Sponsored Content - As you’ll see below, I have some issues with the Federal Reserve’s stance on inflation and their ability to control it, says Rich Checkan, president & COO, Asset Strategies International.
They have no ammunition to fight it, they have no experience or models for the current situation, and their track record against inflation dating back to the 1960s is abysmal.
What’s more, their love affair with debt is fueling the future inflationary fires…
Over the next 20 years or so, we will see a massive transfer of wealth generationally. Unfortunately, the wealth transferred—trillions upon trillions of dollars—will have far less purchasing power than versus what it has today.
Congress and the Federal Reserve are dead set on money creation to fuel government spending to spark economic growth. As a result, our nation’s debt is growing at unprecedented levels.
If you think this will not have consequences, you couldn’t be more wrong. It will not have the desired impact on the economy. It will dilute every dollar in circulation. It will lead to significant inflation. It will in turn lead to a lower standard of living.
And, all that occurs even without the rest of the world seeking more stable alternatives to the dollar. And they will. In fact, they are already.
For those of you looking to keep what’s yours—in other words, those of you looking to maintain your current level of purchasing power—gold and silver are your answer to this fiscal irresponsibility.
Please read on to see my comments on the Fed. Then, protect yourself in gold and silver…
Words Are Just Not Enough
As I listened to Federal Reserve Chairman Jerome Powell speak a couple weeks ago following the Federal Open Market Committee (FOMC) meeting, I kept thinking to myself, “He’s desperate. He’s got nothing.”
Here we are, sending our best “warrior” into battle against inflation…armed only with words. In my opinion, that simply is just not enough.
The lyrics of Depeche Mode’s Enjoy the Silence come to mind the more I listen to Chairman Powell…
“Vows are spoken
To be broken
Feelings are intense
Words are trivial
So does the pain
Words are meaningless
…Words are very unnecessary
They can only do harm”
Inflation is here. It is growing every day. It will get much worse before it gets better.
Chairman Powell’s words are not enough to defeat it.
He Said One Thing, and Markets Heard Another Thing
Here is what Chairman Powell said on June 16…
- We plan to raise interest rates twice in 2023.
- With interest rates near zero, our abilities are somewhat limited.
- We will start to talk about tapering asset purchases (currently about $120 billion per month).
- Inflation surprised us.
- We have no experience in this type of economic environment.
- We have no models to predict what will happen next given this environment.
- We feel confident we will be able to control inflation going forward.
Here is what the markets heard…
- The Federal Reserve plans to hike interest rates twice.
In the aftermath of his public comments, there was carnage in virtually all markets. Equities markets sold off. Precious metals sold off to the tune of about 5% in two days.
It appears nobody liked hearing the punch bowl was in danger of being removed. Nobody liked hearing the party would eventually end.
Of course, the punch bowl is the seemingly endless supply of free, fake money. The party is the “everything bubble” we have enjoyed since the financial crisis of 2008-2009. As a result of the pandemic and subsequent shutdowns, the party raged on even harder over the past year or so.
In essence, the combination of easy money and ultra-low interest rates has allowed all asset valuations to surge higher.
Sorry…I’m Not Buying It
It boggles my mind that people continue to put any faith at all in the words of Chairman Powell or his predecessors—Chairman Yellen and Chairman Bernanke.
The Federal Reserve was “surprised” by the headline inflation numbers. For months, they said inflation would be “transitory” and “manageable.”
Do they not buy groceries? Do they not fill their tanks with gas? Do they not buy medications or see doctors? Do they not monitor the prices of commodities and equities? Do they not listen when companies make public statements about passing on higher producer costs to consumers?
Have they completely lost touch with reality?
And…how fickle must we be to have any confidence in the Federal Reserve whatsoever?
The Fed was fooled by the extent of inflation, even though it is all around us. Chairman Powell clearly stated they lack experience and modeling for the current post-pandemic, post-shutdown economic environment. Since the 1960s—for nearly 60 years now—the track record of the Federal Reserve controlling inflation has been abysmal.
If you remember, last month I talked about the head-spinning Fedspeak, designed to dazzle and mystify…“the Fed would need to talk about starting to talk about scaling back the pace of asset purchases sooner rather than later.” In this month’s statement, Chairman Powell stated that he would need to retire that statement because it has “served its purpose well.”
What purpose? Confusing us?
He did give us a clue as to the measurable goals the Federal Reserve is looking to achieve…“significant forward progress.”
Can he be more opaque?
Despite all that, we are supposed to believe this time is different. We are supposed to hear Chairman Powell’s statement of confidence, forget all the facts, disregard history, and believe him when he says he has it all under control.
Sorry…I’m not buying it.
Thank You Chairman Powell!
Inexplicably, with his words, Chairman Powell moved gold and silver prices down over 5% in two days.
Thank you! In so doing, Chairman Powell created an incredible buying opportunity.
To me, this is a “back up the truck” moment. In other words, you should back up your truck and fill it with gold and silver at these prices. If you don’t have a truck, go out and buy a truck. Then, back up your truck and fill it with gold and silver at these prices.
If I am right, and inflation is just getting going, you will be extremely happy you bought so well in the not-too-distant future.
Chairman Powell and the Federal Reserve will soon find out that they cannot easily put the inflation genie back in the bottle. At zero interest rates with negative real returns, they are powerless to fight back.
They can begin to taper asset purchases. But, as we saw by the market reactions immediately following the FOMC press conference, that will not go over well. They will most likely pop and deflate all the bubbles their easy money policies created.
Fearing that, they will let inflation get well out of control before they step in to curb it.
That is good for gold and silver.
I strongly suggest you consider buying some now…at these prices. I do not expect them to last.
A Word of Caution…
If you heed my warning and act on my suggestion, be careful.
When fears start to run higher, nefarious dealers proliferate. They prey on your fears in order to prey on you.
Do not become a victim of these predators. We are already seeing this play out. You know the good guys. Let us help you keep what’s yours!
Whether it be to buy, sell, or simply to answer some questions, use us. We are here for you as we have been for all our clients since 1982.
Visit Asset Strategies International to learn more about investing in precious metals and other alternative asset classes.