What 5-Year Recovery?

Grim Employment Picture Reveals Need for Prepping, Self-Reliance Skills

Government economic statistics have become so detached from reality that not even the Federal Reserve goes by them anymore. You certainly shouldn’t as an investor or a prepper.

The Fed recently announced that it will no longer peg interest rate decisions to any particular unemployment number. Formerly, Fed officials had said that when the unemployment rate falls below 6.5%, that will trigger them to pursue tighter monetary policy.

It’s becoming painfully obvious even to the Fed that the official unemployment figure fails to paint an accurate picture of joblessness in America. Fed chair Janet Yellen
said she “wouldn’t dream of raising the federal funds rate target” under present labor market conditions unless inflation became a greater threat. Fed economists know
full well that the actual rate of workforce participation is at its lowest level since the late 1970s.

The workforce participation rate shows what percentage of the population is actually working – as opposed to the unemployment rate, which excludes millions of “discouraged workers” who have dropped out of the workforce entirely. The government’s calculation of unemployment excludes people trying to initially enter the workforce. It also misses people who are underemployed – people with advanced degrees waiting tables to make ends meet, for example. Worst of all, the reported unemployment rate gets suppressed by the inclusion of hypothetical jobs in a bit of statistical gimmickry known as the “birth-death model.”

5 Grim Economic Statistics that
Put the Lie to the Stock Market Barometer

Nearly five years into a supposed “recovery,” here are five tell-tale signs that something is still seriously wrong with our economy:

  • The U.S. economy operates with 1.7 million fewer jobs today than when the last recession began in December 2007.
  • A full 20% of all families in the United States lack a single household member who is employed.
  • Ten years ago, more than twice as many women had jobs than women who were on food stamps. T oday, more women receive food stamps than have jobs.
  • The number of Americans who receive monthly benefits from the federal government now exceeds the number of full-time workers in the private sector. By more than 60 million.
  • Fewer than one out of four Americans has enough money saved to cover six months of expenses in the event of a job loss or major emergency.

These statistics taken together show the potential for social unrest to erupt if the government ever pulls back on the free handouts. As the government’s share of the
economy continues to grow, what’s left of the private sector will be expected to bear impossible burdens. The only way forward under our system is higher taxes and higher inflation.

Eventually, the government will break the back of the private sector. The consequences won’t be pretty. Especially for those who are unprepared.

What Is the Stock Market’s
Relationship to Gold Telling Us?

For the time being, the mega-corporations that comprise the major stock market averages seem to be doing fairly well. In part because they are cutting jobs and other costs, which has boosted bottom lines. Actual revenue growth, however, is lacking. Bull markets built on cost cutting and artificial stimulus from the Fed are suspect. The market could give back much of the gains it has delivered over the past five years – either nominally or in terms of gold.

The ratio of the Dow Jones Industrials to the price of an ounce of gold currently comes in at just under 13:1 (it got as high as 44:1 in 1999). The ratio sits slightly below
where it began the year in spite of new nominal highs in the Dow. This is a potential negative divergence – negative for stocks, positive for precious metals.

We’ll have to wait and see whether gold and silver can finally put in a sustained rally. They have been basing out for many months now. The long consolidation period has been frustrating to holders of precious metals, but as long as it persists it presents a great opportunity to buy. In a world of negative real interest rates on most conventional savings instruments and a richly valued stock market, precious metals are one of the only asset classes that look attractive at this point in time.

Of course, you can still find good values in certain areas of the stock market, especially if you look overseas to regions such as Asia (see “Investing Insights from a Westerner,” page 1). But it’s not as easy as it was five years ago, when almost everything in the global equities markets was cheap.