The Federal Reserve has injected over $4.5 trillion into the economy to speed up the recovery from the Great Recession of 2008.
In Part 1 we learned a recession is a significant decline in economic activity spread across the economy, lasting more than a few months. We also learned there isn’t a standard formula you can apply the economic data to…. to see if the economy is in a recession.
And since so many economists failed to recognize the last one, you’d think they’d be looking at other indicators, not just the ones they’ve previously chosen to monitor. Warren Buffet has his way of doing it and another guy who called it early, was Peter Schiff. He looks at nontraditional recession indicators, like household debt, which we talked about in Part 1.
He also looks at the unemployment rate and inflation. So, we’ll go over those in this episode.
According to the Bureau of Labor Statistics, the unemployment rate as of June 2017 is 4.4%. Aside from May 2017, when it was 4.3%, it hasn’t been that low since March 2007. Pretty awesome right? We’re in great shape….so it seems. When you look under the hood however, you see a greasy, broken-down engine in need of a major overhaul.
Basically the government produced unemployment rate is fake. It’s manipulated. It’s designed to make things look better than they are. How?
- If you’re not looking for a job, you’re not counted.
- A part-time job is counted as a full-time job. So someone who has two part-time jobs, equals two full-time jobs. Most of the highly touted “job growth” over the past six years has been low-paying part-time jobs, with the same person being counted two, three, or more times.
Obamacare has also contributed to the level of unemployment. For years now, many of you have been transitioning to a part-time workforce to avoid an increase in your medical insurance expense. You aren’t forced to provide affordable health insurance to employees working less than 30 hours a week.
Although, according to Advisor Perspectives, Inc., the Affordable Care Act hasn’t contributed to the surge in part-time job growth, this is where I’ll invoke a Potter Stewartism. In other words, I know it when I see it.
Actually, I’m not the only one who disagrees with them.
The number of people who have 2 or more jobs is higher now than it’s ever been. According to a USA Today article on October 17, 2016, the number of workers having multiple jobs is at an eight-year high.
And, it’s not just the number of part-time jobs that’s a problem, it’s the type of jobs… Market Watch reported on April 9, 2017 that according to the Economic Policy Institute, these new jobs are mostly low paying retail, leisure and hospitality industry positions.
So, you can drink the BLS cool-aid all day, if you like. That doesn’t change reality and the reality is, the unemployment rate is significantly higher than they report it to be.
This is not a sign of a healthy economy.
How about inflation. Another the government wants to lie to you about.
The most common definition of inflation is a rise in the general level of prices, but that’s the result of inflation. Inflation is actually an increase in the supply of money. So has the money supply increased over the past 8 years? Yes, like no other time in history!
The Federal Reserve has injected over $4.5 trillion into the economy to speed up the economic recovery. But that’s not enough. They are preparing to print even more new money to keep the economic train on the tracks. So, are we still recovering from the Great Recession or are we already in one? If not, why, Federal Reserve, do you need the Treasury to sport you new a boat load of new green-backs?
You can’t just create that amount of money out of thin air without some seriously serious consequences. Yes… I said seriously serious.
More new money and continued low interest rates, allows us to continue spending money we don’t have. As we go further and further into debt, the more painful the correction will be when the music stops.
I will say the money supply isn’t the only factor that effects the prices of goods and services. You have supply and demand, productivity and bunch of other factors, but those are natural economic forces. Creating new money isn’t.
Of course you already know inflation has been high! You see it in the products you buy. You may pay the same for some products but you get less of it and lower quality. You go to the grocery store and buy cereal and you pay the same price for it as you did last year. Hell, the box is even the same size, but the bag inside has a lot more air in it.
The federal government manipulates the economic data to coverup what’s really happening.
The best measure for inflation is the price of gold. Schiff Gold provides the following eye-opener; an infographic showing the difference between two savings scenarios:
- An American stores $3,500 in a safety deposit box in 1967 and takes it out in 2017.
- An American stores $3,500 worth of gold (100 oz) in a safety deposit box in 1967 and takes it out in 2017.
If each person then went on a spending spree, here’s what could they buy.
- The guy with cash could buy 1,500 gallons of gas. The guy with gold, could by 54,350 gallons.
- Cash would buy you 2% of new house while the gold would buy you 63%.
- You could buy 470 burritos with your cash. If you had gold, you could buy 16,700 burritos.
- $3,500 in cash would get you 10 round-trip flights where gold would get you 357.
Basically, $3,500 in cash 50 years ago is still $3,500 but it buys a lot less than it did back then. On the other hand, $3,500 in gold 50 years ago is worth $125,000 today. That’s inflation. The dollar has lost some serious purchasing power where as gold has retained it.