The Fed is exploring the idea of creating a digital U.S. dollar. Officials say the move could shake up the banking system and give many low-income families access to a financial system they might not have had otherwise. Experts advise that the growing interest in cryptocurrencies in recent years motivated the Fed to explore using a digital option in addition to the traditional paper dollar. Kitco News reports the new currency could have a massive boom on precious metal, especially gold.
Fed explores ‘once in a century’ bid to remake the U.S. dollar
The Federal Reserve is taking what may be the first significant step toward launching its own virtual currency, a move that could shake up banks, give millions of low-income Americans access to the financial system and fortify the dollar’s status as the world’s reserve currency.
The idea of creating a fully digital version of the U.S. dollar, which was unthinkable just a few years ago, has gained bipartisan interest from lawmakers as diverse as Sens. Elizabeth Warren (D-Mass.) and John Kennedy (R-La.) because of its potential benefits for consumers who don’t have bank accounts. But it’s also sparking strong pushback from those with the most to lose: banks.
“The United States should not implement a [central bank digital currency] simply because we can or because others are doing so,” the American Bankers Association said in a statement to lawmakers this week. The benefits “are theoretical, difficult to measure, and may be elusive,” while the negative consequences “could be severe,” the group wrote.
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Kitco News/Todd “Bubba” Horwitz
Gold, silver – big week for the metals
It is another FED week; we expect more of the same. Inflation is transitory, although CPI was hot and expect more ridiculous excuses from the FED, Kitco News reports. The bond market will continue to push the FED to hike, but that is unlikely for now. The FED is wrong as they have been throughout history and like markets, we don’t expect this time to be different.
The FED has a sneaky plot to digitize the currency, making it easier with their plans and ignorance. Digitizing currency could be a massive boom for metals, especially gold. However, from a physical standpoint, we are buyers across the board. Although platinum is in a bear cycle now, we are physical buyers because of its long-term value.
Our models are long gold and silver; we would be short platinum as traders, but the market is not liquid enough for our members. However, this week we could finally see gold and silver break out of their tight ranges to the upside. There is no guarantee that the metals will break out or that it will be to the upside if they do, but all signs point higher.
Patience, discipline, and money management always win the day.
CNN Business/Paul R. La Monica
Investors and the Fed aren’t freaking out about inflation. Should they?
There is a gigantic disconnect between Main Street and Wall Street when it comes to inflation. Something’s got to give.
The US government reported last week that consumer prices, excluding food and energy, rose at their fastest clip since 1992 in May. Sherwin-Williams (SHW) is lifting the price of paint, one of many companies that’s responding to higher commodities costs.
Food prices are also surging. Chipotle (CMG) just raised prices. So did Campbell Soup (CPB).
And the chief financial officer of restaurant and arcade chain Dave & Buster’s (PLAY) said during a recent earnings call with analysts that he expects a 6% to 8% increase in food costs for 2021 due to higher chicken, beef and dairy prices.
Wages are rising too, especially for workers in the retail, leisure and hospitality sectors that are returning to jobs as the economy reopens. That adds to inflationary pressures, because some companies will choose to hike prices in order to maintain profits.
Labor shortages aren’t helping.
The CEO of online pet retailer Chewy (CHWY) wrote in a letter to shareholders after its latest earnings report that it “faced labor shortages in our fulfillment centers similar to those being faced by many companies nationwide.” As a result, Chewy continues “to invest in higher wages and benefits” in order to fill job vacancies.
Yet investors — and the Federal Reserve — are shrugging off rising inflation as “transitory.” Long-term bond yields are falling, which isn’t what normally happens when inflation runs hot. If bond investors believed that price hikes are here to stay, they’d be demanding higher yields.
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