Economy Off Rails: Gold and Silver Remain

But Gold and Silver Can’t Fail!

As the Federal Reserve unwinds its bloated balance sheet and threatens to keep interest rates higher for longer, investors are forced to reassess everything in their portfolios: stocks, ETFs, bonds, literally everything. Even cash isn’t safe since sticky inflation has made “sitting on your hands and doing nothing” a non-option in 2023.

The era of easy money certainly was fun (for some people, at least) while it lasted. Many middle-class Americans didn’t benefit from the spoils of suppressed bond yields and stocks that had nowhere to go but up for a full decade, though the billionaire class profited handsomely.

There was one final bailout for wealthy bankers and a few scraps thrown to the middle class in the form of stimulus checks during the peak of the COVID-19 crisis. The already steep upward trajectory of America’s money supply went vertical as the government printed and spent dollars at a breakneck pace.

This saved the stock market from ending 2020 or 2021 in the red, but politicians and central bankers can only kick the can down the road for so long. 2022 was a year in which the nation would face some, but not all, of the consequences of extreme debt-spending policy – not just after COVID-19 but since the bailouts of 2008-2009.

The result is that the “American Dream” of owning a home is out of reach for millions of millennials, and Generation Z won’t likely remember a time when homeownership was a viable option.

There are really only two ways the housing bubble can go at this point: either home prices stay elevated and Americans remain shut out of homeownership or home prices roll over (which seems to be happening). Don’t assume that the second option is any better than the first one because many people have most of their wealth stored in the value of their home.

Plunging home prices will wipe out people’s wealth and put them underwater, just as it did in 2008-2009. This isn’t a story that can resolve calmly or peacefully; the “soft landing” scenario is improbable, and the “no landing” scenario is only a fantasy perpetuated by the media since next year is an election year.

Not only is the price of a home exorbitant now but so are the interest payments. Remember that every time the Federal Reserve chairman announces another interest rate hike, there are ripple effects throughout the economy. Among those ripple effects is higher mortgage payment rates, which directly impact America’s working class.

Naturally, the central bank’s elite class isn’t overly concerned about the impact on middle-class American families. Not long ago both Minneapolis Fed President Neel Kashkari and Atlanta Fed President Raphael Bostic expressed support for a bigger-than-anticipated 50-basis-point interest rate hike at the upcoming March 21-22 FOMC meeting.

We now live in a bizarre world in which the stock market reacts negatively to 3.4% unemployment, the lowest since 1969. Good news is evidently the worst possible news when investors fear the Fed more than they fear a declining GDP or lackluster corporate earnings.

This is what fear and loathing look like: bond prices getting smashed along with stock prices because interest rates are relentlessly on the rise. In order to address the central bank policy errors of the past decade or more, the Federal Reserve now has to overcorrect in the other direction with terrible consequences in store.

Think about what has to happen before the Fed finally backs down from its ongoing tightening path. People spend more money when they’re gainfully employed, and this boosts inflation, so the Fed wants to see millions of people lose their jobs.

Fed officials also want to see the stock market go down, though they won’t specify how far down it would have to go to satisfy them… 20%? 30%? Maybe 40% from current levels? Only then can they pat themselves on the back for a “job well done” and tap the brakes on quantitative tightening.

In other words, things have to break within the financial markets before the Fed finally lets up. I’ve been holding both gold and silver bullion for years in anticipation of this. Do you really think it’s just a coincidence that the central banks of China, Russia, and other global powers have been hoarding precious metals?

They see what’s coming, and so do sophisticated investors who don’t trust politicians and central bankers to do what’s right or reasonable. Using one course of policy errors to fix another isn’t a recipe for success, but the elite class won’t have to bear the brunt of the consequences.

If gold and silver prices haven’t moved much lately, that’s actually a good thing. It’s just another opportunity – possibly your final chance – to own precious metals before a confluence of rare and unfortunate events push the prices both necessarily and inevitably much higher.