This past Wednesday you saw the increasingly hawkish Federal Reserve hike rates another quarter percentage point. More importantly than the actual interest rate increase was the accompanying tone of the Fed who signaled that they are looking at two additional interest rate increases before the end of 2018. That would bring them up to four increases in a year when only three had been projected by the U.S. central bank.
The biggest reason behind the Fed’s growing hawkishness was an increase in inflation pressures. The Bureau of Labor and Statistics recently released its CPI Consumer Price Index showing the base increase of 2.8 percent measured year over year for May. The central bank is worried that this inflation will continue to run at more than their two percent target. Other analysts concur, expecting a 2.1 percent CPI for the remainder of 2018 and through 2020.
The higher inflation translates to a significant win for the Fed as it signals a more robust American economy. For consumers it is a serious loss though. It signifies that we are moving towards a zero growth and high inflation environment.
In the 1970’s they called this stagflation. It was among the worst economic periods in recent U.S. history. Escaping from it took years of disciplined action from the central bank and its heroic leader Paul Volcker. This chart below shows American CPI inflation from the 1920’s to date:
Actually creating inflation is not difficult. All it takes is for you to print money. Much more difficult is the battle to put the inflation genie back in the bottle once the central bank has released it. Paul Volcker’s model is a worthwhile episode to consider given the country’s present circumstances.
Volcker realized that the only viable way to tackle inflation was through boosting interest rates substantially higher. In the 1980’s, he succeeded in doing this. It caused a severe stock market crash along the ride though. This Fed is unwilling to repeat the stock market-killing incident.
Gold analyst Peter Schiff worries that he has never seen a Fed chairman who is so overwhelmingly bullish over the U.S. economy. Schiff warned:
“Given the fact that the Fed is a pretty good contrarian indicator as far as being reliable, if Powell is extremely bullish, as bullish as a Fed chairman has ever been, it likely means that the best days of so-called growth are behind us and it is all downhill from here.”
Today’s interest rates are a mere two percent. Ultimately, the Fed’s policies will lead to a recession before much longer. Then the Fed will do their usual two-step dance and start cutting rates aggressively again. Around and around we go, and you may not like where we finally stop.
More worrisome than the inflation and higher rates, or even a recession though, is the zero growth and high inflation economy the U.S. is headed towards. Unfortunately for the working stiffs, this is all part of the government’s plan. The federal debt load is unbelievably enormous.
There is no realistic way to pay it off (or even meaningfully down, for that matter). Instead, the powers in Washington will choose to inflate away the value of the 20 plus trillion dollars. This is their secretive policy today, so prepare yourself and your retirement portfolio for it while you can.
Is Your Retirement Portfolio Prepared for the Era of Zero Growth, High Inflation?
The higher inflation and inflating away of the enormous debt is a Pyrrhic victory for central bankers. It’s tragic news if you are the average working guy trying to cover your bills with every paycheck though. Fortunately, there is no reason to lose sleep every night pondering how to save your retirement portfolio from a stagflation-induced market crisis. Gold has repeatedly demonstrated its dependability time after time in periods of stagflation throughout time and the planet.
Click here today to get your no-cost, no-obligation gold IRA rollover kit from the top-rated gold retirement company Regal Assets. This will ensure you possess the critical information that you need to insure your IRA accounts with a partial diversification of your retirement assets and funds into tangible, physically held gold.