A wilting, stifled economy is the story this week with the Fed. They’re trapped, unable to bolster the economy and they have no ammo to halt inflation.
Fed President Lacker Urging Preemptive Rate Increases
Regular Fed dissenter Jeffrey Lacker said this week he sees even bigger rate increases coming in if the Fed doesn’t start gradually tightening as soon as possible. His remarks sent precious metals tumbling. In his latest podcast, Peter Schiff discusses why the Fed can’t accomplish Lackers’ plan: “We have so much debt that if we try and fight inflation we’re going to have a worse financial crisis than 2008,” Peter said. “Because it can’t fight inflation, the Fed pretends it can do it.”
There are currently about 54 million millennials entering the workforce in the US, and for many of them, the idea of buying a home isn’t an immediate goal. That’s because the majority (70%) are under an enormous amount of student debt. Large school loans are motivating many millennials to put off their first home purchase until they pay down some or all of their education expenses. The delay is having an immediate impact on the housing markets.
Ever since the financial crisis of 2008, many investors have bought gold and precious metals to withstand the storm of volatile markets and insolvent banks. Demand for gold storage services is so in-demand throughout the world, Switzerland vault owners are turning customers away. Many of these Swiss vaults reside in the Alps within old military bunkers converted to high-tech facilities catering to the wealthy.
The Fed wasn’t immune from the political spectacle that was the Presidential debate on Monday. After that, Yellen had to answer even more criticisms from the nation’s financial regulation.
“The Fed is being more political than Secretary Clinton”— Trump
In Monday’s much-awaited presidential debate between Hillary Clinton and Donald Trump, there were many contentious topics brought up to over 80 million viewers throughout the event. One topic, brought up by Mr. Trump, was the Federal Reserve, as well as Janet Yellen. As you might guess, he was not singing praises to the Fed Chair on the stage. Trump brought up that Yellen’s moves might be influenced by President Obama, and that the possibility of a stock market bubble was a near-certain disaster awaiting the economy.
On Wednesday, Federal Reserve Chairwoman Janet Yellen testified before the House Financial Services Committee on financial regulation. The Fed Chair took criticism from both sides, with Democrats and Republicans criticizing the regulatory body for doing too much and for doing too little. Among the topics was the over-reach of Dodd-Frank, breaking up “too big to fail” firms, and the recent Wells Fargo phony account scandal. However, one important topic side stepped was the impact of low interest rates on any of the problems brought up at the hearing.
In light of the Fed rate hike news finally dropping this week, we can start looking ahead to the rest of the year. It’s a great time to be Fed Up with the election looming and global central banks making moves to preserve their economic health into next year.
Fed Holds Interest Rates “For the Time Being'”
In her press conference Wednesday afternoon, Janet Yellen said the Fed decided to keep rates at their current target but pushed that a hike before the end of the year was likely. The delay suggests Yellen and policy makers are continuing to keep up the illusion of economic health by maintaining an undercurrent of optimism despite the bad data continuing to come in.
“The case for an increase in the federal funds rate has strengthened,” she said, citing a need to “wait for further evidence of continued progress” in the economy. Despite the renewed optimism express by Yellen, most economists are still skeptical of a November hike, given that it’s just before the election.
Many investors wonder whether they can use their retirement funds for buying physical precious metals. It’s important for those who want to diversify their portfolios and reap the wealth-retention benefits of gold and silver. The answer depends mostly on what type of retirement fund you have.
India has traditionally been one of the largest gold markets on the planet, second only to China. However, the high price of the yellow metal is threatening India’s status as a leading importer of gold. Indian gold bazaars are the common places of exchange, and lately, their owners have seen a mass movement of people selling their gold jewelry. The market has transformed from whole sellers and brokers to everyday individuals looking to take advantage of the high price of gold, up 22% this year so far.
If this week’s any indication, it seems as if the Fed is a divided house. Former dovish members are now suggesting tightening while others want to stay the course of QE and low interest rates. What’s more, the Fed itself is likely to become a political football if Donald Trump has his way. The Republican presidential nominee took aim at Fed Chair Janet Yellen this week, saying she was a puppet for Obama. All of this and more in this week’s Fed Up Friday.
The drama at the Fed continues to unfold after another high-ranking official, Governor Lael Brainard, expressed comments suggesting the US economy was still too vulnerable for a rate hike. At this point, the governing body seems divided about the health of the economy, which seems odd given their self-proclaimed “data dependency”. Either the data is indicating a growing economy or a shrinking one. Lack of consensus suggests a division in leadership and a delay in any rate hike at least until the end of the year.