You Can Thank the Federal Reserve!
Gold, alluring enough in the age of a $27 trillion federal debt, just became even more important for people seeking to prosper and protect their wealth from the breakdown all around them.
Inflation in the US is going to run hot. Not as an accident. Not by surprise.
As we wrote the other day, the Federal Reserve actually intends to let inflation run hot.
Fed Chairman Jerome Powell made in official last week at the central bankers big (virtual) Jackson Hole, Wyoming conclave.
The Fed wants more inflation. It’s a unanimous decision.
Let’s see now… The Fed arbitrarily selected a two percent annual inflation rate way back in 2012. It’s a target the Fed couldn’t hit for years.
So now it has raised its sights. No wonder gold took a big jump.
One analyst responded to the Fed’s new policy with a headline that says, “This Has To Be A Joke, Because If It’s Not…”
But it’s not a joke. Jeffrey Snider, Alhambra Investments, writes:
If you aren’t distracted by the shiny wrapping, you realize what Powell’s saying is that after failing to hit the inflation target for over a decade he’s now going to let inflation run over the target none of them could hit because for more than a decade no one could hit their own target.
Another described the Fed move as being like “an awful echo of the end-days of the former Soviet Union.”
Michael Every of Rabobank explains:
There were some planet-sized brains among the apparatchiks running that place. The problem was that the entire system didn’t work, and any tinkering with it could never achieve anything: the political-economy had to change, or nothing did. As a result, time after time, committee after committee of technocrat PhDs would meet, debate…offer up more agitprop jargon, and decide to build a new statue of Marx or Lenin.
Another headline reads, “Fed’s New Policy Will Compound Its Errors.”
That’s the view of Michael Shedlock at Global Economic Trend Analysis:
Inflation is under two percent because the Fed ignores housing prices, employer health care costs, education, and stock market bubbles.
The idea that one can offset errors by further errors in the other direction is pure nonsense.
It’s as if a doctor said, “For the last three months we gave you too little medicine so for the next three months we will give you too much.”
Our own observation the other day was that this is another case of spectacularly bad Fed timing, since core consumer prices in July already showed their biggest increase since 1991.
Just how bad is the timing? A couple more items in addition to those in our last post:
- Americans are already hurting for cash. The Wall Street Journal reports that grocery shoppers are cutting back on their spending.
- The FHA insures 8 million mortgages. In July, 17% were delinquent in July. That is the highest rate in FHA history.
- Since the middle of March, more than 58 million Americans have filed new unemployment claims.
And now the Fed wants higher prices? It intends to keep interest rates low to generate higher inflation. But higher inflation is the entrée to higher interest rates.
They have really painted themselves into a corner.
The single best thing you can do is to buy gold and avoid this comedy of errors. Speak with a Republic Monetary Exchange precious metals professional today.