Quite contrary to the real fundamentals of the economy, the U.S. dollar — the king of the global fiat monetary system — shot up to record highs (or quite close to it) against a basket of international currencies, including the Brazilian real, Mexican peso, and the Turkish lira. What was not unexpected was the impact on gold prices — true to form, gold bullion dropped nearly half-a-percent on the close of Friday, September 25.
The unusual dynamics across the financial markets has not been ameliorated by the U.S. Federal Reserve, with fresh statements from Fed chair Janet Yellen offering nothing but ambiguity in a time when Wall Street is clamoring for certainty. Supposedly, the biggest central bank in the world plans on raising interest rates towards the end of the year; however, this intention was carefully managed with the caveat that economic data must be supportive.
Oh joy! If that conditional metric is the barometer, the Fed statistically has the moral and functional obligation to both raise rates or to lower them. Either option is backed with copious evidentiary documentation. Neither option is preferable.
The bull argument has been disseminated endlessly by the mainstream media — the lost jobs as a result of the Great Recession has been recovered on a nominal basis, and the unemployment rate — as measured primarily by whom are receiving unemployment benefits — is at multi-year lows. Pure numbers speak of an economy that could reasonably be described as a renaissance.
Yet the old (paraphrased) adage — lies, damned lies, and statistics — is quite apt in this circumstance. Despite a surge in employment figures, real wages have failed to follow suit. This is primarily because prior to the Great Recession, most of the jobs created in the economy came in the first half of the year. Post-2009, most jobs today are posted in the second half of the year, where seasonal demand due to the culmination of shopping holidays are strongest among the retail sector. It is no coincidence that most of the “jobs recovery” originate from the broad “temporary help” category.
To push the logic further, the rising dollar — typically a symbol of economic stability and strength — is rising on a deceleration of broad demand. Due to the surge of low-wage “Wal-mart workers” in the economy, cash flow is significantly hampered, making each dollar printed (and accepted) a precious commodity. Thus, the other major indicator of economic health, gasoline prices, should be viewed with a grain of salt. While a stronger dollar does reduce pain at the pump, that stronger dollar is a result of a weakening and tightening consumer base.
So while the mainstream media celebrates the greenback renaissance, we may very well be on the precipice of a terrible economic reckoning.