“We’re halfway there. This is the definition of a recession, and it is the definition of stagflation!”
In this segment of “Ask the Experts,” we spoke with New York Times bestselling author and radio/TV commentator Charles Goyette about the current recession risks, increasing Fed rate hikes, how the devaluing dollar can impact your retirement savings and 401(k), and how the price of gold is being affected by all of this.
Question: Charles, the last time we spoke, we talked about the Fed rate hikes as only a possibility. Now they’re here and the Fed is getting widely criticized. Many experts are saying the central bank waited too long and now the American people are the ones who will have to pay the price. What do you make of all of this, and what should we be looking out for next?
Goyette: “We should be looking out for exactly what you’ve said. The American people pay the price. We pay the price for everything. The Fed has no money. It has no money. The only money that the Fed has to do anything to intervene in the markets to buy interest rates up or buy interest rates down is money that it takes from the American people by depreciating the currency.
Washington, D.C., the capital, has no money. The only money they have is the money they take from the people, so the people pay for all of this. When we bail out banksters, when we bail out cronies, the people pay for it. When inflation is 10%, the people pay for it. When the federal reserve says there’s only transient inflation and then you find out that it’s not, the people pay for it.
The people pay for everything. And I swear to you, having followed this stuff all my life, I have never seen such a series of screw-ups one after another, and things are getting…Kaylee, I don’t wish to overstate the case, but things are getting very, very serious.”
Question: People have been talking a lot about the state of the economy and how we had some shrinkage last quarter. It seems like there are some scary things going on.
Goyette: “It’s a stagnant economy, so if the economy’s not growing, people don’t have jobs, they can’t pay down their debts, they can’t meet their obligations, they can’t provide for the future. That’s the stagnation part. The stagflation part is inflation at the same time, so costs are going up while their ability to earn and pay down debt and enjoy an American lifestyle declines, it descends.
And I have talked about this till the cows come home, that we are heading into a period of serious stagflation. And guess what? It’s here! It just arrived this week. So now we have double-digit inflation everywhere in the country…Now, on top of that, for the first time this quarter, January, February, March, just reported this week, the United States economy is in decline. It’s contracting. It is not growing, it is contracting, and it is contracting substantially. It is down 1.4% in the last quarter.
Now, think about this: They forecast that it would rise by 1.1%, and it actually fell by 1.4%. That’s a 2.5-point swing in the first quarter. This is the definition. We’re halfway there. This is the definition of a recession, and it is the definition of stagflation. Negative economic growth, down 1.4% in the first quarter, and double-digit inflation. They [the Fed] have got us in a tremendous mess…
They have primed us, and they have pimped us, and they have promised us they are going to get a handle on inflation. They are going to start raising interest rates. They are going to do something about what they have done. But for the life of me, there’s not a conventional economist in the world that is familiar with the 1920s that can say, ‘Oh, we are entering a serious recession, they should raise interest rates.’ This is the plan that they have embarked on for the last three months. ‘Oh, we’re going to raise interest rates, we’re serious about it this time…50 basis points this time in May and then another 50 and yada yada yada.’ On the eve of a recession, it’s even by my standards, and I’m not some Keynesian, spend our way to prosperity nut job, but even by my standards, you cannot raise interest rates going into a recession. Business conditions are bad and then you start raising the costs on business with higher interest rates, raising the cost on real estate. You kill the real estate market. You kill the stock market. You kill the bond market. They can’t do it. And yet, for all we know, they’re gonna do it.”
Question: Charles, I know we’ve talked before about how the dollar and other currencies are losing value every day. Now, Bloomberg analysts estimate that the average American household must spend $5,200 more this year to buy the same goods and services as last year. That’s a nice chunk of change. It’s also important to keep in mind what that means for your typical retirement savings like a 401K. What would you say to investors who are seeing this and still not taking advantage of other investment options like precious metals?
Goyette: “People believe, having read the financial press in the last couple of days, that the dollar is up. ‘Oh, the dollar is up. The yen is down. The dollar is up.’ Well, that’s great the dollar is up. But the truth is the dollar is not up. The dollar is down, but the poor American people that get their news on TV and get their news in the newspaper…on the very day they announce we’re dipping into a serious stagflation into a recession, they announce, ‘Oh, the dollar is up.’ But the truth is that the value of the dollar is dependent on what it can purchase. People work, they save money, they get a paycheck, wake up in the morning when they don’t want to, and go to work for the dollars that they get paid. Those dollars have to buy things for them. For somebody to say the dollar is up, you have to believe that they can buy more with those dollars. But in fact, when the inflation rate is at 40-year highs, their dollars buy them less…
The truth is that all of the currencies of the world are doing the same thing. All the currencies of the world are shrinking. They are all printing money like we do. All the currencies of the world are shrinking and losing value. All of them. So here’s the dollar. The dollar is sinking this week more slowly than the yen… They say, ‘Oh, the dollar is up. Look at the dollar. The dollar is up.’ It’s like saying, ‘Oh, the Titanic is up because the Lusitania is going down faster.’ But they are all sinking…The dollar is down, and it has been losing value for generations and continues to do so today, despite the financial press. It’s so important for people to understand that.”
Question: I do want to point out that gold, which has been rising especially with the ongoing Ukraine war, has been trending down. Is this worrisome or is it an opportunity to buy the dip?
Goyette: “So, basically, what it is is the telegraphing of the Fed that they are going to raise interest rates. So, everybody kind of goes to the sideline; Netflix sells off, Amazon sells off, and a lot of companies sell-off because the Fed is going to raise interest rates. You know, if the Fed’s going to give me 5% with no risk. If I can put money out at 5% with no risk, I’ll try it. I’ll see what it looks like. The funny thing about Wall Street is…now this isn’t your clients [Red Rock Secured], this isn’t the clients of gold firms that rush out and sell their gold because they heard the Fed is going to raise interest rates. It’s Wall Street again. Wall Street says, ‘OK. The Fed is going to raise interest rates, let’s find some way to get liquid, to get liquidity, and to move it into Fed interest rates, buy our way into the new higher rates and see how we do.‘ So, whenever they start telegraphing higher interest rates, all of the markets, bond markets, stock market, gold markets, will sell off a little bit. They’ll test the seriousness of the Fed in an environment like that. And that’s what they’ve done.
To me, Kaylee, having watched them do this over and over for a very long time, it is actually quite welcome. I like it when they do this because, you know, it’s like they are giving you free money. They are saying, ‘OK we’re gonna suppress the price of gold for a couple of weeks.’ If you’re quick, you can go in and buy a bunch at lower prices. Gold is on sale today. Have at it, and I say, ‘Thank you very much. I will.‘”
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The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment advice and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.