The Economics Credibility Gap

15 May

The Economics Credibility Gap

How They Made a Mess of the American Economy, the Dollar, and Your Prosperity – and Gave You a Buying Opportunity at the Same Time!

The Federal Reserve has made a mess of everything.

The American economic establishment has made a mess of everything, too.

But I repeat myself.  The American economic establishment is the Fed’s puppet.  The Fed calls the tune and the establishment dances.

This has been going on for a long time. 

The Fed is awash in high-priced economists and expensive consultants who carry its water and defend the Fed’s decisions and protect its prerogative to create money out of thin air. 

G. Edward Griffin, author of an excellent history of the Fed called The Creature from Jekyll Island, describes how the Fed mobilizes public opinion:

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession….

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed’s thrall, the economists missed it, too.

Today the Fed has hundreds of economists on staff, while hundreds more receive lucrative contracts to do studies for the Fed.  The Fed’s influence extends over the academic economics departments and the professional economic journals.

So the Washington monetary establishment has a very effective chokehold on the philosophy and opinions people hear about monetary policy.  Dissenters are choked off.  This goes a long way to explain why there were not more warning voices about today’s raging inflation.  

The following chart illustrates the consensus expectations from economists for inflation to have subsided by now, all wildly incorrect.  

The monetary authorities clearly have no idea what they are doing.   So they will try a 50 basis point interest rate increase this month, and then may try another and another after that, as see how things work out.  It’s all hit and miss.

But they have done us a favor.  The Fed’s interest rate increase has spooked Wall Street.  The stock and bond markets have been clobbered, and – at least for now – gold has moved down below its long-term (200-day) moving average, the red line on the following chart.  This gives us an opportunity to buy gold at prices that prevailed early this year.

Silver has corrected as well.  But bear in mind that these charts reflect the prices of “paper” gold and silver.  Real physical silver remains in high demand and in short supply and is only available at significant premiums above the paper or “spot” prices.

Your Republic Monetary Exchange gold and silver professional can provide you with more information and steer your investments in ways that take advantage of this break in prices and meet your individual needs.