By Sean Kelly
Sometimes hiding in plain sight seems to be the best way to go unnoticed. The U.S. Treasury and the Federal Reserve are running a world-class Ponzi scheme and Madoff-style money management that are undetected by most people.
One of USA Today’s largest newspapers splashed this headline across the top of its webpage the other day: “Your retirement savings aren’t as large as they seem.”
There was not a word in the entire article about inflation or the Federal Reserve. We searched the article to make sure we didn’t miss anything. It was mostly about statutory taxes, the kind that everyone sees, but it totally missed the concealed taxes that will destroy your savings and retirement.
But it’s this concealed tax that is destroying the purchasing power of your savings. As we pointed out in a recent commentary, “Year-over-year consumer prices have risen 5.4%; producer prices 7.4%; and import prices 11.2%. In May the Case-Schiller Home Price Index showed a 15% increase from the year before.”
In a new piece in The Hill, Boston University professor Lawrence Kotlikoff paraphrases Washington’s Madoff-like messaging for the gullible this way: “Yes, the federal debt has risen from 35% of GDP to 100% in just 13 years with further major increases likely. Yes, Social Security’s trustees report a $53 trillion unfunded liability. Yes, putting everything on the books suggests the U.S. is in worse fiscal shape than any advanced country. But, over time, the economy will outgrow its debt…”
The political classes have been promising us for generations now that we will “grow our way out” of the compounding debt crisis. Never mind that with the advance of Keynesian spend-our-way-to-prosperity economics, U.S. economic growth has suffered a long-term slide.
Need evidence of the decline? Here’s a breakdown by former Reagan budget director David Stockman:
Real GDP Growth Rates, 1951-2020
· Post-war Golden Era, 1951-1970: 3.72% per annum
· Initial Fiat Money era, 1970-1987: 3.24% per annum
· Greenspan Money-Pumping Era, 1987-2007: 3.08% per annum
· Post-crisis fiat credit explosion, 2007-2020: 1.28% per annum
“That’s right,” says Stockman. “Real GDP growth has slowed to barely one-third its golden era rate despite the evolution of Fed policy toward increasingly massive money-printing.”
Increasing money printing is right! The Wall Street Journal reports that with the arrival of COVID-19, the Federal Reserve has purchased 76.4% of all U.S. government debt.
It’s this operation that hides in plain sight. Washington gushes red ink. The Fed prints “dollars” to fund that debt.
But the Fed isn’t creating new wealth. It does not build houses, treat the sick, or bake any bread. It is simply issuing new dollars that take on value to the exact degree that the existing dollars lose value. More dollars chasing the same amount of goods and services.
The only way to protect yourself is to get off the hamster wheel. Inflation only works as long a people are willing to hold and save the currency that is being devalued. It is a policy dependent on gullibility.
That is why we recommend a portfolio of gold and silver. The authorities cannot print gold. And as people begin to notice the Ponzi scheme, gold is where they turn for protection and profit.
So let us illustrate this with one chart that makes it impossible to miss. Beginning when the U.S. abandoned the last link of the dollar to gold, it shows the declining purchasing power of the dollar (in green), and the rising price of gold (in gold).
So, what are you waiting for? Give us a call for your free one-on-one consultation.