Fed Cries Heard From Rubble - Gold Set to Rescue

by David EngstromDecember 17, 2014

Today, as the wrecking ball of debt tears down the future of our economy, a faint cry from the growing pile of rubble emerged.  It comes as no surprise the statement made by the Fed today indicates zero urgency to raise interest rates.  I hate to say it but in my last report, “Where’s the Can?,” I showed why the Fed has no interest in raising interest rates.

Referred to in today’s statement was inflation.  It, presumably, remains well below the Fed’s target rate of 2%.  Today’s low oil prices were described as having a transitory lowering effect on inflation.  Funny!  When gas is $4 a gallon how they exclude food and energy costs from normal inflation calculations.  Then BOOM!  The minute oil goes down they say inflation is in check because of low energy costs.  Please will someone make up my mind?

While oil prices tumble, totally ignored is the fact that a prolonged period of low oil prices could . . .

  1. Put thousands of people out of work, with Texas, Alaska, North Dakota, the Gulf States and others being grossly affected;
  2. Bring a cascade of loan defaults by those who borrowed money to produce oil;
  3. Tempt Russia to default on more than $670 billion of national debt to foreign lenders;
  4. Result in global war over debt defaults; and
  5. Wreck havoc in energy stocks.

We better hope tumbling oil is having only a transitory effect on inflation.  Could be the understatement of the decade.

As to improving labor markets, what do you think happens to unemployment numbers when millions of unemployed fall off the unemployment roles?  Bingo!  Unemployment rates go down.  Let’s look at the real numbers and state of our workforce.  In 2008 the actual number of unemployed workers was 13.58 million.  Today the actual number of unemployed workers is 17.76 million.  1776!  Ring a bell?

Then there is the Labor Force Participation Rate (LFPR).  At the end of 2009, right in the middle of a full blown crisis, the LFPR was 64.6%.  At the end of November 2014 that rate, in the middle of a so-called recovery, is 62.8%.  Does it make sense that in the middle of a recovery the LFPR is 2.4 percentage points lower than it was in the middle of an employment crisis? – And, then we can call that improvement in the labor force?  Someone isn’t being very transparent.

There are as many holes in reports we hear from the media as there are holes in the walls supporting our economy and markets after being battered by the wrecking ball of debt.  Focus on the facts and you will realize that real money will be all that is left standing when the debt can reaches the end of the road.  Real money is gold and silver and regardless of the shape it is beaten into by negative press and misinformation, it will be the last money standing when the walls that support our markets and economy are beaten into the great pile of rubble.  Take heart.  That’s when gold and silver come to the rescue. For more information, call Lear Capital today at 1-800-576-9355. 

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