Washington, DC -- (ReleaseWire) -- 11/03/2015 --Seventy-seven years ago, on October 30th, 1938, a twenty-three year old actor and director made radio history and supposedly sent much of a nation into a panic. On the CBS radio program, The Mercury Theater on the Air, Orson Welles and his cast broadcast an adaptation of Orson Welles' The War of the Worlds portraying the events of the novel as if they were happening in real time in the New Jersey township of Grover's Mill. While the ensuing widespread panic and mass hysteria was probably exaggerated by the press of the time, The War of the Worlds remains a touchstone in media history: fake "news" that affected the real world.
Today's media are still in the fake news game, but instead of provoking a panic they are doing just the opposite. They continue to repeat and reinforce the message of the Federal Reserve and the government that the economy is stable, even on the upswing, in the face of a growing mountain of evidence to the contrary. It's as if the big papers, networks, blogs and social media outlets are the cast of a drama and Janet Yellen is the Orson Welles calling the shots.
The Fed continues to float the idea that they're going to raise interest rates soon, and if they really believed the economy was strengthening, that would be the logical thing to do. But the economy isn't strengthening. In fact I believe we're in the run-up to another recession, if not in the beginning of one. Look at the September jobs report, which was disappointing on its own, and gets even worse when you check under the hood. They reported 142,000 jobs added during December, far less than the expected 200,000. When you look closer, though, 28 states lost jobs during September, with total losses in those states at 120,000 with gains at 99,000. With a net job loss for more than half of our states at 21,000, how credible is that overall 142,000 job gain? In addition, the Bureau of Labor Statistics revised July and August numbers down by a total of 59,000 jobs. And yet, "The economy is growing!" announce the actors reading Orson Yellen's script.
Some bits of news do slip out directly from industry and analysts. The Wall Street Journal published an article on October 26th titled "US Companies Warn of Pending Recession." They reported that quarterly profits and revenues at big American companies are declining. Industrial firms are warning of a pullback in spending, from railroads to manufacturers to energy producers. Businesses say they're facing a protracted slowdown in production, sales and employment that will continue to spill over into next year. And this isn't just coming from the Wall Street Journal. On the same day, Reuters talked about tandem falls in profit and revenue with a third of S&P 500 companies reporting so far. Analysts actually expect the index's companies to book a 2.8% decline in EPS from last year's third quarter sales. This is the third straight quarterly decline, and sales are on to fall another 4%. The last time sales and profits fell in the same quarter was in the third period of 2009. "The market's going great guns!" the announcers repeat.
This just confirms to me that a new crisis is beginning, because we have compromised a return to growth due to debt, as well as probably reached the limits of adjusting any monetary policy to continue to mask the risks that are building up in the US financial system. The "magic bullet" of central bank intervention is illusion. Either through ideologically-driven blindness or incompetence, they've just stopped attempting to use solid, fundamental policies to help to create solid and sustainable growth.
It's hard not to connect the dots from the government's deep seated philosophy of command and control to the increasing flight of individuals and corporations from the United States. In the third quarter of 2015, the highest number ever of Americans renounced their citizenship. At 1,426, the number may seem insignificant on its own, but we are on track to have more renunciations in 2015 than ever before in history. For comparison, in 2008 only 231 people renounced U.S. citizenship.
What are the reasons behind this trend? I believe one reason is that America simply isn't recognizable as America any more. We're living in an era of constant war, bullying by government agencies and the ever-deepening erosion of our constitutional rights. The easiest reason to point to, though is related: taxes.
Americans living abroad must pay taxes on their income both to the United States and to the country they're living in. This double-taxation is a hit to even the deepest pockets. Corporations are also renouncing "citizenship," because the U.S. isn't helping corporations be competitive. If you go out of your way to make yourself unattractive to capital, you're going to lose. That may just sound like common sense, but it's just what the government has been doing for years. With tax policies that sabotage global economic competitiveness, the U.S. has the highest effective corporate income tax rate in the developed world, and unlike most other countries which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of American companies when the money is transferred back to the United States. As it is, U.S. companies are keeping $1.9 trillion in retained earnings offshore because they're trying to avoid our crippling corporate tax policies.
Those listeners to The War of the Worlds on that Sunday night seventy-seven years ago that "got it," understood that it was entertainment, could enjoy the show and maybe even feel superior about the fact that they weren't among the supposed hordes of the panicked. What are the options for those of us that understand that much of today's media is government-created fiction? We certainly can't enjoy the show, and neither smugness nor panic is productive. What we should do is rely on ourselves. Wherever possible, opt out of a system that needs to be covered in a blanket of fairy tales to survive; get out of debt so that's not hanging over our heads; look behind the stories and find the real facts we should be basing decisions on. That's the only protection we have.
All data sourced through Bloomberg
Securities offered through Western International Securities, Inc., Member FINRA & SIPC. Bennett Group Financial & Western International Securities, Inc. are separate and unaffiliated companies.
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.