By Philippe Herlin – Researcher in finance / Contributor to Goldbroker.com 

European hedge funds

The economic landscape has rarely been this schizophrenic. If we read the mainstream media, like Les Échos, France’s foremost economic daily paper, we learn that « gold will be hurt by a better-than-expected recovery » and that the resulting higher interest rates stemming logically from this recovery will keep pressure on the precious metal’s price.

Yes, you’ve read correctly, there is a « better-than-expected economic recovery »! I wonder on which planet the people writing such drivel live… This recovery is being sold to us by the mainstream media and the political leaders, but what of it, really? As a reminder, in the United States, GDP growth for the first quarter has been revised to the downside, from 2.4% to only 1.8%. This is not a recovery! And let’s not forget that this weak growth is being bought by massive QE from the Fed, to the tune of $85Bn a month. All that money created out of thin air is only resulting in a paltry 1.8% growth!

But then we are told that the unemployment rate is declining. Sure… But if we dig deeper, we see that most jobs created are part-time low-paying ones… so what gives? It’s the Obamacare effect! Businesses with over 50 employees working 30 hours a week have to pay Obama’s health coverage for them, and it’s too costly and complicated. So, instead, these businesses have fired their paid employees and re-hired them for under 30 hours, adding a few more employees to compensate. This is why we’re seeing many bartending jobs or the likes being created. But, on the other hand, there are no quality full-time jobs, either in administration or manufacturing. Recovery?

In Europe, growth is globally zero. Italy is going through its eighth consecutive quarter of recession! Not to say anything about Greece, Cyprus, Spain and Portugal. Even Germany is slowing down, and France is hovering around zero growth. But all political leaders are talking recovery. Of course, they’re always campaigning to get re-elected, so they have to promise better tomorrows…

So, there is no recovery. But, since the mainstream media and the governments keep repeating it over and over again and since we prefer believing good news than bad news, a majority of people believe in this so-called recovery. This is why the stock market is up and gold is down.

Such schizophrenia cannot last forever, and the wake-up call will be painful. The smartest ones, notably those who own gold, will do well, but those who « bought » this recovery might pay a very hefty price.

 

Philippe Herlin

 

Philippe Herlin – Researcher in finance and junior lecturer at the Conservatoire National des Arts et Métiers in Paris / Contributor on Goldbroker.com

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