Washington, DC -- (ReleaseWire) -- 04/21/2016 --In a recent conversation with CNN's Fareed Zakaria, Janet Yellen asserted that ours was an economy on a solid course, not a bubble economy. "We try carefully to look at evidence of potential financial instability that might be brewing, and some of the hallmarks of that are clearly overvalued asset prices, high leverage, rising leverage, and rapid credit growth. We certainly don't see those imbalances." How can the Federal Reserve not see these things? How can Yellen continue to assert that our economy is on a solid course?
Here's what I see. U.S. factory orders have now declined on a year over year basis for 16 months in a row, something we haven't seen in 60 years without the economy being in recession. First quarter corporate earnings are projected to be down 8.5 percent over first quarter 2015, the fourth quarter in a row of year-over-year declines. We haven't experienced four quarters of dropping earnings since the last recession. S&P 500 earnings are down 18.5 percent from their 2014 high. Corporate debt defaults have soared to the highest level since 2009, and the average rating of corporate debt has fallen to BB, the lowest since the last crisis. United States oil rig count is at a 41-year low. Outplacement firm Challenger, Gray and Christmas released statistics that job cut announcements from U.S. firms were up 32 percent for first quarter 2016 over first quarter 2015. Consumers accumulated more new credit card debt during the fourth quarter of 2015 than during the entire years of 2009, 2010, and 2011. We have $19 trillion in federal debt, a number which has increased $100 million every hour since President Obama's inauguration.
And yet, "solid ground," says Janet Yellen, and the stock market is only down 2 percent off its all-time high, despite very low volume and all the bad economic news. The markets, the Fed, financial institutions, all are starting to act like they're schizophrenic. Morgan Stanley's Adam Parker issued a statement this week comparing stock market strategies, bizarrely enough, to cockroach behavior. Even more strange, he seemed uncertain as to whether this was a good thing or a bad thing.
It is in this environment that we find ourselves, additionally, in the midst of an all-out war on cash. Interest rates are negative in Japan and several European countries, and we seem to be trending toward that possibility in the United States. Central banks keep printing more and more money, but that money isn't tied to any real value. The assumption is that these negative rates will force banks to lend their reserves, and that lending will boost aggregate demand and help struggling economies, but it just isn't happening. No one's buying into it. Meddling with interest rates creates an increasing disconnect between supply and demand over time, and the wider that disconnect gets, the more risk there is when things eventually and inevitably realign to reality.
So what do we do? Just keep our cash out of the banks, stuffing it in a mattress or burying it in the back yard? Even with that, cash keeps getting more and more discouraged by governments and financial institutions. Across the globe, governments are placing restrictions on the use of cash, supposedly to make life more difficult for terrorists and criminals. Central banks set inflation targets, and inflation is another way that our savings is taken from us. As Alan Greenspan said in 1966, "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation."
Maybe that is why gold is up 17 percent in dollar terms, year to date. The U.S. government has spent nearly a century trying to convince American citizens that gold isn't currency, despite the fact that gold is, and always has been, a reliable store of wealth. Even the Chinese government is encouraging its citizens to acquire and hold gold, and other countries do the same, to some degree. But here, we're told that gold is just for jewelery. The question is, if gold isn't money, why do central banks, including our own Federal Reserve, hold physical gold and keep it as an asset on their accounting ledgers?
The system runs to benefit the system, and the notion that the government is going to protect us in the next crisis is groundlessly optimistic. It comes down to notion of individual liberty, really. With that liberty comes personal responsibility, and the expectation that we need to act to protect ourselves. Investors must examine all the options and choose carefully those that leave us less exposed to the whims of "too big to fail" banks, government bureaucrats, and politicians. Precious metals are one way to do that.
For over a quarter century, the experienced advisors of Bennett Group Financial Services, LLC have been successfully guiding clients through the complexities of wealth management. Bennett Group Financial Services provides individual investors, corporations and foundations with holistic investment strategies using unique portfolio solutions across a breadth of asset classes. Our unique vision and insight into market trends makes Bennett Group Financial Services a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to our highly regarded weekly talk radio program - Financial Mythbusting. Through attentive service and prudent, thoughtful advice, Bennett Group Financial Services, LLC strives to consistently provide its clients with the highest quality of guidance and personalized service available.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com.
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.