“The tide is turning which is going to cause pain for everybody.”— Precious Metals Advisor Damian White
Just a few months ago, Jerome Powell finally admitted that inflation was an issue at a time when everyone was already feeling its pain. Now, the Fed is changing its tune once again by raising alarm bells over aggressive inflation.
Understandably, investors are confused about what’s going on and how they should protect their wealth. Watch the video to hear what Precious Metals Advisors Joe Elkjer & Damian White are saying about the situation.
Why the Fed is at fault.
The Fed’s initial reluctance to even admit the presence of inflation left a sour taste in the mouth of the average American who has had to deal with the resulting economic catastrophe of rising costs and the devaluing of the dollar. Although there are countless factors at play, the Fed has had a big hand in the rapidly rising inflation.
For 40 years, our financial czars have been running the money printer and flooding the economy with tons of cash without considering the future cost of inflation. Interest rates have been at historic lows for years, encouraging people to borrow too much. To make matters worse, the COVID-19 relief saw more than $2.5 trillion pumped into the slowing economy.
The “oh crap” scenario.
With inflation reaching 40-year highs, the Fed is starting to grow more and more concerned over the state of the economy. They’re realizing too little too late that their response is well behind the curve. Interest rates should have been raised when the economy was roaring at least a year ago.
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Instead, the Fed sat on its hands until the economy hit the “oh crap” scenario with raging inflation, skyrocketing costs, and a pummeled greenback. Now, the government is raising interest rates into an economic downturn which only causes more pain for the average American.
Stagflation: The worst of both worlds.
Warning cries of inevitable stagflation are starting to pour out from experts who don’t see this economic turmoil turning out well. The economy is coming to a screeching halt at the same time inflation is ramping up. The US hasn’t experienced this economic blunder since the 1970s when poor monetary policies and an oil embargo rattled a once-strong economy.
Even the mention of stagflation is enough to make the most experienced investor nervous. When you consider that inflation is hitting energy and food prices the hardest – two of the most important commodities in the economy – things look even worse. The economy isn’t quite at this point yet, but things are headed in that direction.
The Fed painted itself into a corner.
The Fed’s snail-pace reaction to the rapidly deteriorating economic situation has resulted in a proverbial rock-and-a-hard-place scenario. The Fed has painted itself into a corner with poor decision-making and slow response times. There are really only two levers it can pull in an attempt to put the economy back on track: raising interest rates or reducing the money supply.
The economic situation is bad enough that the Fed is doubling down by using both strategies in an attempt to increase spending. Jerome Powell has made it clear that he won’t hesitate to continue raising interest rates until inflation slows down. There are already talks of more rate hikes in June and July and nobody really knows how long this could continue.
There’s going to be pain ahead.
Powell’s cautionary tone didn’t stop there. He recently said that “some pain” will be necessary to slow inflation. As the economy slows down and inflation rises, the Fed knows Americans are going to feel the pressure. In fact, older individuals will feel pain they haven’t felt in 10 to 15 years while younger generations will experience true economic pressure for the first time.
See through the smoke to protect your wealth.
It’s getting more difficult for investors to see through the smoke as the Fed vainly attempts to keep the economic flames to a minimum. Smart money investors are moving their wealth away from USD-backed assets and into inflation hedges such as gold and silver coins. Precious metals help protect against inflation due to their inherent value and historic performance.
If you’re not sure where to begin with precious metals investing, the advisors at Scottsdale Bullion & Coin can help you. Request our free precious metals investment guide to learn the ins and outs of investing in gold and silver and how it can protect your wealth, especially during periods of economic downturn like we’re experiencing right now.