Buy gold now because the Fed is about to get even worse!
US wholesale prices are racing higher at a breathtaking rate.
For the month of January, the Producer Price Index was up a full one percent. For the 12-month period ending in January, the PPI was up 9.7 percent.
From the Wall Street Journal:
U.S. suppliers sharply boosted prices last month, in a sign upward pressure on already high consumer inflation continued to build at the start of the year. The Labor Department on Tuesday said the producer-price index, which generally reflects supply conditions in the economy, rose a seasonally adjusted 1% in January from the prior month, the sharpest rise since May 2021. The gain reflects pandemic-related disruptions from the Omicron variant of Covid-19 at the start of the year and continued strength in consumer demand, economists said. Producer prices rose 9.7% on a 12-month basis, nearly the same as the prior month.
For the same 12-month period consumer prices are up 7.5 percent. Rising producer (wholesale) prices) inevitably must work their way into consumer prices.
Note that the above explanation does not deal directly with the Fed’s frantic creation of trillions of digital dollars in the last two years. To be more precise, from mid-February 2020 until today, mid-February 2022, the Federal Reserve has purchased $4.7 trillion dollars of financial assets, mostly US Treasury bonds and mortgage securities, with money that it simply created digitally. It is unbacked, irredeemable, fiat money that is not the result of wealth production. It is simply created with a couple of computer keystrokes.
It looks like counterfeiting, it walks like counterfeiting, and it quacks like counterfeiting. But it is legalized counterfeiting.
Gold up 11 of the last 13 days, surging above both its 50-day- and 200-day-moving averages.
While some – ourselves included – are looking at the lunatic money printing and the prospects for another war as the primary forces driving gold today, it is worth noting that the Senate Banking Committee is soon sending to the full Senate for confirmation a slate of Biden nominees for the Federal Reserve Board, including a second term for Jerome Powell as chairman.
This slate alone is a sufficient reason to doubt the future prospects of the US dollar. Missing the resurgence of inflation and then pronouncing it “transitory” is the least of their shortcomings. Among the nominees are those who believe climate change is part of the Fed’s charter. The Fed can’t maintain stable prices as it is tasked with doing, but it wants to manage the solar system. Another nominee’s chief academic accomplishment is a research study so riddled with error that she has been accurately described as being “innumerate,” which is basically incapable of arithmetic. Great. Put here in charge of the money supply.
But at least it will be a “diverse” Fed.
Buy gold while you can!