If the Economy is Slowing… Buy Gold!
We have shared our view that the Federal Reserve is anxious to cut interest rates before long to help elect Democrats in November. (See our January post THE FED TILTS THE SCALES! TO THE LEFT, OF COURSE!)
It’s not too complicated. The very existence of a central bank is a left-wing dream come true. It was on Karl Marx’s shot list. So, you shouldn’t be surprised to learn that there are 10 Democrat economists for every single Republican economist at the Fed.
The latest consumer price and producer price indices are somewhat contradictory, but the is ample clear evidence piling up that the economy is slowing. That will give the Fed cover for cutting rates ahead of the election.
Unemployment has begun to climb. It has reached the highest level since November 2021, while wage growth has risen at the slowest rate in more than three years.
But what about the Fed’s insistence that it would bring inflation down to 2 percent?
Fuhgeddaboudit!
Here’s the way Fed chairman Powell put things in his recent congression update on monetary policy: “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
Powell was giving himself running room. Doug Casey says, “The Fed has effectively given up on bringing price inflation down even though the year-over-year change in the CPI remains around 3.3%, significantly higher than the Fed’s target of 2%.
“In other words, even with their crooked statistics and rigged game, the Fed has failed even to come close to their inflation target. It’s a massive failure.”
Evidence of slowdown:
To repeat: a slowing economy and rising unemployment give the Fed the cover it needs. Many Fed watchers are now expecting two rate cuts in short order, before the election for sure, and less likely in our view, one even as early as this month. The price of gold seems to be confirming that view as it raced up to $2,400 on the unemployment news.
Bear in mind, too, that gold has climbed to new highs despite the Fed’s higher interest rate regime. Now imagine what happens when the Fed forces rates lower, buying government bonds, and printing money to do so.
So, a slowing economy, more money printing, rising gold. Sounds like the stagflation decade all over again!