The Federal Reserve’s cure may actually be worse than the disease

As I explained in my last article, the wonderful Bidenonomic economy has been dominated by inflation that was first historical and now simply persistent. Since his swearing in, our purchasing power has officially decrease of about 19%.

The cost of living has risen even more… Data from the Department of Labor confirms that housing, energy and vehicle maintenance costs have all increased by double digits as of January 2021. It also costs more to buy a car (+20.4%), maintain it (+30.5%) and insure it (+51.3%) than it did just a few years ago .

It all boils down to this phrase I saw on X a few days ago:

“Bidenomics means you pay more for less”

Inflation has remained so hot for so long that I have to wonder if the Fed is really as concerned with it as Powell lets on.

Simply put, the Federal Reserve looks like it’s actually opting for higher inflation.

I hope I’m wrong, but I’m afraid I’m right. First, let’s consider how that decision would be a truly diabolical deal with the devil – then, I’ll present my evidence…

Inflation is the destruction of wealth: “They steal our heartbeats”

Investing legend Jim Grant (from Grant Interest Rates Monitor) just wrote an absolute blast of a column. In the context of a book review, he points out the sociopathic immorality of allowing inflation to exist at all:

…inflation is partly a moral phenomenon. Life is short and work is hard. Money is the worker’s reward. To deliberately lower the purchasing power of his wages is to steal the human heartbeat.

This is brutal.

We spend so much time talking about concepts like GDP and money supply that it is really easy to forget what those things actually means.

Grant continues – and by the way when he says “King” he is referring to the British economist Stephen D. King, author of the book We need to talk about inflationtopic of this article:

Inflation is as old as Roman coinage, as King eloquently demonstrates, but we moderns have written a new chapter in history. Kings and emperors swelled in peace. The Federal Reserve is openly inflated, as a political issue and, as he believes, for the good of the economy. He defines “price stability” not as the absence of inflation, but a 2% annual rate of inflation – in other wordsa 2% price increase or, to put it another way, a 2% loss of heartbeats and purchasing power.

Ron Paul wrote about those “Roman mints” before. The point here is that inflation as politics it destroys the savings we worked so hard for.

The Fed is in the swap business YOUR purchasing power, stealing your heartbeatto support overall economic growth.

They argue that economic growth benefits all. Besides, if they weren’t engaged in a constant campaign of purchasing power destruction, something much worse would happen. They tell us that a 2% heart rate loss is the lesser of two evils.

And their job is to make sure we never find out what “something much worse” really is.

It’s the budget version of the old gangster defense racket:

That’s a nice nest egg you’ve got there. Shame if something happens to him.

This threat works BECAUSE it’s so vague. Most people’s imaginations can conjure up a much scarier scenario than even the most inspired central banker.

This plan to deliberately destroy purchasing power is going well, from the Fed’s perspective. So far, since the Fed was launched in 1913, they have been successfully destroyed 96.9% of the purchasing power of the dollar:

Yours St. Louis Federal Reserve

They have done such a great job that there is only 3.1% of the dollar’s purchasing power left to destroy.

Mission (almost) accomplished!

Where does that leave us? Some recent survey data tells us how successful the Fed has been:

• Food prices have increased by 25% since the start of the pandemic

• Americans report feeling financially unstable

• The financial instability caused by the rising cost of living has resulted in

• of Americans are sacrificing necessities (eg, rent, bills) to afford groceries, while more than a quarter (27%) occasionally skip meals

• Another 18% have applied or considered applying for food stamps, and 15% rely, or have considered relying on food banks for their groceries.

All of this is happening right now, in what is supposed to be the “richest” economy.

This is Bidenomics in action!

Of course, if you’re reading this, you’re not likely wondering where your next meal is coming from. Count your blessings!

Then watch them evaporate.

The Fed creates economic problems it cannot fix

Returning to Grant’s article, I found another gem.

As of this writing, the CPI shows a year-over-year increase of 3.3%. To bring it down to 2%, Powell has vowed to keep interest rates higher than they have been in many years…

Today’s relatively high interest rates are putting a lot of strain on those who borrowed at yesterday’s absolutely low interest rates.

It’s this thing called “interest rate risk” that most of the world seems to have forgotten about over the past two decades. It works like this:

• When interest rates are low (and credit is cheap), everyone borrows more money than they need
• When interest rates rise (and credit becomes more expensive), keeping those debts current becomes increasingly difficult

The conclusion is this: The Federal Reserve has created a huge problem that cannot be fixed interfering with interest rates.

The highest interest rates are It is assumed to work like chemotherapy: it is the poison administered by the doctor just toxic enough to eliminate the most unhealthy parts of the patient. The rest of the patient feels terrible, accepted, but MUST alive

Higher interest rates MUST to be able to eliminate the most unhealthy parts of the economy – disinvestment, overvalued businesses and irresponsible borrowers. This is precisely the “strong medicine” that Paul Volcker used to quell the stagflationary episode of the 1970s, for example. Make no mistake, it was not fun – felt the patient terrible – but the treatment worked. The American economy continued to grow at an unprecedented rate for almost 20 years.

But what if the patient is too sick for Fed chemotherapy to work?

Well, if we extend our metaphor, here’s what happens next:

1. Once the doctor realizes that they are doing more harm than good, they stop the treatment. In this case, that means the Fed gives up its grip on inflation – cutting interest rates again.
2. That way, at least the patient can enjoy the remaining time. After all, they are terminal – why should we worry about all the heartbeats that inflation steals away?
3. The patient then goes into hospice care, where he is made as comfortable as possible for whatever time he has left.

You already know how the story ends.

Keeping your savings healthy when the economy is terminal

You cannot withdraw from the entire American economy even if you wanted to. However, you can diversify your savings so that your personal financial health doesn’t depend entirely on the sick economy, dysfunctional government, or the Fed’s bacon chemotherapy.

Consider diversifying with physical precious metals. Their value is not determined by interest rates or inflation – but based on global supply and demand.

You can get an idea of ​​how resistant gold specifically is to Fed economic intervention from the chart below. Since its founding in 1913, even as the Fed destroyed the dollar, the price of gold has risen:

We cannot get our stolen heartbeats back by owning gold or silver. The best we can do is protect what heartbeats we have left.

Please take a moment to learn about the benefits of owning precious metals like gold and silver. They can both provide some stability and a solid foundation for your savings, regardless of how sick the patient actually is.

_______________

Phillip Patrick is Birch Gold Group’s chief spokesperson and educator. He was born in London and received a degree in politics and international relations from the prestigious University of Redding in Berkshire, England. Growing up in London, he saw first-hand the dangers of overreaching government and socialist policies. He spent years as a private wealth manager at Citigroup on Lombard Street (London’s Wall Street). He joined Birch Gold Group as a precious metals specialist in 2012.