Our federal government’s budget deficit during October rose 34% versus a year ago to over 134 billion dollars; the deficit should breach one trillion dollars for the fiscal year 2020. The last time the deficit was that high occurred eight years ago when the federal government spent money like crazy to keep the economy and stock market afloat after the Great Recession, caused by guess who, Wall Street bankers.
Why this matters to you?
The government deficit increase is occurring at the same time the value of the stock market as a percentage of the nation’s GDP is the highest since the Wall Street Dot Com bubble burst and bust in 2000.
Gold prices rose from a low just under $300 per ounce to about $750 an ounce during that time period.
The last time these events occurred eventually it led to pain and anguish for investors in paper assets like stocks, and for the investors of NASDAQ high flying stocks it took 18 years to get back to those lofty levels.
Let that sink in for a bit, years not months and that is why it matters to you.
Federal Reserve Chairman Powell said during testimony before Congress last week
There is no reason to believe that the probability of a recession is elevated at this time. Powell said
We don’t see the warning signs that appeared in other cycles, yet. Then why did the Fed cut rates and say it was an insurance rate cut? And what does yet mean?
Federal Reserve says Stocks Valuations are Elevated
On Friday, a day after Chairman Powell’s comments the Federal Reserve released a report and said equity prices
remain high relative to corporate earnings but the Federal Reserve Congress valuations are pretty much consistent with the low level of interest rates.
The Federal Reserve report said continuing low-interest rates could reduce bank profits and push bankers into riskier behavior that might threaten the nation’s financial stability. Wonderful, Wall Street and bankers dancing in the streets again. Maybe that is why Powell said ‘yet’ and shows how convoluted the Federal Reserve is.
Gold may be the best strategic investment to diversify your assets. Gold rose from a low just around $700 per ounce to about $1,900 after the last period of high-risk behavior on Wall Street.
The Federal Reserve report said
“If interest rates were to remain low for a prolonged period, the profitability of banks, insurers, and other financial intermediaries could come under stress and spur reach-for-yield behavior.”
The report said this may increase the vulnerability of the financial sector to ‘shocks’.
Where will the price of gold and other precious metals head the next time Wall Street’s risky behavior is flushed out by a dose of reality?
Not likely down, that means gold may be your most strategic asset. You can own gold and hold it in your hand and can even diversify your IRA with a Gold IRA.
Federal Reserve Warns Congress about Deficit
Last week during his testimony before Congress Federal Reserve Chairman Jerome Powell told the leaders of our government to reduce the Federal government’s one trillion dollar a year deficit.
Powell said such a huge deficit will make it harder for Congress to cut taxes or increase spending during the next recession.
It’s very important that Congress be able to support the economy because we won’t have as much room to cut, he said this because typically the Federal Reserve cuts its interest rate by about 5 percentage points in recessions.
What the Federal Reserve is saying to Congress and that means all of us; If the economy slows or Wall Street causes a bubble and it busts you are on your own. The Fed has used the bullets in their gun.
What the Federal Reserve and the Federal Government may have to do is monetize the one trillion dollar debt along with the nearly twenty-three trillion dollars of debt now on the books while interest rates are low.
That pretty much means the only thing the government can do is print more money or drop it from the sky during the next recession. That means the only asset to have any value is gold, making gold your best friend to protect your wealth and your family’s lifestyle.
Gold offers you one simple thing other investments do not, you can own the gold coins and bars and hold them in your hand. If you invest in gold you offset risk posed by a central bank and a do-nothing Congress who wants to spend recklessly and print piles of money to play with.