This year will mark the 50th anniversary of President Richard Nixon severing America – and the world – from its last tie to the gold standard. The rapid devaluing of the dollar is the most obvious result. But another consequence has been an enormous national debt that continues to grow at a staggering pace. Most people don’t realize it, but this is a direct and intentional result of the current fiat money system.
There were a number of inauspicious records set in 2020 and the impacts will continue to reverberate through the economy in the future.
The Federal Reserve created money at a record rate. It also increased its balance sheet to record levels. And not to be outdone, the US government set a budget deficit record.
These three records were actually linked. The money printing and expansion of the Fed balance sheet were necessary to monetize the massive federal debt. And there is no sign that anything will be different in 2021.
The year 2020 is coming to a merciful end. As it was with pretty much everything, it was a nutty year for the economy and the precious metals markets. We all hope 2021 will be better, but it seems unlikely that it will be any less nutty. In this special Thursday episode of the Friday Gold Wrap podcast, host Mike Maharrey takes a look back at 2020 and speculates on what could lie ahead in 2021.
So far, the US has escaped negative interest rates as a matter of central bank policy. Back in May, many thought a Fed move to negative rates was a real possibility. Of course, much of the world has operated under negative rates as a matter of policy for years. The European Central Bank (ECB) launched negative rates in June 2014. The Bank of Japan (BOJ) introduced negative rates in January 2016. Both are still maintaining a negative rate policy today.
While the Fed has resisted the temptation of a negative rate policy so far, that doesn’t mean Americans have escaped the reality of below-zero real rates. In fact, the world is awash in negative-yielding debt.
The Dow Jones cracked 30,000 this week and stocks continue to surge generally upward as investors are embracing risk-on sentiment based on high hopes a vaccine may put an end to the coronavirus pandemic. But there’s more to it than that. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey takes a deeper look at what’s really driving this market mania, and he also takes down the myth that printing more money means more wealth.
US taxpayers are on the hook for a $435 billion loss on the $1.37 trillion in student loans that were on the government’s books at the beginning of this year, according to an internal study by the Department of Education recently reported by the Wall Street Journal.
That’s before any loan forgiveness program that might come down the pike under the Biden administration. And the massive number doesn’t account for any student loans issued going forward. It also does not include student loans issued by private lenders but still guaranteed by the federal government.
Student loan debt continues to surge despite falling college enrollment.
In Q3, student loan balances rose by $23 billion from the second quarter, according to the latest Federal Reserve data.
While the markets were giddy about the prospects of a coronavirus vaccine, the Federal Reserve was warning of more economic chaos on the horizon.
The Fed released its biannual Financial Stability Report Monday. The report warned we could see a wave of defaults and “significant declines” in asset prices in the near future.
The debt monster is loose.
S&P Global Ratings projects the global debt-to-GDP level will swell to a record 265% this year. It also expects insolvencies and defaults to rise to levels not seen since the 2009 crisis.
Stocks sold off Monday as markets fretted over the lack of progress on stimulus and a rise in COVID-19 cases. In his podcast, Peter talked about the sell-off and the political dynamics driving the markets right now. He also drove down to a question nobody seems to want to grapple with: why are the markets and the economy so dependent on and desperate for stimulus?
