The stampede of dollar into the gold and silver markets has not yet begun. There is record demand for coins, rounds, and bars, but institutional money is still ignoring precious metals, for the most part.
Anyone wondering could find a clue in the current makeup of the US economy.
The large majority of the nation's spending, and wealth, is handled by people who don't have much in common with gold bugs, at least not yet. Here's how.
- Federal outlays are now 31.35% of the GDP. That percentage was just under 21% in 2019.
- State and local governments spent $3.2 trillion, according to the latest report. Total GDP is at $21 trillion, so this spending represents 15.2%.
- The Finance, Insurance, and Real Estate (FIRE) sector added 22.3% in 2020 and will likely capture a higher percentage of GDP this year.
To summarize the concentration of these three sectors in total GDP:
- 31.35% - Federal Government sector.
- 15.2% - State and Local Government sectors.
- + 22.3% - Finance, Insurance, Real Estate sectors.
That adds up to 68.85% of the entire GDP.
Government, banks, real estate, and insurance now comprise nearly 70% of our economy. Government sectors alone are approaching 50% of GDP.
This information should have Americans worried about the direction of the country. They don't even have to know GDP statistics to understand that the economy isn't doing well and isn't working for most Americans.
It is not sustainable for half of all spending to be done by people who produce nothing.
When this travesty is the "business model" underpinning so much of our economy, it makes sense to buy guns and gold.
However, lots of the people with a significant stake in GDP have a different take. Their share of the pie has grown dramatically, and they invest accordingly. They prefer conventional assets over precious metals.
We shouldn't expect them to allocate any assets to precious metals until they discover Fed Chair Powell is wrong about higher inflation being transitory.