Another Federal Reserve meeting is just two weeks away. One week, the markets conclude that, out of fear of recession, the Fed will moderate its planned July rate increase to 50 basis points. The next week, an employment report has the markets sure that the economy is so resilient that the Fed will raise the Fed funds rate by 75 basis points.
But we are skeptical about all of it.
It wasn’t so long ago that the Fed was performing monetary policy dances to raise inflation to two percent. When rates screamed past that arbitrary number, the Fed insisted it was only fleeting. In May, we heard from Chairman Jerome Powell that June wouldn’t see a 75 basis point increase, only for rates to be hiked just that much a few weeks later.
If one wonders how it is that the whole economy shudders and shakes with fear of the next Fed step or misstep, it takes us right back to the beginning. Since we have abandoned the reality-based and objective precious metal monetary system that our founders had in mind, we are tossed about by the whims and caprices of a board of unelected and mostly unknown bureaucrats who play with our nation’s money and credit conditions like a kitten plays with a ball of yarn.
James Grant observes that we have traded the gold standard for a Ph.D. standard. It’s true, and despite, or because of their advanced degrees and those of hundreds more economists on the Fed payroll, people are growing irritated at officialdom’s parade of excuses that they didn’t really understand inflation to begin with. In any case, so completely do they deny parenthood for today’s inflation that Lawrence Kudlow even coined the scoffing term “immaculate inflation.”
Well, we do understand something about inflation. It’s our business to understand. We point with certainty to the trillions of dollars the Fed has conjured out of nothingness. We point to 8 trillion digital dollars created with nothing more than a computer keystroke since the Great Recession got underway. That’s an 1,100% increase!
We do understand the role of money printing in devaluing the dollar, just as it has devalued countless currencies throughout centuries and around the world in the past. And as our friends and clients have grown accustomed to hearing, we point out that the Fed can’t print more gold.
Eventually, the Fed’s spasms will have the world looking for a way to avoid any more peril. Actually, the beginning of this de-risking is evident in the freefall we’ve seen in stocks, bonds, and cryptocurrencies this year. But it is only the beginning.
For the last few years, the Fed was engaged in the most frenzied money-printing in U.S. history. Then something broke and we awoke to the highest inflation in the lives of most Americans. Now the Fed has a new plan that it will pursue until something else breaks.
But things are already breaking everywhere we look. U.S. sanctions policies, designed to weaken opponents, are making them richer and we and our allies poorer. Crypto banks are halting withdrawals. The bond market is a disaster. Stocks are a calamity.
And after months of the Fed’s new rate hike regime, consumer prices keep rising.
Most laughable of all, the financial media tells its audience that the dollar is strong, even as its purchasing power plummets. We’ve called this a Jedi mind trick. The dollar can only be called strong if it is compared to currencies like the euro and the yen which are losing purchasing power even faster. Wall Street speculators, either believing the media or believing that others will be fooled by this mind trick, sells their paper gold and gold substitutes.
But on main street, when people buy gas and groceries, the dollar doesn’t look very strong, does it? Maybe that’s why no matter what Wall Street says, the people keep buying real gold and silver.
They’ll need it.
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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.