Lately, there’s been a lot of chatter about the true state of the U.S. economy. For years, we’ve been told everything’s going great—the economy is strong, jobs are plentiful, and growth is on the rise. But recent developments suggest a different story, one that reveals an economy far more fragile than many believed.
Powell’s Wake-Up Call
Last Friday, Federal Reserve Chair Jerome Powell delivered a speech that sent shockwaves through financial markets. While his words were carefully chosen, the underlying message was hard to miss: the Federal Reserve is bracing for possible economic trouble. Powell hinted that interest rate cuts might be on the horizon, stating, “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
This signals a major shift in the Fed’s outlook, as they now face mounting economic risks that have intensified in recent months. Powell’s remarks reflect growing concern, especially after it was revealed that the Bureau of Labor Statistics (BLS) overstated job growth by a staggering one million jobs—jobs that now appear to have simply vanished.
The Economy Worse Than You Think
Market expert Scott Shellady, also known as “The Cow Guy,” has been vocal about the economy’s real condition. According to Shellady, the U.S. has avoided an official recession only because of massive government spending.
“The reason why we haven’t officially entered a recession is that government spending has been off the charts,” Shellady explained. “We’ve essentially spent our way out of a recession. But if you look at the job numbers month over month, it’s clear that government spending is the only thing keeping us afloat.”
Shellady’s point highlights a critical issue: while government spending may have temporarily propped up the economy, it hasn’t fixed its underlying weaknesses. The recent revision of job numbers further underscores this, showing that the U.S. added far fewer jobs than initially reported. This aligns with Powell’s warning about an “unmistakable” slowdown in the labor market.
A Divided Federal Reserve
Not everyone at the Federal Reserve agrees on how to proceed. Kansas City Fed President Jeffrey Schmidt is cautious about lowering rates too soon. He argues that inflation must be reduced to the Fed’s 2% target in a sustainable manner, and that current interest rates, while higher than in recent years, are still within a historically average range.
In contrast, Philadelphia Fed President Patrick Harker believes it’s time to start cutting rates, citing current data. But Shellady adds another layer to this debate. He warns that if the Fed cuts rates, inflation could resurge. On the other hand, if they don’t cut rates, the labor market might continue to weaken, creating a “damned if you do, damned if you don’t” scenario.
Are We Already in a Recession?
With rising unemployment, fewer job openings, and declining consumer confidence, signs of a potential recession are everywhere. According to the Sahm Rule, a reliable recession indicator, the U.S. may already be in one. Another trusted metric, the McKelvey-PMES Combined Recession Indicator, also suggests the economy is in serious trouble. This indicator has accurately predicted the last 11 recessions without a single false positive.
If a recession hits, the Fed will likely slash interest rates to near-zero levels, similar to the response after the 2008 financial crisis. However, today’s economic environment is different, with much higher national debt and widespread financial strain on households.
Preparing for Uncertain Times
Given this uncertain outlook, it’s more important than ever to consider how to shield your wealth. Diversification remains one of the most effective strategies to fortify your assets. Physical precious metals like gold and silver have historically served as wealth havens during economic turmoil. They are not just commodities; they are stores of value that have preserved wealth through countless economic crises.
Conclusion
The Federal Reserve’s recent admissions, along with insights from experts like Scott Shellady, underscore the fragile state of our economy. As Powell and his colleagues face these growing challenges, it’s clear that the risks are mounting. Now is the time to prepare for what lies ahead. By diversifying with precious metals, you can fortify your wealth.
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