Peter Schiff: The Fed Has Lost the Inflation Battle
Global Silver Report out in 1 week. Women on the Rocks from Guanajuato Mexico.
Peter Schiff on CPI
Men Underestimate the Power of Women's Wallets. From Gold to NCAA Basketball Finals
Meanwhile the 2024 Presidential election has Trump vs Biden (2 old men) while USA still has not elected a woman President. Pathetic
Women on the Rocks from from Guanajuato Mexico.
The Federal Reserve has Lost the Inflation Battle
Bill Martin had a pretty serious problem in 1969.
As the Chairman of the Federal Reserve (back when people had the audacity to say “chairman” instead of “chair”, as if we are pieces of furniture), Martin was one of the few people who could say that he had central banking in his blood.
His father, William McChesney Martin Sr., was actually one of the original architects of the Federal Reserve Act of 1913, and then later served on its Board of Governors and as President of the St. Louis Federal Reserve Bank.
Bill followed in his father’s footsteps, first cutting his teeth on Wall Street, then becoming President of the New York Stock Exchange at age 31.
Following a period of military service during World War II, Bill Martin was ultimately made Chairman of the Federal Reserve by President Truman in 1951. And to this day he is still the longest serving chairman in Fed history.
Martin’s problem started surfacing in the mid 1960s. Lyndon Johnson was President, and the United States was spending an unbelievable amount of money fighting a war in Vietnam, while simultaneously funding Johnson’s “Great Society” welfare programs.
With so much government spending (most of which was financed by debt), inflation started to rise. And by 1969, US inflation reached 6%.
People weren’t happy, politicians weren’t happy, and Martin was in trouble. So he did what Central Bankers are trained to do— he aggressively raised interest rates.
The Federal Funds rate, in fact, reached 10% by the summer of ‘69, right around the time Woodstock kicked off and Neil Armstrong walked on the moon.
High interest rates cooled the economy, and inflation soon started to fall. By 1972, inflation had come down to around 3%— and everyone was convinced that the problem was over.
But we all know the rest of the story— inflation didn’t go away; the remainder of the 1970s was the worst inflationary period in US history, and inflation didn’t come back down to the Fed’s 2% target level until 1986!
There are a lot of similarities to today.
Just like the 1960s, the US government is spending outrageous sums of money that it cannot afford, most of which is financed by more debt.
Inflation shot up to a peak of 9% during 2022— in large part due to the government’s spending binge during the pandemic. But the Fed aggressively hiked rates, and inflation fell back to around 3%.
But the government just released its latest statistics this morning showing that inflation is rising once again for the third month in a row. On an annualized basis, in fact, inflation is more than 5%.
Naturally this doesn’t come as a shock to anyone who goes grocery shopping... or shopping for just about anything else. Apparently, you lose all sense of reality when you get a PhD in economics.
For the past several months, the Fed has tried to tap-dance its way out of reality. They keep claiming that the recent spikes in inflation data have been “seasonal” aberrations.
Well, there’s no mistaking it now. Inflation is not falling to 2%. It’s not falling at all.
The Fed clearly claimed victory over inflation way too early, based on a complete fantasy that they had fixed it. And they’ve already been talking very publicly about when (and not if) they will cut rates.
They’re missing the entire point.
Americans aren’t looking for lower inflation. They don’t even want zero inflation (although that would help). People want prices to go back down to pre-pandemic levels— which is what they promised back in 2022 with all the talk of “transitory” inflation.
Well, that ship has completely sailed. But the Fed still seems to think that they’ve won the inflation war and that interest rates are going to come down soon.
Notice that no one is even talking about whether interest rates need to go up even higher.
Nor is anyone suggesting that inflation may simply be beyond the Fed’s control.
As long as the federal government continues overspending by trillions of dollars each year, there’s very little that the Fed can realistically do to tame inflation.
Sure, in theory they could keep raising rates to bring down inflation... and maybe even cause a recession. But as we’ve talked about many times before, there’s just no way they can do that: higher rates will bankrupt the federal government.
Remember that the $35 trillion worth of US government bonds have to be refinanced every six years (on average).
Back in 2021, for example, the Treasury Department issued 3-year bonds (technically they’re called notes) at close to 0%.
Now it’s 2024 and those 3-year notes need to be repaid. Well, the government never actually repays anything. They just issue new bonds to pay off the old bonds, essentially refinancing the national debt every few years.
The problem, of course, is that interest rates are much higher now. Bonds that were issued at 0% a few years ago are now costing the government 5%.
This means that the government’s annual interest bill is about to skyrocket.
Prior to the pandemic the government’s annual interest expense was about $500 billion. This year it will surpass $1 trillion. And if rates stay at these levels (or go higher) the annual interest bill will pass $2 trillion in a few years.
The Federal Reserve knows this; the risk of bankrupting the Treasury Department with higher interest rates is a real possibility.
Higher rates also cause a lot of other problems in the US economy, including real estate, bank solvency, the stock market and more.
All of these risks exist because the Fed kept interest rates so low for so long— the better part of 15 years. They created enormous financial bubbles, and they’ve created a legacy of inflation and financial destruction.
It should be obvious by now that the Fed has lost... and that they are not in control of the situation.
Remember, just because inflation has declined from its peak, doesn't mean that it’s going away.
Ultimately, we believe this is bullish for gold. Even though the gold price is near its all-time high, these realities will probably continue to push gold much higher in the long run.
And people are starting to figure this out.
Individuals and ETFs that have been selling gold for years are starting to reverse.
Even Costco is selling around $200 million a month in gold bars.
Remember, we’re in 1972 right now. This is likely just the beginning.
The Pickaxe made the call in January. We don’t expect you to remember so it’s my job to taunt readers and say “Told you so” - I take this job seriously and everyday I lose friends for it (but pick up way more than I lose)
We don’t expect you to remember but the video below will help you recall and it’s understandable you would forget given how much noise there is. We apologize we contribute to this “inflation of ideas.”
Today's media landscape is moving faster than our brains can process.
Web (sorry, we are part of this problem)
Email (sorry, we're part of this problem)
Text campaigns (we contribute to this too)
AI ( we can't stop using it)
Social (another thing we're guilty of leveraging)
We made the call that women were skipped over in marketing (media planning and buys) by US and Canadian Gold and Silver promoters (physical bullion and mining equities), which led to disastrous underinvestment and missed opportunities.
People just hate it when we’re right but lets read these tea leaves together
More Viewed the Women’s NCAA Final Game than Men’s Final Game
Men TV deal worth 873 Million
Women TV deal worth 6.5 Million
Woman TV sponsors 99.3% smaller
Men TV sponsors 134.3 times larger
The final game, a historic showdown between South Carolina's Gamecocks and the University of Iowa's Hawkeyes, captivated an average of about 18.7 million viewers and peaked at a staggering 24 million combined on ESPN and ABC. This monumental achievement marks the first time in history that a women's final has drawn a larger TV audience than the men's, a moment of triumph for women's sports and a testament to their growing popularity, according to ESPN.
money each side earned for TV rights: $6.5 million for the women's tournament and $873 million for the men's.
Women fuel the Gold Rush and Gold Selling Out at Costco
end of this section
From VBL aka GoldFix
Over the last eight trading sessions (rectangle) gold has made a new all-time high every single day. On seven of those eight Trading sessions, gold has also closed the day at new all-time highs. Today was no different.
All of this started March 1 (red arrow starts) when gold broke out of a sideways range that had actually flagged a little bit lower. That range went all the way back to December 3 (see below chart) when gold had that massive spike higher on a Sunday night. For the next three months, gold vacillated back-and-forth while someone quietly accumulated massive amounts. On March 1, less patient buying, (the kind that had all the markings of global macro discretionary, investment funds) came in and relentlessly took the market higher while the Comex vaults were drained of metal.
Over that time, United States treasuries have also largely traded weaker as institutions, central banks, and nations continue to buy gold as a replacement for treasuries they no longer wish to hold.
All of this, even while the dollar itself remained stable to strong.
We are in a perfect storm right now. While it is tempting to wait for the next sell-shoe to drop, it should be noted that seeing is believing.
The world is catching up to what we’ve all known for years; That the fiscal path of the United States is unsustainable, and the global trust cemented for decades under Pax Americana is no longer to be relied upon.
The article from Costco below further cements that belief.
Costco selling as much as $200 million in gold bars monthly, Wells Fargo estimates
Gold has turned into money for Costco, where yellow metal sales begun last year have turned into a cash cow for the big-box retailer.
In fact, sales are so brisk that analysts at Wells Fargo expect revenue “may now be running at” $100 million to $200 million a month, a rapid acceleration since bullion hit the warehouse club late in the summer of 2023.
“Our work suggests there has been significant interest given COST’s aggressive pricing and high level of customer trust,” Edward Kelly, an equity analyst at the bank, said in a note to clients Tuesday. “The accelerating frequency of Reddit posts, quick on-line sell-outs of product, and COST’s robust monthly eComm sales suggests a sharp uptick in momentum since the launch.”
If Kelly’s assessment is correct, that would represent quite a move for a product that only debuted last August and generated about $100 million in sales in Costco’s fiscal first quarter that ended in late November 2023.
Costco is selling 1-ounce bars made of nearly pure 24-karat gold. While the price is not disclosed online to nonmembers, it’s estimated that the product generally sells for about 2% above the spot price, which as of Tuesday morning was around $2,357 an ounce. That would put the price at Costco just more than $2,400.
Gold has been on a tear this year, with spot prices rising more than 13% in 2024, pushed higher by a persistent bout of inflation that started in 2022 and investor fear over the state of the deteriorating U.S. fiscal situation. The government is on pace for a $2 trillion deficit this year, adding to a total debt load that has surpassed $34.6 trillion.
end of this section
Best photo of the year
Setting: The Majestic city of Guanajuato
Guanajuato is a city in central Mexico. It's known for its silver mining history and colonial architecture.
Photo taken on Dia Internacional De La Mujer MMXXIII
Women on the Rocks: Reavivar la minería con fuerza femenina
TSXV : GSVR / OTCQX : GSVRF