Why the Federal Reserve’s September Announcement Doesn’t Matter

Will Federal Reserve Chairwoman Janet Yellen finally announce a rate hike during her forthcoming September policy announcement? Yellen hinted just as much in June, when she stated the economy was expanding moderately. After years of stagnant interest rates as part of the Federal Reserve’s Quantitative Easing policy, many have long-awaited an announcement of higher rates, a definitive signal that the economy is back on track. However, would the Fed’s rate hike really make a difference?

Financial experts like host of the “Financial Myth Busting with Dawn Bennett” radio show, Dawn J Bennett, don’t think so. While higher interests rates will of course have some economic impact, Bennett argues that the announcement won’t make a difference in regard to the larger issue at hand: a disillusioned Federal Reserve.

The Fed may suggest that the ground has been laid for interest hikes and a celebration of economic recovery, but there remain a host of other economic factors that are cause for just the opposite, such as troubling activity overseas.

Instability in China

China’s economy has been a rollercoaster ride of late, and given our country’s interdependence with this economic powerhouse, any unstable economic activity in China will undoubtedly impact the U.S. On August 11th, China unexpectedly devalued its currency in an attempt to increase inflation, which means U.S. goods imported into China have become far more expansive. Naturally, this will hinder U.S. sales. This major devaluation comes on the heels of a stock market free fall in China and the inexplicable insurgence of gold into the Chinese market that drove down global gold prices to unexpected lows. Yet, the Federal Reserve pays these concerning developments little attention.

There are other troubling economic indicators that the Federal Reserve rarely mentions, such as collapsing energy prices and a stock market that continues to show record-high gains, even as internal indicators of strength and volume show otherwise, which is clearly indicative of a speculative market.

Inaccurate Unemployment Rates

While the Federal Reserve primarily points to decreasing unemployment as primary evidence that the economy has recovered, even here, they’re disillusioned. The unemployment rate referenced, which currently sits at a respectable 5.3 percent, doesn’t account for long-term discouraged workers. These are the unemployed who’ve attempted to find work, but who have given up out of discouragement. As economist Paul Craig Roberts points out, when we account for this sector of the unemployed, the unemployment rate is actually 23%, a rate similar to that during The Great Depression.

With this type of blatant disregard of critical economic factors, do the Federal Reserve’s policy changes really matter? Dawn Bennett certainly doesn’t think so.

Bennett Group Financial Services LLC, based in Washington, D.C., is a comprehensive financial services firm committed to providing opportunities to clients’ as they seek long-term financial success. Its customized programs are designed with the potential to help grow, lower overall risk and conserve client assets by delivering a high level of personalized service and skill.

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About Dawn Bennett

Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com

She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.

She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett ordbennett@bennettgroupfinancial.com