Double Dip Recession? The 2008 Recession Never Ended In The First Place (GLD, GDX, GDXJ, IAU, DZZ)

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September 12, 2011 12:55pm NYSE:DZZ NYSE:GDX

Larry Edelson:  Not for nothing, but in my view all this talk about a double-dip recession in the U.S. is a bunch of baloney that misses the real issue …

A. The United States economy never even came out of its recession in the first place. And …

B. Our economy is already in a depression, one that’s about to get a whole lot worse.

Don’t believe me? Just ask anyone on Main Street if the U.S. economy ever came out of a recession. I doubt you’ll find more than one out of every five Americans you talk to who believes the economy recovered.

Yes, the economy did avoid a total meltdown in 2008 and 2009. But get out of a recession? Give me a break!

First, the true unemployment rate in this country is at least 22%. Not the 9.1% mythical figure Washington is reporting.

You see, Washington plays with the unemployment number. The figure they report every month is what they call the “official” unemployment rate. But it includes only those ages 16 or older who are not currently employed, but are able and available to work and “actively seeking work.”

Plus, Washington conveniently leaves out people who are working part-time, people whose hours have been dramatically cut, and “discouraged” workers — those who are ready, willing and able to work — but have given up looking for a job because they can’t find one.

Add these workers into the mix and you have an actual unemployment rate of 22% — more than double the so-called official number and almost as bad as the Great Depression of the 1930s.

Plus, of the unemployed, a full 45.1% have been out of work for six months (27 weeks), also rivaling the Great Depression.

President Obama’s just announced job plan will help a bit, but not much in the grand scheme of things.

Second, from its 1925 peak, the median home price in the U.S. fell 12.57% into a bottom in 1932. Compare that to the 32% decline since the property peak in 2007.

Third, in 1929, total U.S. debt as a percent of GDP stood at roughly 290%. Today, it’s approaching 1,000%, and growing. That’s equal to 10 times our country’s economic output!

Put another way, it now takes $10 of debt to produce $1 of GDP, compared to $2.90 during the Great Depression.

I don’t know about you, but to me, that’s not real economic growth. It’s debt-riddled growth. It’s treading water at best, before drowning.

Fourth, U.S. high-yield corporate bond default rates last year hit their highest level since the Great Depression. And although they’ve come down a bit since then, there’s no doubt in my mind that corporate bond default rates are going to surge again in the months ahead.

Fifth, there are at least half a dozen more stats I can cite that are already worse than those seen in the Great Depression. From durable goods production and sales, things like autos, etc., to the number of families requiring public assistance, to the number and rate of children that are now homeless.

So no matter how I look at it, our country is not heading into another recession. It’s already in a depression. In fact …

In real terms, the U.S. economy has already contracted more than it did during the Great Depression.

In today’s world of floating fiat currencies, it’s very difficult to measure changes in the value of anything without a benchmark, since the dollar itself floats in value.

That’s why I often prefer to use honest money — the price of gold (NYSE:GLD) — as a value-measuring yardstick, because over time, gold always holds its purchasing power.

For instance, back in the 1930s — and all the way through 1971 — the U.S. monetary system was on a gold standard. In 1932, for instance, just before President Roosevelt devalued the dollar, $1 was equal to roughly 1/20 of an ounce of gold.

In 1971, it was equal to about 1/42 of an ounce of gold. Then, Richard Nixon severed the link between the dollar.

And today, one dollar is worth roughly 1/1865 an ounce of gold.

So now, let’s take a look at our country’s GDP in terms of the amount of gold it can buy.

And let’s do a simple comparison of 1932, the depths of the Great Depression …

With 1971, just before the gold standard was abolished …

And then with the year 2000, the peak of the tech bubble … the year 2007, the real estate peak … and the latest GDP data.

That way we can see what’s really happening to the value of our country’s GDP in terms of how much gold it can purchase at those different points in time.

 In 1932, our country’s GDP was worth 2.8 billion ounces of gold.

In 1971, it was worth 27.74 billion ounces of gold. Put another way, our country’s GDP was almost 10 times what it was in 1932. So over that 39-year period, the purchasing power equivalent of our country’s GDP grew almost 1,000%.

In 2000, the purchasing power of our country’s GDP continued to appreciate and would purchase 34.54 billion ounces of gold, a 24.5% increase.

But at year-end 2007, it was worth only 16.87 billion ounces of gold. A whopping 51% CONTRACTION in the purchasing power of our country’s GDP!

Think that’s bad? As of July 31, 2011 — latest GDP data — our country’s GDP would purchase a mere 7.72 billion ounces of gold.

That’s a 54.2% decline since the peak of the housing bubble in 2007 …

And a whopping 77.65% decline in GDP since the end of the year 2000.

If that’s not a contraction, if that’s not a depression in real honest money terms, I don’t know what is.

Of course, almost everyone will argue with me about the above analysis, the main objection being that I’m viewing the economy in terms of gold only, and that the contraction I speak of is merely because the price of gold has gone through the roof.

But I ask you the following questions …

If 5,000 years of gold holding its purchasing power doesn’t give it the right to be a measuring tool, then what tool would you use? Paper money?

And if you think paper money can be used to measure real values, then why does paper money — in almost all cases — buy you less than it did a couple of years ago … five years ago … 10 years ago … 50 years ago?

Moreover, for the economy’s current GDP to equal the same gold purchasing power it had in the year 2000 — 34.54 billion ounces of gold — the price of gold would have to plummet by more than 77.65% to roughly $417.

What are the chances that’s going to happen?

Especially since the Federal Reserve — I have absolutely no doubt about it — will soon be forced to start printing money again?

Folks, the U.S. economy is already in a depression. Deep in a depression. Problem is, almost no one realizes it.

Hopefully, you do. And hopefully, you’re taking the steps necessary to protect your wealth so that it does not suffer the same devastating losses in real terms.

Related ETFs: SPDR Gold ETF (NYSE:GLD), Market Vectors Gold Miners ETF (NYSE:GDX), Market Vectors Junior Gold Miners ETF (NYSE:GDXJ),  iShares COMEX Gold Trust (NYSE:IAU), PowerShares DB Gold Double Short ETN (NYSE:DZZ).

Best wishes,

Written By Larry Edelson From Uncommon Wisdom Daily

Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit

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