Another week, another 3.5 trillion dollars was proposed by our White House leaders. Senate Democrats began drafting the details on a social and environmental bill. Senate Democratic leaders have said they aim to pass both the budget blueprint and a narrower, bipartisan infrastructure plan that is still being written before the August recess. Our leaders are concerned with extending the reach of education and health care, taxing the rich, and tackling climate change.
According to the NY Times,
“The outline covers much of Mr. Biden’s $4 trillion economic agenda. It addresses every major category from his American Families Plan, including investments in child care, paid leave and education, and expanded tax credits that this week will begin providing a monthly check to most families with children.”
The US energy economy would move from oil, natural gas, and coal to wind, solar, and other renewable sources. Someone should tell our leadership that our financial system is already failing under an existing overwhelming debt burden with many more trillions in debt to come. All of this pending, increased taxes, and rising prices is not what the American people want or need. Record levels of government spending are already being reflected in a rising consumer price index and grave inflationary concerns.
The Covid environment will be with us for a long time
Variants are causing Covid cases to increase again and mostly democrat governments are imposing new mandates. New mutations are just going to keep coming. Just like the common cold, coronavirus, it will keep mutating around vaccines and cannot be snuffed out like smallpox, so that the war with Covid is going to stretch on and on. Stimulus checks, larger unemployment benefits, printing money, Fed intervention, and more debt have been all the tools used to combat recession. Our currency will continue to be debased at an even more alarming rate. Jerome Powell, in prepared remarks before a congressional hearing this week, said the US job market
is still a ways off from the progress the Fed wants to see before reducing its support for the economy, while current high inflation will ease in the coming months. Investors are moving into precious metals to hold something of value in a time of such Covid uncertainty. This Covid uncertainty is not going away anytime soon. Putting masks on, being injected with a vaccine, working remotely, and social distancing will save lives. All of this is not enough to abandon more fake money printing. The economy will just stumble along until it doesn’t. The markets will continue to grind higher with the assistance of the Fed until it doesn’t.
Interest rates will remain subdued
In a plot twist for the mortgage market, inflation is rising, but mortgage rates are still falling. The average rate on 30-year mortgages fell this week to 3.11 percent from last week’s 3.13 percent, according to Bankrate’s weekly survey of large lenders. Mortgage experts offer mixed predictions about the future of rates. In Bankrate’s recent survey (July 15–21), 50 percent said rates will stay the same, 42 percent predicted rates will rise and just 8 percent said they will continue falling. Interest rates must stay subdued if we consider government debt. The public debt is just over $28 trillion. The government also owes the Social Security Trust Fund and other federal agencies. That’s called intragovernmental debt. It’s not part of the public debt and doesn’t impact the interest on the debt. That’s because it’s money the government owes itself. The yield on the 10-year Treasury note is expected to remain below 3% until 2024, thanks to strong demand for US Treasurys. By 2026, the interest on the debt will be $543 billion. These estimates are all way too low. Debt could realistically double by 2026 with the pace we are on. These debt predictions are meaningless by government agencies. We all know spending will skyrocket more. We all know this debt will never be paid off. Future generations are completely screwed. If you look at the interest rate environment and ballooning debt, it’s no wonder investors are moving assets into precious metals. Subdued interest rates are going to inflate the mother of all bubbles more until it pops.
Central banks will continue to provide liquidity
The only way for governments to address the ongoing Covid issue for the foreseeable future is to print money. They always do this in times of uncertainty, crisis, and emergency. Uncertainty, crisis, and emergency are going to be with us for many years to come. The Fed, BOJ, BOE, ECB, PBOC, and the SNB are the modern central banks doing all of this stimulation and asset purchasing. Fed’s Powell says the economy is
a ways off from bond tapering. The Fed has been providing $120 billion a month in bond purchasing since September of 2019. Of course, they can’t stop. US Federal Reserve Chair Jerome Powell reassured investors this week that the central bank would continue its accommodative monetary policy despite a spike in inflation readings. We keep hearing that inflation is transitory. With continued asset purchasing and fake printed money stimulus, prices are not going to just crater and remain there. Corporations are not just going to lower prices and keep them there. Investors do not believe the rhetoric on transitory inflation and are moving assets into precious metals.
Investment-grade precious metals include gold, silver, platinum, and palladium. In the last 5 years, gold is up 34%, silver is up 29%, palladium is up 260%, and platinum is down 5%. The US dollar index has lost 4% in the last 5 years. We all know damn well that things cost more than 4% over the last 5 years. The indexes are not telling us the truth; they are skewed to support this fiat currency paper system. It’s a system based on debt and credit expansion, and it’s a system that is overwhelmed and broken. Our monetary system is failing, and this increased debt load is not adding to the future destruction of paper wealth. If you are fortunate enough to have benefited from the largest debt bubble in history, move some of those assets into physical precious metals. Bars and coins will hold your buying power over the next ten years. Of course, no one has a crystal ball. Past results do not mean future guarantees. What we do know is this. You would have to be insane to keep all of your assets in paper at this juncture. You would be better off going to the casino and putting it all on red. Those investors should let it all ride and also should consider purchasing a ticket to Mars with Bezos and Branson. Musk says he hates being CEO of Telsa and the company would die if he steps down. Zuckerberg is busy surfing on a hoverboard. They already have millions and billions to blow. This is a mad and insane time. For those investors who don’t have millions to blow, move some of your nest egg into physical precious metals today.