Would you agree with this statement?

It is a very broad statement, and I am by no means educated in the subject but here it goes.

A decline of the middle class will lead to an increase in bullion prices.


In order to maximize profits firms will continue to send jobs oversees which may result in a decline of the middle class. This decline will lead to less investments in the U.S. and a weakened U.S. Dollar. As the dollar decreases in nominal value the rest of the world will hedge against it?

Thus driving up the price of bullion?

 

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Well that may be the most simplified version I have ever heard, but essentially, yes. There are many other factors that you need to take into account. And the fact is, nobody really knows beyond a shadow of a doubt what the PM market would do or they will sell off every worldly possession that they own to get more. Or sell off what PM they have. Depending if they see it going up or down.

There has been a good thread going lately about this.

 

Well, if the actions of big business of sending jobs overseas weakens the middle class and drops the value of the dollar, then no matter what those businesses will be losing money by their own actions which seems counter-productive. The middle class is the backbone of the economy so without their spending a company can send all the jobs they want overseas and it won't matter because there will be nobody to buy their product. I don't think the rest of the world is as concerned about the strength of the dollar as Wall Street wants us to believe. Therefor I don't see this having any bering on the price of bullion.
Guy

 

I'd prefer to quote Hamlet on this.


More honour'd in the breach than the observance?
This heavy-headed revel east and west
Makes us traduced and taxed of other nations.

They clepe us drunkards and with swinish phrase
Soil our addition. And indeed it takes
From our achievements, though performed at height,
The pith and marrow of our attribute.

 

I would agree with it in a broad sense by saying instead the same factors that are causing the decline of the middle class are also causing the rise in gold & silver prices.

 

Decline in average wages has little to do with gold or silver prices going up which is being driven up mainly due to low interest rates and investors looking for a new safe haven. Average wages have been relatively flat for over 2 decades adjusted for inflation that is primarily driven by globalization.

 

I agree with the statement on wages. I'm not sure if low interest rates alone are driving prices of gold & silver. I would argue however that interest rates are being kept low to head off the effects of glottalization. It's a very bad economic philosophy.

 

If I were to put your thought process into my own words ...

A decline of the purchasing power of the dollar will lead to an increase in bullion prices.

In order to maximize profits firms may continue to send jobs oversees which would result in a decline of available jobs thus pushing more people into poverty. This decline will leave people with less money to spend on the real economy and make a recovery more difficult. As the dollar has decreased in nominal value the rest of the world has not been purchasing enough US sovereign bonds which are now over 60% dependent upon the Federal Reserve.

Thus the price of bullion will continue to rise as more money is printed to support the bond market and the economy.

 

As stated, the answer would be no. A decline in the middle class is not the CAUSE of higher bullion prices. They may be coincidental factors, or even move in the opposite direction in a deflationary depression.

 

Gold is very popular in Egypt and we know there is no middle class there. Just look at King Tut.

 

I ran this by the professor today in class. I got shut down before I could even get to bullion prices. Apparently the investment in China is essential for "globalization."

 

And why is globalization essential? I wouldn't bother getting into it with your prof. I'm not a seasoned academic but have been to one major uni and in my experience they are there to tell you how it is more than anything else. Might be worth examining why he shut you down and modify your delivery technique in future discussions.

 

Fortunately, I received my degree before the advent of globalization and the rise of the one-worlders. Makes me feel like I learned some ancient and forbidden knowledge.

 

Globalization destroyed the Kensyan economic model in the mid 1970's. As the government poured money into the economy and made Japan fat. This time the Government poured money into the system and made China fat.

Ruben

 

Lets' ask our self why did wages increase in 60s and 70s? Because US productivity greatly increased (better educated work force high productivity, superior infrastructure, innovation and open society compared). But those advantages have all but vanished and technology (i.e manufacturing, internet, cell phones) has been the main reason why. So from companies stand point does it make sense to pay more when you can find the same talent else where? Imagine how hard it would have 20 years ago to get a supplier from outside of USA, these days you can do it with a click of button.

 

It reminds me of a Twilight Zone episode, the Brain Center at Whipples, where a factory manager ends up replacing all of his employees with machines, a look into the future at the time that we are living today to some extent. Still, as far as technology has come I think the jobs we've lost to machines could have been offset if not for the jobs we've lost due to globalization, even if we are at a point where we are utterly dependent upon them for our way of life. That is how the Matrix explains the beginning of the war with the machines. We became so dependent upon their processing abilities to perform reasoning for the world's complex problems that we were unable to regain control as it was beyond humanity's mental faculty to make the correct choices going forward.

In any case, I don't see any reason for wages to increase unless we increase tariffs/taxes to the point where it impacts a company's bottom line not to do business from the US. That would pretty much kill our trade with other nations so we'd have to revamp our productive capacity to provide the nation's needs internally. Not exactly ideal, but seems worth a shot to me.

 

Because of the 13% inflation rate and the 10% unemployment, as well as the oil shock?

 

Not really wage increased mainly till that Oil shock so i should have actually said 1950-1970.

Household income adjusted for 2006 dollars

 

That chart is junk. You weren't there. If you think the economy was better in the 1970's then the 1950's, you've taken a leave of your senses.

 

BTW - does that chart, FWIW, take into account the two income family?