Fighting the Fed (and the Crooked Banks) by Holding Gold / Commodities / Gold & Silver 2020
Market forecasterMartin Zweig famously warned investors against underestimating the power of theFederal Reserve Bank to control markets. He coined the phrase “Don’t fight theFed” back in the 80’s. Preciousmetals investors are wondering if this is still goodadvice.
On one hand, it ispretty hard to argue with that bit of wisdom.
The Fed Zweig wasreferencing had begun taking a more overt role in markets, using interest ratesas a tool for managing the economy.
Paul Volckerdramatically raised interest rates to put price inflation from the late 1970’sback under control.
Zweig hailed froman era of less irresponsible central bankers. He expected them to use theirimmense power in rational ways.
Today he might bedisturbed by just how vast the powers of the central bank have become.Officials there recognize no limits on their authority. They buy stocks,spearhead bank bailouts, monetize federal debt, and act as a lender of lastresort in the repo markets.
The Fed’s balancesheet exploded to 4 trillion dollars over the past decade. It is stuffed withassets few others wanted to buy; U.S. debt with very low yields, dodgy mortgagesecurities and who knows what else.
Officials therehave unlimited power, but the way they use it undermines – not inspires –confidence. The feeble attempt to normalize interest rates and unload some ofthe junk on their balance sheet failed a year ago when the stimulus addictedequity markets went into withdrawal.
Past assurancesabout being able to throttle back when the economy recovered proved to beworthless. They are back to spiking the punch bowl, and investors have to worryabout how crazy things will get this time around.
Fed bankers won’tgive an honest accounting for their extraordinary intervention in the repomarkets, but it smells like trouble. If it spreads, rates will be headed backtoward zero.
They talk openlyabout even more bizarre and extreme policies, including negative interestrates, as tools to combat an economic slowdown.
The power of theFed isn’t the only consideration when deciding how to invest. It is just asimportant to think about who wields that power and how well they do it.
For the most part,today’s central bankers lack wisdom or principles. They have Politburo-likearrogance in their ability to centrally plan the economy. And they lackVolcker’s tolerance for pain which explains why the bubbles they blow just keepgetting bigger and more dangerous.
Fighting the Fedmay be a bad idea. But so is climbing on board with the people running policythere. We suggest the best plan is to try and get out of their way. That iswhat an investment in physical gold and silver is really about.
By Clint Siegner
Clint Siegner is a Director at MoneyMetals Exchange,perhaps the nation's fastest-growing dealer of low-premium precious metalscoins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon,puts his experience in business management along with his passion for personalliberty, limited government, and honest money into the development of MoneyMetals' brand and reach. This includes writing extensively on the bullionmarkets and their intersection with policy and world affairs.
© 2019 Clint Siegner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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