication. Here’s the second:
- Central banks have exactly one response to economic crisis: Quantitative easing (also known as “money printing.”)
- Governments have a variety of responses to economic crisis, but all of them boil down to one thing: Massive spending.
The obvious results of following this playbook yet again? As we’ve seen! First, inflation – then, currency devaluation. Currency devaluation is a finite resource – the value of a single dollar can’t go below zero. Look at that chart above one more time. Consider how close it already is to zero…
