We now have QE to infinity and beyond.
On March 23, the Federal Reserve announced it will purchase an “unlimited” amount of US Treasuries and mortgage-backed securities. The Washington Post called the move “unprecedented” and said that it goes “much further than what the central bank did in the 2008-2009 crisis.”
Last Thursday, we embarked on a journey through the Southeast for business purposes and to check up on our kids who live in Kentucky. In case you were wondering, it is as crazy out there as you might imagine if you’re sequestered in your home following events through the news or social media.
Don’t worry; we practiced social distancing…mostly. And there was a lot of hand-washing.
Many people have likened the battle against coronavirus to a war and invoked imagery of the US fighting World War II. President Trump has even deemed himself a “wartime president.”
The president told reporters at a White House briefing that fighting the virus would require a sacrificial national effort just like it took to defeat the Axis in the Second World War.
On Sunday evening, the Federal Reserve announced additional extraordinary emergency measures in an attempt to keep at least some of the air in the bubble economy. But in fact, the Fed has been engaged in extraordinary emergency monetary policy for over a year.
With the madness in the markets over the last couple of weeks that led the Federal Reserve to implement a 50-basis point interest rate cut, Peter Schiff is starting to get some love in the mainstream media.
Peter was a regular on MSNBC, Fox News and other mainstream outlets in the months leading up to the 2008 financial crisis. He was typically the lone contrarian, insisting that the economy wasn’t great. Of course, in 2008, he was proved correct.
Stop and pause for a moment and think about what just happened. The Federal Reserve says the US economy is strong, but it just initiated emergency monetary policy last seen during the worst financial crisis since the Great Depression.
Something doesn’t add up.
The Fed cut rates 50 basis points on Tuesday. It was the first interest rate move between regularly schedule FMOC meetings since the 2008 financial crisis. The Fed funds rate now stands between 1.0 and 1.25%.
The US stock market continued its freefall last Friday. The Dow lost another 357 points to finish off the worst week since 2008. One would expect a safe-haven like gold to thrive in the midst of the massive stock selloff, but it had a bad day on Friday as well crashing through the $1,600 mark and plummeting as low as $1,568.
Gold rebounded Monday and was trading back above $1,600, but how do we make sense of its precipitous plunge? Has gold failed as a safe-haven?
The short answer is no.
The powers that be insist that inflation is low. In fact, the central bankers at the Federal Reserve tell us that low inflation is one of the reasons they can keep interest rates artificially low. But everyday people who go to the store each week smell a rat. We know our dollar doesn’t stretch as far as it used to. If inflation is so low, why do prices seem to keep going up?
The only logical explanation is maybe inflation isn’t as low as the pundits keep telling us.
Every once in a while, the truth slips out of Federal Reserve Chairman Jerome Powell’s mouth.
Powell was on Capitol Hill this week addressing Congress. He continued to talk up the economy, but in a moment of honesty, tacitly admitted that the central bank is already engaged in extraordinary monetary policy, and confessed the Fed may not have the firepower to fight the next recession. During testimony before the House Financial Services Committee, the Fed chair conceded that the current low level of interest rates “means that it would be important for fiscal policy to support the economy if it weakens.”