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Do You Believe the Fed’s Inflation Rhetoric?
Earlier this week, several of our Federal Reserve Principals—in what seems to me to be an attempt to keep consumer confidence in check—declared three things that I think you will find extremely suspect, based on THEIR interpretation of recently released economic data:
1) The Fed: There are no “asset bubbles”
Really? How about the STOCK MARKET, real estate market, student loan market, auto loan market, and corporate debt market? What about Bitcoin and trading platform speculation due to irrational exuberance? Financial analysts across the board call our situation “The Everything Bubble.” Here’s the S&P 500 index skyrocketing as our economy and employment are tumbling. “No asset bubbles.” Really?!
2) The Fed: The 10-year yield spiking is “of no great concern”
Really?! A second-year economics student will tell you that a rising yield indicates falling demand for Treasury bonds, which points to investors voting with their investments for higher-risk, higher-reward investments = speculation = gambling = a recipe for collision with disaster. Just look at the publicly published market Fear/Greed index:
3) The Fed: “Inflationary pressures are now in a downward trend”
This one, in my opinion, takes the cake: With a “straight face,” Mary C. Daly, President of the Federal Reserve Bank of San Francisco, stated that “inflationary pressures are now in a downward trend.” So, inflation is abating? Really?!
I guess Ms. Daly doesn’t shop for groceries. Food prices—the leading indicator of inflation—are up 25%. Maybe she doesn’t get her own gas for her car. Prices at the gas pump have been rising steadily and look like they will continue to rise. Maybe she hasn’t looked at home prices, another leading indicator of inflation. Home prices have now surpassed their 2005 peak. The rhetoric is unbelievable, to say the least!
Inflation is here
At this time, the data points to the exact opposite than what the Fed is telling us: inflation is already here. ALL inflation-sensitive asset classes are rising: food prices, energy prices, materials pricing, housing prices, agriculture prices…everything. And there is no indication of any improvement.
I believe we are seeing an inflationary outburst not seen in many decades. And one of our TOP Fed officials is having us believe that inflation is actually disappearing?
Sadly, once inflation takes hold of our financial system, the only thing that can stop it is if the Fed begins to frantically hike rates. Think late ’70s, early ’80s, when rates went just north of 20%! Double-digit inflation (HYPERINFLATION) in an economy in freefall.
This time around, when inflation is clearly already running hot, the Fed is not merely unwilling to raise rates—they won’t even admit that inflation is present.
This is a recipe for financial disaster.
And, unfortunately, it will have dire consequences for savers, wage earners, and retirees living on fixed incomes.
How you can protect your wealth from inflation
The silver lining? (No pun intended.) During the double-digit inflation of 1976–1980, gold rose by 2,100% and silver leap-frogged 3,300%!
We have protection for our investments via the opportunity to generate wealth with our gold and silver holdings.
And the beauty is that once we do own gold and silver, the Fed’s talk and actions of suppressing interest rates and printing money—which are making things worse—are actually benefiting gold and silver investors as these actions push the prices of gold and silver higher. When was the last time the Fed worked for you?
Sr. Portfolio Manager, Gold Alliance