This is an important question which does relate to our theme here which is to watch for signs of change in the monetary system. If the economy is slowly improving (which is the FED and mainstream financial media view), not much is likely to change anytime soon. If the economy is getting worse, change is more likely at hand. So which is it?
It doesn't look like we learned much about the answer to the question from Janet Yellen's remarks. Here are a couple of links to articles about her comments. Best I can tell, she says things are slowly improving, but there are still problems. She says the Fed will keep interest rates low for quite awhile though because they need more data.
NYTimes - FED Chief Sees Not Enough Data to Raise Rates
"Janet L. Yellen, the Federal Reserve chairwoman, said on Friday that the economy was improving but that the Fed was awaiting more evidence about the health of labor markets before deciding when to start raising interest rates."
CNBC - Yellens Balanced Approach soothes Doves, Encourages Hawks
"In what arguably was the most anticipated Fed speech of the summer, Yellen carefully constructed a picture of a still poorly functioning labor market that requires easy Fed policy. But she also said the economy is getting closer to the central bank's objectives, and the Fed is "naturally shifting" to the debate on when to raise rates."
So basically the FED says things are getting better unless they aren't which they don't know because they don't have enough data yet. Not much clarity there.
Economic reports that come out seem mostly mixed. Some seem positive, others seem negative. Not much clarity there.
Anecdotal evidence also seems somewhat mixed as well depending on where you live.
For example, here in Texas the economy seems to be improving. Real estate prices have moved up, there are new small businesses that open, and the oil and gas industry is doing well. In fact, the office building where I work is now fully leased after being almost empty about 2 years ago. A new lunch deli has opened up in the building as well. So things do seem to be improving here in the real economy.
But then you read articles like this one where it appears there are places where things are getting worse, much worse. So again things seem mixed with not much clarity.
We have noted that Jim Rickards is on record with a forecast that the economy is getting worse and will continue on that path into 2015 when he predicts the Fed will reverse course yet again to try and stimulate growth. He was joined this week by Peter Schiff who says much the same thing in this interview with Greg Hunter. Here is a quote from that interview:
"I think when it dawns on more investors exactly the predicament the Fed is in, that this recovery in the U.S. is a mirage. It is not real, and rather than the Fed ending QE and raising rates, it will be launching a whole new round of QE. It will be even bigger than the last one."
We have noted in an earlier post that someone has to be wrong about 2015. Either the Fed is right and we will see slow improvement that leads to not much real change in 2015 or Peter Schiff and Jim Rickards will be right. Then the Fed will have to reverse back to more QE due to a failing economy and take another credibility hit.
And then we always have the unknown "black swan" lurking out there that might arise at any time, but hasn't so far. Who knows, maybe this former Mafia Boss will be right. We'll continue to follow it into 2015 and see who ends up getting it right.