Here is the performance over the past week for four important indicators:
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Now what YOU, being a follower of Gold, may have noticed about the above data is the encouraging fact that the $US Gold price rose over the week despite the fact that the $US index was up over one percent. What is much more likely to hit anybody between the eyes is the gross discrepancy between the performance of the $US price of oil and the performance of the other items in the table.
Here is the economic data which came out in the US over the past two weeks:
The numbers just keep on getting worse and worse. Recent gallup polls reveal that 66% of Americans presently rate the US economy as "fair to poor" and Americans who think the economy is getting worse outnumber those who think it's getting better by at least two to one.
In the midst of all this, Treasury Secretary Snow is STILL running around talking about the world economy being in a "sweet spot" and media "pundits" close to the Bush Administration are still talking about the "Bush boom". Not only are they not blushing, they are actually managing to keep a dead straight face while so employed. Being a politician or a media pundit these days is indeed an arduous task.
All this is, of course, for public consumption. Behind the scenes, it is clear that the Bush Administration and the Republican party know full well that the US economy is steadily worsening with no end in sight. That's why they flew into an orgy of China bashing last week.
This week, the stakes were raised still higher. Out of the clear blue sky, and to the great chagrin of the networks who are in the midst of their semi-annual ratings wars, President Bush announced a prime time news conference to deal with DOMESTIC issues.
It is a very well known fact that Mr Bush doesn't like press conferences, no matter how well choreographed they are. He holds the Presidential record for the least number of them. It is an equally well known fact that the Bush Administration doesn't like talking about domestic issues, except those which concern their efforts to "protect" Americans against Terrorism and to make the rest of the world safe for "democracy".
The problem is that public perceptions inside the US are stubbornly refusing to comply with the picture being painted by the Administration. So Mr Bush, or more accurately Mr Bush's "handlers", decided that it was time to do something about this. It is one thing to assure people that mayhem perpetrated abroad is "good" for them because it is keeping them "safe". The War on Terror and the occupation of Iraq have not DIRECTLY affected most Americans. Yes, the government has become visibly more intrusive and travelling by air has become rather a trying experience, but these are fobbed off by many if not most as the price they have to pay for their "freedom".
The economy, however, is a different matter. Higher prices, static or lower incomes, and the prospect of NOT having that nest egg to enjoy in retirement, affects EVERYBODY. These things are all pervasive and their effect is cumulative. After years of borrowing ever larger sums of money to buy an ever cheaper cornucopia of (imported) goods, the reverse is not going down well in the USA.
This is reflected in Mr Bush's "popularity" ratings, the most recent of which was the lowest ever recorded by a US President at the equivalent point in a second term. It is also recorded by the fact that the majority of Americans now deem the Iraqi adventure to "not have been worth it". The last time that the US was in a similar predicament was in the early 1970s. Then, the visible deterioration of the economy led to the resignation of a President, the withdrawal of the US from an occupied country (South Vietnam), and ultimately, by the end of the 1970s, to a near death experience for the entire global post war financial system.
There are many people all over the western world who remember that decade well. Up until not much more than six months ago, very few of them had any inkling that such a thing could possibly recur. Now, it is dawning on many of them that not only can it recur, it IS recurring, and if anything, it promises to be worse than it was then.
This is the great danger, not only to the Bush Administration, but to the entire US political establishment. So the distractions are starting to rain down thick and fast. Last week, it was China bashing, and that hasn't gone away, of course. This week it has been Mr Bush's prime time appearance to talk about his "energy policy" and about his plans to privatise Social Security.
For a month if not more, the Saudis have been telling anyone who will listen to them that their capacity to pump more oil and indeed OPEC's ability to "cap" the oil price was almost gone. But this week, the Crown Prince of the Saudi royal family came to the US and talked first to Vice President Cheney and then to Mr Bush himself. Mr Bush primed the markets (and the media) for this meeting by the simple statement that: "He (Prince Abdullah) knows high prices are bad for the market."
Lo and behold, the aftermath of these meetings was a great show of bonhomie between the American President and the Saudi Crown Prince, giving credence to market "rumours" that the Saudis were going to ratchet up production by 500,000 barrels a day a level unmatched since 1980. Presto, a fall of more than $US 5.00 in the price of Oil on the "markets" by the end of the week. The fall was blamed on the growing realisation of the fact that the US economy was "slowing". Strangely enough, none of the other markets in the US has reacted to this "growing realisation" over the past week.
As we have repeatedly stated here and in The Privateer, the modern usage of the word "inflation" is a rise in the price of things which everyone HAS to buy. That is why rising stock, bond, or real estate prices are not recognized as being "inflation". It is also why the CPI is segregated into "core" and "non core" segments. The "core" segment excludes precisely the items which everyone HAS to buy - namely food and energy - thereby doing its bit to reduce the number which purports to "measure" price rises within the US economy.
Unfortunately, the government's inflation measure and the price rises which are slowly overwhelming the American people are too severely out of whack to work any more. This fact has now dawned on the Bush Administration. "Oh #$!!@#$ - They've Noticed!". As already stated, the distractions are flying thick and fast. Last week it was China bashing. This week it is a re-found focus on domestic economic issues, and a corresponding 10% plus dive in the $US price of oil. Next week? Stay tuned.
Of course, "they" haven't REALLY noticed. Not yet. If they had, Gold would not still be hovering below the highs it set last December. But Gold did go up this week despite the higher US Dollar and the oil price crash. The day when "they" WILL notice is getting closer - every day.