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.
We’re approaching all-out market mania with optimism about a COVID vaccine and the ensuing economic renaissance that many seem convinced is right around the corner. On Tuesday (Nov. 24) the Dow Jones closed about 30,000 for the first time.
On his podcast, Peter Schiff talked about the big stock market rally. He said it’s not really about the presidential election, or the COVID vaccine, or excitement about Joe Biden. The rally is all about the Federal Reserve. And it always has been.
A lot of people are turning more bullish on the economy with the possibility of an effective COVID-19 vaccine. But in his podcast, Peter Schiff argued that coronavirus isn’t the problem. COVID-19 isn’t making the economy sick. All of the Federal Reserve stimulus and money printing is making the economy ill. And coronavirus vaccine isn’t going to make it well.
When governments started locking down the economy in response to coronavirus, the Federal Reserve sprung into action. First, it slashed interest rates to zero. Then it quickly launched what we’ve dubbed QE infinity. In effect, that meant printing trillions of dollars out of thin air and pumping them into the economy.
Meanwhile, the US government did its part, passing a massive stimulus bill – pumping trillions of dollars of borrowed money into the economy. Of course, the Fed monetized a big chunk of that debt via QE infinity. So, in effect, the federal government joined forces with the central bank to pump trillions of dollars out of thin air into the economy.
The central bankers at the Federal Reserve can be pretty clueless. A report issued by the Fed a few weeks ago serves as a prime example.
The stock market continues to climb on coronavirus vaccine hopes. But why should it? After all, it didn’t sell off because of the pandemic. It’s at record levels despite COVID-19. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey explains why this really isn’t about a vaccine. He also talks about one of the pernicious effects of this super-loose monetary policy – the theft of our savings.
As central banks continue to inject trillions of dollars created out of thin air into the financial system, the mainstream generally sits backs and shrugs. But a few lonely voices in the wilderness continue to warn about the potential for price inflation and its nefarious effects on the average person.
In a recent podcast, Peter Schiff warned that prices are going to surge because “the Fed is not going to take away the punch bowl.”
The US government has borrowed $4.2 trillion in the last 12 months, pushing the total national debt to over $27 trillion. In order for Uncle Sam to borrow, somebody has to lend. So, who is buying all of these government bonds?
Foreign and domestic investors, commercial banks and US government entities all buy US debt, but increasingly, the Federal Reserve is backstopping the market and making this borrowing binge possible.
Stocks continue to surge upward thanks to optimism about a coronavirus vaccine. Of course, stocks have been on a bull run ever since their big March drop at the beginning of the pandemic. This led Peter Schiff asks a poignant question during his podcast: if COVID-19 didn’t hurt the stock market, why should a vaccine help?
We have argued that the Federal Reserve has no exit strategy from this extraordinary monetary policy. In fact, it never could extricate itself from the extraordinary monetary policy it launched during the Great Recession. Today, we’re merely witnessing the same policy on hyperdrive. And there is still no way out.
