Joe Biden unveiled his massive infrastructure spending plan complete with tax increases this week. The president says it will create “opportunities.” But what about the opportunities that will never be realized because Biden and company went on a spending spree with our money? Host Mike Maharrey talks about it in this week’s Friday Gold Wrap podcast, along with the latest precious metals and Fed news.
US money supply growth hit another all-time high in February as the Federal Reserve continues to churn out dollars and inject them into the economy.
As measured by the True Money Supply Measure (TMS), the money supply grew by 39.1% year-on-year. That was up slightly from January’s record growth of 38.7%.
We have been saying that given the extraordinary level of money printing the Fed has done since the beginning of the pandemic, a wave of price inflation is coming down the pike – perhaps even hyperinflation. But many will be quick to remind us that we raised the warning flag about inflation when the Fed launched three rounds of quantitative easing in the wake of the 2008 financial crisis. In fact, Paul Krugman has been doing victory laps again – reminding everybody that the inflation monster never did come out of its lair and promising it won’t this time either.
Basic economics tells us that increasing the supply of money without a corresponding increase in the number of goods and services in the economy should lead to rising prices. Is basic economics wrong? Or are there other things going on in the economy that suppressed or hid inflation in the aftermath of the great recession?
Since the beginning of the pandemic, government debt and money printing are off the chart. This is creating inflationary pressure. Prices are on the rise. And this is by design. In fact, the Fed has been promising more inflation for years. As Peter Schiff explains, it looks like this is one promise the Fed is going to keep.
Every time the economy gets into trouble, governments and central banks react the same way. They slash interest rates and loosen monetary policy. This gooses the economy — temporarily. But when the next crisis comes, it takes an even bigger dose of extraordinary monetary policy to revive the economy. The Fed has pushed things into the future several times, but as Friday Gold Wrap host Mike Maharrey explains, at some point you’ve got to pay the piper. In this episode, he also discusses the bond market and the latest Fed talk.
Every time the economy gets into trouble, governments and central banks react the same way – they cut interest rates and loosen monetary policy to stimulate borrowing and spending. The idea is that the “stimulus” will increase demand and pull the economy out of trouble. But there is a dark side to this policy – debt. And debt is slowly poisoning the economy.
The latest Biden/Democrat stimulus bill is just the beginning. There is more government spending coming down the pike. That means more money printing. But Paul Krugman says not to worry. It didn’t cause a big jump in CPI last time and it won’t this time either. Peter Schiff talked about it in his podcast. He said when Krugman talks – nobody should listen.
We’ve talked extensively about the growing levels of debt in the economy. The national debt recently eclipsed $28 trillion. Corporate debt was already skyrocketing prior to the pandemic. All of this is driven by loose Federal Reserve monetary policy designed to drive borrowing. And people wonder why Peter Schiff insists the Fed can’t actually let interest rates rise to fight inflation.
As economist Doug French highlighted, there’s another segment of the economy buried in debt – the commercial real estate market. The problem is compounded by the fact that the value of commercial real estate is falling like a rock thanks to a shift toward work-at-home and the brick-and-mortar retail apocalypse. In a nutshell, the commercial real estate market is plagued by too much debt and not enough assets.
Last month, Federal Reserve Chairman Jerome Powell testified before Congress. In his answer to one question, it sure did sound like he doesn’t believe in the basic economic principle of supply and demand. Peter Schiff talks about it in this clip from one of his podcasts.
The Federal Reserve held its March FOMC meeting this week. There were no changes in monetary policy, but there was plenty of talk. The question is does anybody really believe what the Fed is saying? SchiffGold Friday Gold Wrap podcast says the mainstream doesn’t seem to believe the Fed. And he doesn’t either. But for very different reasons.
