An Economic OverviewIn Conversation with Dawn Bennett and Michael Belkin

A Pulse on the Economy

Indicators of U.S. economic health seem to be plentiful, but are they always accurate? Given the constant influx of conflicting information from media outlets, government officials, and stock market indices, it can be challenging to make an honest assessment of the U.S. economy. Though many believe we’ve fully recovered from 2008’s recession, other indicators of economic health present a slightly different picture of the economy.

Dawn Bennett, CEO of Bennett Group Financial Services and host of the Financial Myth Busting with Dawn Bennett radio talk show, recently sat down with financial expert and research analyst Michael Belkin, publisher of the Belkin Report, to attempt to get an accurate sense of the U.S. economy’s health.

Belkin’s Take

According to Belkin, signs of a weakening U.S. economy are becoming increasingly evident.

• Gold stocks are noticeably rising in value and popularity. However, a greater emphasis on gold is in many ways an undercut to central banks. The more we invest in gold, the less we invest in our central banks.

• In Belkin’s view, this is in some ways a good thing. Central banks have long been holding up the market with their generous fiscal policies, and their low interest rates have encouraged many companies to buy back their own stocks for extremely low prices.

• This practice, which was supposedly banned after the stock market crash of 1929, creates a distorted picture of the health of the stock market, and has been highly misleading to investors.

Europe’s Quantitative Easing

• Though the U.S. has finally ended its extended period of quantitative easing, Europe is about to launch its own. Given the European market can significantly impact the U.S. economy, Belkin notes we should observe unfolding events in Europe closely.

• Quantitative easing refers to a process by which central banks infuse a surplus of money into circulation to spur spending, and in turn, improve the economy.

• While Belkin didn’t initially believe quantitative easing would work in the U.S., he admits it did yield benefits, but he doesn’t expect that it will aid European banks. The reason? The global economy is too far gone for quantitative easing to make a real difference in Europe.

• In fact, the Organisation for Economic Cooperation and Development has stated that falling oil prices and loose monetary policy are increasing risks for an already weakening global economy.

• As part of Europe’s quantitative easing strategy, local countries’ central banks will be able to buy back their own debt, which isn’t striking some countries, most notably Germany, as good practice. Interest rates are already negative on countries’ debt throughout Europe as it is, which makes it incredibly difficult for European banks to make money from these debts.

Other European News

• Greece has been downgraded from having a “stable” economic outlook to having a “negative” economic outlook by the Fitch ratings system. Greece has suffered from a drastically weakening economy for months now, and has most recently appealed to other European countries like Germany for financial assistance. Solutions haven’t been forthcoming, as potential contributors demand Greece enact economic reforms and insist its wealthiest citizens pay taxes before aid will be considered.

• The Swiss Central Bank has also recently detached the Franc’s peg to the Euro. In doing so, it has undermined the power of the European Union’s Central Bank, which only further complicates Europe’s attempts at a successful quantitative easing plan.

The Dollar & Gold Stocks

• The dollar has increased in strength in recent months, which, while typically a good thing, yields both positive and negative economic results.

• According to Belkin, in the short term, a strengthening dollar will likely reap the benefits of a de-leveraging global economy. However, a strong dollar weakens trade significantly as it becomes more difficult for other countries to afford U.S. exports.

• Additionally, gold stocks are slowly but surely gaining momentum, and Belkin expects they’ll begin to more prominently attract the attention of investors and hedge funds. Already in the beginning of 2015, gold stocks were increasing by 20 to 30 percent a week.

• However, gold is the only precious metal that’s experiencing an increase in value, which in a way, makes them an even more valuable asset during an economic downturn.

The Takeaway

According to Bennett and Belkin, there are enough signs of economic weakening both at home and abroad to make investors think twice about their investment decisions in 2015.

As Belkin concludes, downturns are already evident in decreased U.S. revenue, weaker trading, an unstable European market, and higher gold values (which undermine central banks). As Belkin argues, it’s time for investors to break free from the control of weakening central breaks and begin investing more wisely as we await an impending economic slump .