Why the Economic Depression Will Send Gold to New All-Time Highs
Another 2.24 million Americans just filed for unemployment
Going back nine weeks, 38.64 million Americans are now unemployed. And what’s truly disturbing is that many Americans are staying unemployed.
You see, there are two types of jobless claims: initial and continuing.
Let’s say you lose your job because the economy is shutdown temporarily. When you go to file for unemployment, you would file an initial jobless claim. Meaning this is the first time you’re applying for unemployment.
Fast forward a week, and the economy is still closed. So you are forced to file for unemployment again. However, because you have already applied for unemployment once before, this time around your jobless claim would be classified as a “continuing” jobless claim. Meaning you continue to be unemployed.
Everyone knew that the economic shutdown meant that initial jobless claims in the U.S. would be horrific. The big question was whether people would be unemployed for a short-time period and then return to work… or if they would stay unemployed.
The data suggests they are staying unemployed.
Continuing jobless claims for the week ended May 16 hit 25.07 million. This is up 2.48 million from the continuing jobless claims number for the week ended May 9.
So a total of 38 million Americans have filed for unemployment at least once… and 25 million of them remain unemployed. And why wouldn’t they?
A study from the University of Chicago has revealed that 68% of unemployed Americans are receiving MORE money from unemployment than they were receiving from their former jobs.
In fact, the median replacement rate is 134%, meaning they are making 34% MORE money from being unemployed than they were from working!
What incentive, if any, will there be for these people to return to work when the economy reopens? If you can make more money from NOT working… why would you want to start working again?
Okay. We’ve covered a lot of ground here, so let’s do a brief recap:
- The economic shutdown in the U.S. is forcing tens of millions of Americans to lose their jobs.
- Once they lose their jobs, the vast majority of Americans stay unemployed.
- There is evidence that unemployment is actually paying Americans MORE money than they would earn by working.
Add it all up, and this means the U.S. will likely be spending TRILLIONS of dollars on unemployment going forward.
Small wonder then why gold and precious metals continue to erupt higher.
An Incredible Environment for Precious Metals
While CNBC focuses on stocks – which remain well below their pre-COVID-19 highs – gold has already recouped ALL of its March losses and has risen to hit a new 52-week high.
Indeed, while stocks are up 28% from their March lows… gold miners are up a staggering 78%, and gold mining juniors have nearly doubled, rising 94%!
Will the economy rebound quickly? Will Americans continue to stay unemployed? Will we have a second wave of COVID-19 that forces the economy into an even deeper depression?
I have no idea. No one does.
The ONLY thing we do know is that the government and the Fed will be printing trillions of dollars to fight these issues. And that means gold going to new highs, with gold mining companies outperforming the stock market.
That’s where I’m looking for investments today. You should too.
Editor, Money & Crisis