The Fed’s been looking for new friends this week, tuning out the haters and struggling to convince the public about potential rate hikes. Check out their follies below!
Flip-Flopping Fed Gets No Credibility from Market
A market that doesn’t care about the direction the Fed wants to take us can be a recipe for a firestorm. In 2016, the market’s faith in the Fed seems to be at an all-time low as they tout guidance, yet change course with as little as a single economic report contradicting them. All eyes were on Jackson Hole today as Fed Chair Janet Yellen opened up the annual Economic Symposium.
So what did she say? She stuck to her guns about the (now laughable) potential for another rate hike before the election. Those guns include being as vague as possible and hinting that a rate hike may or may not be coming very soon. All in all, Yellen didn’t really say much at all, other than to continue her standard issue talking points and give very little guidance for the market on the direction of the US economy.
According to Charles Schwab’s chief fixed income strategist, Kathy Jones: “Yellen succeeded in leaving the door open to almost anything. Unless there’s a huge rise in jobs in the next jobs report, [a rate hike is] still probably more likely in December than September.”
No other economic concept has created as much confusion and in-fighting among economists as the idea of inflation. Along with its antithesis deflation, they have been the boon and bane of many monetary policy makers, detractors, and admirers for decades.
But what does inflation really mean? How does it affect the average business owner or the average individual? More importantly, how do governments and central banks use inflation to justify their own actions? These are essential questions to understand for anyone interested in making informed decisions to protect their wealth.
Bloomberg recently reported the safe depository company, Malca-Amit, is seeing a 90% jump in demand for storage of precious metals and stones in its Singapore-based branches. It’s hardly surprising given the 26% increase in gold and 37% rise in silver prices year-to-date. Like the rise in any metal, high prices are spurring many to dig through their old jewelry boxes and reappraise Grandfather’s gold watch for its intrinsic value.
In his most recent Gold Videocast, Peter Schiff takes on San Francisco Federal Reserve President John Williams’ new monetary prescription for the ailing US Economy. Williams sees the current trend of slow economic growth as a “new normal”. His plan calls for raising the target inflation rate beyond its current 2% value. But how does Williams want to raise inflation? With a simple sleight of hand trick that no longer uses real GDP growth (i.e. adjusted for inflation), but uses nominal GDP growth.
Essentially, Williams wants to use a less accurate (and conveniently higher) number as the standard for measuring the economy’s “real” growth. It’s the policy equivalent of removing the gold standard. Once again, the government substitutes something real for something fake. The Fed can now add fantasy numbers to their magician’s box, which they use to hide the real recession we’re in.
Billionaire and founder of Icahn Enterprises, Carl Icahn, recently appeared on Bloomberg to discuss his support for Donald Trump and a future move to start his own super PAC. During the discussion he had with Erik Schatzker, the wealthy activist made a case for the coming demise of the US economy and collapse of the dollar due to over-regulation of the markets and lack of capital spending.
The US Federal Reserve Presidents have been busy this week, flexing their speculative muscles and antagonizing the markets. In case you missed it, here’s everything they’ve been up to in the past seven days.
Global Banks Abandon US Bonds: Largest Selloff since 1978
In total, $192 billion of US Treasury bonds have been dumped off by other nations’ central banks in the first half of 2016, according to CNN Money. That’s more than double the rate of 2015. What does this mean? The world economy seems to be showing an overall trend of drastic weakening. Many of the nations, which include China, Japan, France, and others, need quick cash in an attempt to stabilize their shaky economies.
Earlier this year, chief of the International Monetary Fund Christine Lagarde predicted the beginnings of a global economic destabilization.
“There has been a loss of growth momentum,” Lagarde said. “Emerging markets had largely driven the recovery and the expectation was that the advanced economies would pick up the ‘growth baton.’ This has not happened.”
Now that these numbers have been released, it seems world banks are retreating inwards more quickly than the IMF anticipated. That’s a move Lagarde sees as a danger to everyone.
On his latest podcast, Peter Schiff takes New York Federal Reserve President, William Dudley, to task for his off-the-cuff remarks about a September rate hike. Peter also looks at the fine print of San Francisco Federal Reserve President John Williams’s new “era” monetary policy proposal, which is only a panacea if you want higher inflation, lower interest rates, and more quantitative easing.
Yesterday was the end of some short-lived rallies as stocks fell back from their record highs and the dollar index retreated back to pre-Brexit lows. In the long term, these changes are showing the dollar continues to lose its purchasing power due to central banking’s bad fiscal policy. As the dollar declines, gold prices are likely to respond with upward movements throughout the remainder of the year.
It’s been an electrifying summer for gold. The explosive potential of precious metals investment has really taken off over the past few months, and the Fed has followed the exact trajectory Peter Schiff predicted they would. Peter recently appeared on Albert Lu’s Power and Market Report to discuss gold’s true value, the Federal Reserve’s mishaps, and the recent merger with GoldMoney.
Several economists for the International Monetary Fund (IMF) recently expressed concerns about moving interest rates into negative territory. They believe it could backfire on the European Central Bank (ECB), making banks less profitable overall and reducing lending.