Is The Soaring Stock Market Proof Of Economic Recovery?
Is the soaring stock market proof of economic recovery? Many people think so, but frankly, nothing could be further from the truth.
Since the 2008 collapse, the S&P500 has tripled from a low of 683 on March 6, 2009 to 1,975 as I write this article on July 21, 2014.
So, doesn’t this PROVE that there is an economic recovery?
No, because this growth has only come from the Fed’s programs of printing money and holding interest rates close to zero.
When we look at the Fed’s current balance sheet, we see that it has grown by a factor of FOUR since 2008.
According to the website FederalReserve.gov, the current balance sheet has ballooned to about $4.4 trillion, and much of it was used to prop up the financial institutions that were “too big to fail.”
Where did all of this money go?
Since investments like U.S. Treasuries, corporate bonds, CDs, and various fixed-income products are paying less than the current rate of inflation, much of that money found its way into the stock market.
Who is doing all of this buying? It’s certainly not the average main-street investor, because multiple studies have shown that only about 47 percent of all Americans own stocks. And this is down from 65 percent compared to 2002.
This is most likely because many average investors are pulling money out of their retirement accounts just to survive.
So, who’s doing all of this buying, pushing up the stock market? It’s the banks and large corporations!
So, the Fed’s program of printing money is distorting economic reality.
Even worse, the ever-increasing amount of worthless paper money affects the general work ethic of society.
It feeds a something-for-nothing mentality, a mindset of anything to make a quick buck without providing real value.
Fiat currencies always create an illusion where financial speculation and gambling are viewed as more important than real productivity, production, and long-term value.
Paper money also typically expands consumption well beyond income. This drives up debt, and virtually guarantees the eventual collapse of the economic system.
Fiat currency is ultimately an illusion, because it can continually be created by the government without limit.
In contrast is real money, in the form of gold and silver.
As a paper currency comes to its end, we typically see government suppression of previous rights, and often, the start of fiat-funded foreign wars.
Where does all of this eventually lead? Typically, it leads to the default of the currency.
Do I expect this with the U.S.? It’s certainly possible, but even if it doesn’t come to that, it’s still happening right now in an informal way. I’m talking about the gradual depreciation of the U.S. dollar through inflation.
The only way for real economic growth is through the transfer of goods and services between people and businesses that actually produce something.
For example, if someone provides a product or service and gets paid in real money (backed by gold or silver), there is a real exchange of value with a corresponding increase in his standard of living.
This sort of real-world transfer has worked well for thousands of years up until the invention of fiat currency.
The Fed knows that at this point, they have a serious problem and are doing all they can to control public perception, because the last thing they want is a run on the banks.
So, what are we to do?
Many smart investors have decided to move their assets out of the dollar in favor of silver and gold.
As we’ve previously discussed, the price of gold and silver is being manipulated down to keep interest high in the U.S. dollar’s value. But that shell game can only go on for so long.
The situation is setting up for an explosion in the price of gold and silver.
The only problem is there’s no way to know when prices will skyrocket, and this uncertainty has caused many investors to be hesitant in taking a larger position in metals.
But some people, like me, see this as a perfect opportunity to buy.
How do you feel about fiat currency and the debt situation we’re facing?
Please leave your comments below.
Good trading,
Dustin Pass
“Take this great power away from them [the Banks] and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves to the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.”
Sir Josiah Stamp, Director, Bank of England 1928-41, (reputed to be the 2nd richest man in England at the time)
This is very disturbing! How is it possible that the FED is ignoring all these ” deadly ” but clear indications, which can ruin the financial position of all americans…… and doing this knowingly !!
What will Pres. Obama ( or any other future President ) tell his people and what will be his excuse?
Is it not time that” world currency ” should move away from the USD$ ?
I don’t know what to think at this time.
Dent research says gold is going down to $250 by 2016
Larry of Weiss group says Gold is going to $5000 by 2020.
Somebody is wrong and baby boomers like me can’t be.
Buying gold was outlaw once before.
Why do you think they will not do it again?
Fred I have read both of the commentators that you site. As usual the financial advisors say that the market is going either up or down. Yeah, thanks for nothin!
During the depression my mom lived on a farm in Minnesota. She told me that farmers there survived as well as anyone because they grew their own food, animals and grain. There were lakes for fish. The place was paid for and they had a doctor somewhere in their little town. A simple self-sustaining life if a person could stand the bitter cold of winter.
Nice job Dustin–How did you discover Austrian economics ? What is your background and education? Always curious to see how truth seekers figure things out
I agree, as many from recent internet commentary are coming to be ‘educated,
that the present fiat currency system is
due for a fall. In fact I have felt this coming
on since reading “The Coming Currency
Collapse” by Jerome F. Smith in 1991!
However let me say this, that in study of the Elliott Wave Theory and Robert Prechter’s work with it on his website, I would disagree that Gold is set along with Silver to explode, but in fact
has already peaked though they are both due for
some uptrend movement, but not anything that will surpass the previous high.
Of course only time will give the final word on any of these potentials.
EDT
Chicago, Illinois
for me sir is to save some money for the rainy days ahead
so what we should do
As said on a previous comment, the Fed is quietly pumping the money they print to invest in the stock market, as this is what keeps the industrial economy going in the US, as this is all they have. If the stocks kept falling since 2008 many of these companies would have failed and dried up, and much of the private investment would have gone off shores, or reinvested into gold or silver, putting the price even higher. Many middle class US citizens have left the US after 2008 to other countries to live, and here in New Zealand ( population 4.8 Mill. ) we have over 26,000 US citizens living here permanently, and per head of population is one of the highest in the OECD countries of the world. China, the EU, ( Germany, France, Italy ) Ireland, to name a few already have signed an agreement to trade among themselves using there own currencies, not using the US currency as a standpoint. There is still alot of wealth within the US, but it is only the top 10% that has 90% of this wealth. As a business owner/operator for over 25 years, running the country or Government/Federal Reserve is just like running a business, but if run incorrectly, the system will eventually fail, domino effect. ( we hope not !)
Great post. However, it really only scratches the surface of what’s going on behind the scenes. For a in depth and excellent dissertation on the difference between money (gold and silver) and fiat currency (paper money) read the best selling precious metals investment book of all time by Mike Maloney “Guide to Investing in Gold and Silver”. This book together with his video series “Hidden Secrets of Money” gives you everything you need to know about wealth creation and preservation and how the monetary system in this country works. Or rather, I should say isn’t working and why today we face an unprecedented global monetary crisis and how the US and the Federal Reverse have come to be the central players in all of this.
To Fred:
The US government WILL outlaw private gold holdings. It WILL happen again. They will likely do just what they did last time – pass a law to declare all gold must be disposed of to the State but at some ridiculously low price.
I live in the UK but both of our nations are controlled by the same thieves.
There is a very good vid ‘The Death of Britain’ published by MoneyWeek. You can simply substitute USA for GB.
Clearly we are in an unsustainable bubble that the Fed has created, just as the Fed likewise was arguably the proximate cause of both the Great Depression and the 2007 real estate crash leading into the 2008 stock market crash. Now we are in the single longest stock market upswing in the entire history of the US stock market. The question is not whether or not a major stock market crash will come, but instead, only when it will come. For those of you who work with geocosmic factors, note that in “weather” transits (movements of the planets not in relation to any specific birth or event chart), Mars (action) Conjunction (potential for major event) Saturn (contraction, depression) occurs 25 August 2014. Mars-Saturn is what Ebertin called the “death axis”. Next, looking at the NYSE Foundation Chart and Solar Arc Directions specific to that chart, Mars by Solar Arc is Conjunction “natal” Saturn on 30 August 2014. I am not a master of probability, but I must say that the chance of having the “death axis” Mars-Conjunct-Saturn combination occur both in the “weather” transits impacting global events, and then within just a few days later also by Solar Arc Direction to the NYSE Foundation chart, is almost impossibly low. I could go on with other geocosmic factors, but Ray Merriman of MMA Cycles has been predicting an immense crash pending since last summer, and even if I am wrong that the crash could occur around the dates given (plus or minus an unknown orb of trading days), the crash will still come, and quite likely before the end of this year, because of the large number of other negative geocosmic factors falling due. I have never purchased gold before but will act imminently to move all index fund holdings and some low-priced-stock holdings into gold.
Good article Dustin, we live in a rigged world with rigged markets. Meltonmark has the proper quote. Our world is controlled by the BIG banks–they call the shots. It’s no wonder the S&P continues to climb considering that it’s comprised mostly of financial institutions. And yes, I believe gold and silver is being manipulated by the banks, too. I also think the Fed is in bed with the banks…where will it end? Nobody really knows…just like no one knows if the markets will continue to climb or not. ask the Chinese.
How is there even enough gold to go around. I see the potential here of creating a “has” class and a “no” class. The buying and selling of metals has always been a “fear” meter utilized by fear mongers (who get rich off of people with skittish mentalities). Yes the market will crash. when? who knows. For those folks selling fear….even a clock is always right two times a day.
I think there is a big difference between selling fear and being a proponent of being cautious investment practices. There is no need to fear it. Just be aware of the possibilities and do not turn a blind eye to history. We can learn a lot from it.
I agree there are serious issues with our currency and debt along with many other countries around the world. Some people will buy precious metals and other precious assets, diamonds etc. others will buy guns and ammunition. I think everyone just needs to stay vigilant with there investments.
Who really own the federal Reserve bank? Is it Vatican? The currency that the great Thomas Edison proposed is the way to control inflation