AWAITING THE BIG ANNOUNCEMENT FROM THE FED, WE QUESTION IF THEY’LL RAISE RATES AND WHAT THE ECONOMIC REPERCUSSIONS COULD BE.
From Filip Karinja, for Birch Gold Group
With the Federal Reserve set to meet next week to vote on what to do with interest rates, many are speculating that we may see a rate hike.
This is something Janet Yellen has hinted at over the past few months but has kept delaying.
Should the Fed raise rates, it would be the first hike in 7 years since rates were lowered to 0.25%. Prior to these past years, it was unheard of to have rates so low, and for such a long time.
With some financial experts claiming that the economy is likely headed for another recession, why would Yellen want to raise rates now? According to the L.A. Times, ”…she said one reason to raise the so-called federal funds rate… is so the Fed has the flexibility to lower it if those risks cause the economy to falter in the future.”
In other words, the claim is that Yellen is buying herself some breathing room. By raising rates now, if (and when) crisis strikes in the future, she can lower them again back to today’s levels, and thus avoid having to lower rates all the way down to 0% (or negative) and/or launch QE4.
So by next week, backed by her dubious claims that the economy is finally on solid footing, we may see Yellen increase rates rise to 0.5%. And in the coming months, she may even go as high as 0.75%.
Here’s the problem: This illusion of a recovery put on by the Fed has so many holes in it that a growing number of people are beginning to see through. And more people are also questioning, Why further stunt growth of our plodding economy by increasing rates?
Can you imagine how embarrassing it will be if they raise rates next week and the economy slows even further, or we see a sell-off in stocks? What will they do then?
They won’t be able to raise rates any higher, as it will just compound the problem. But lowering rates immediately may not work either, as it would be a huge blow to confidence in the Fed’s ability to forecast the economy, something for which they already have a poor track record.
After next week’s decision, if the Fed needs to take steps in the future to begin easing monetary policy again, the only other option it will have is to fire up the printing presses again and print money through some form ofquantitative easing (QE). In fact, some experts are predicting that QE4 will be launched early in 2016.
Keep in mind that on a global level, Europe is already printing money as the global network of central banks collude and take turns in trying to prop up the frail global economy.
When it’s the Federal Reserve’s turn to print money, you can rest assured that we are nearing the end game.
But until our economy reaches that final point of no return, you can count on Yellen to continue to do whatever is necessary to keep the economy going, even if her decisions aren’t sustainable.
Is such an aimless monetary policy something you want to tie your savings to? If you want to put at least some of your savings into an asset that can provide a counterbalance, give us a call.
What will happen to gold if the Fed raises interest rates? Find out here.
NOW THAT THE IMF WILL INCLUDE CHINA’S YUAN IN ITS BASKET OF CURRENCIES, WHAT ARE THE REPERCUSSIONS FOR THE WORLD ECONOMY AND YOU?
From L Todd Wood, for Birch Gold Group
The Communist Party of China still is a totalitarian government. Many people around the world forget this fact. The world’s second largest economy is run by a committee of dictators, where the people aren’t free and neither are the securities markets.
It is for this reason that the inclusion of the offshore version of the renminbi, the yuan, into the International Monetary Fund’s Special Drawing Rights, or SDR, may not be the panacea for China that their leaders think it will be.
You have to think about the marriage of the yuan’s rise to a convertible, global reserve currency, with the dramatic slowdown, or crash, of the manufactured, Chinese economic miracle. Although China has allowed some capitalistic thought and practice into its economic fiber, the economy is still “managed” — hence the term, managed capitalism.
This means that the markets are not truly allocating capital; on the contrary, China is still issuing five-year economic plans. In short, all China has done over the last several decades — in addition to making things cheaply and exporting them — is misallocate capital to keep its billions of people working, and to prevent social unrest.
Now, the decades of building ‘ghost cities’ are coming home to roost.
The Economic Times reports, “Now, with increased convertibility the yuan may be used for two purposes; one to attract more investment and two to enhance flight of capital to safer and more stable economies. It can also trigger off conversion of hoards of black money to safer havens…Therefore, inclusion of the yuan in the IMF’s basket of currencies may not be a good thing if things turn bad for China.”
In other words, with the yuan becoming a convertible, international currency, money can flow into China as well as go out. Only a small portion of the Chinese population is benefiting from the Chinese “economic miracle.” It is not sustainable.
The wealthy in China are hauling boat loads of cash out of the country as fast as possible. They know it is a ponzi scheme and they don’t want to be the last ones holding the empty bag. The convertibility of the yuan will allow this massive capital drain to increase.
Investors are going to be wary of a system where the sellers of securities in a market downturn are arrested and put in jail, where company intellectual information is stolen and there is not a level playing field in regard to competition with local firms. But that’s not all China has to worry about.
China could be headed for serious social unrest as well. There are millions of people, effectively serfs, who are disenfranchised from the wealth that has been created. They are angry. Their land is being taken for a factory, a city, a wealthy person’s palace. The ghost cities in China are surrounded by ghettos filled with people whose land was stolen to build the empty metropolis.
To summarize, China is headed for a serious socio-economic crash with all of the negative effects that will entail.
The problem to you and me is that this will damage the global economy as well. You can’t have a collapse of the world’s second largest economy and not have outsized, collateral damage.
The fact that wealthy Chinese people will be able to remove billions of dollars in stolen wealth from the system, while a collapse happens, will only add gasoline to the proverbial fire.
The bigger the economic bubble, the bigger the consequences when it pops. China is history’s biggest. The world’s financial system is teetering on many levels. All the more reason to make sure you have a properly diversified portfolio, one that includes more than just the paper assets that could be worth no more than the paper they’re printed on.
China has also been drastically hoarding gold. Read about it here.
IN TODAY’S WORLD, “ON FIRE WITH RISK”, HOW CAN YOU POSSIBLY SAFEGUARD YOUR SAVINGS? ONE FORMER FINANCIAL PRO OFFERS HIS OPINION ON THE KEY TO SUCCESS.
From L. Todd Wood
Having been a financial professional most of my adult life, I can remember many instances at a lunch, a dinner party or after a speech, where I was asked, So where should I put my money? I have found that most people – even hyper-successful businessmen or women – are clueless when it comes to handling their personal accounts. I’ve talked with executives who own a few million shares of their own stock tell me, since they also own a dozen penny stocks, they’re savings are diversified. I have to laugh at those.
AT A DISTURBINGLY INCREASING RATE, THE WORLD IS MOVING AWAY FROM THE U.S. DOLLAR. WHAT DOES IT MEAN FOR OUR CURRENCY’S FUTURE?
From Filip Karinja
In recent history, for as long as the U.S. dollar has reigned as the global reserve currency, countries have traditionally paid for goods in trade by converting their currency into the dollar. Thus there has usually been a huge (but artificial) demand for the greenback.
THE FEDERAL RESERVE HAS 18 TRILLION REASONS WHY THEY CAN’T SEND INTEREST RATES HIGHER. WHAT HAPPENS TO OUR SAVINGS WHEN THE BUBBLE FINALLY BURSTS?
L. Todd Wood
For the past several decades, bond yields have grinded lower and lower, now reaching effectively 0%. Yet despite such a decline, there has been a lot of talk in the financial press of a growing bubble in the market.
BY FOLLOWING THE FEDERAL RESERVE’S LEAD AND FLOODING THE ECONOMY WITH MONEY, HAS THE EUROPEAN CENTRAL BANK AVERTED ITS “DAY OF RECKONING”… OR DOUSED MORE FUEL ONTO THE FIRE?
From Filip Karinja
Here we go again – only this time, in Europe.
This past Thursday, Mario Draghi, president of the European Central Bank (ECB), announced that the ECB will launch its own Quantitative Easing program in March, purchasing €60 billion ($67 billion) in government debt each month. [Read more…]
|Alan Greenspan, Peter Schiff and others have all advocated gold ownership – why hasn’t your financial adviser?Several big names from the financial world have recently came out in favor of gold, including former Federal Reserve Chairman Alan Greenspan, who said that given its value as an international currency and that it’s unaffected by government decisions, gold is a good place to put your dollars these days. Yet, many financial advisers still don’t advocate gold. Why? Listen to our latest edition of the Market Report with Will Hart and Jake Kennedy.|
76 Million Baby Boomers To Cash Out Retirement – Can The Economy Handle It?
AS MILLIONS OF BABY BOOMERS MOVE ON TO RETIREMENT, THEY’RE CASHING OUT OF STOCKS. CAN YOUR PORTFOLIO WITHSTAND THE SELL-OFF?
From Rachel Mills
We frequently discuss the many reasons why the economy as we know it is unsustainable. The Federal Reserve has printed the bejeebus out of the U.S. dollar. Our manufacturing sector is being continually chased overseas. China and Russia are buying gold like crazy. We don’t make much of anything anymore except war. The majority of Americans aren’t saving anywhere near enough for retirement. Even if they were, it is all being inflated away. [Read more…]
COULD THIS DECISION BY GREECE SEND FINANCIAL MARKETS INTO TURMOIL? FIND OUT WHY SOME EXPERTS ARE PREDICTING JUST THAT.
A Greek decision to leave the eurozone could send financial markets into turmoil even worse than the collapse of Lehman Brothers in 2008, a leading international economist has warned.
WITH THE U.S. GOVERNMENT PULLING THESE TWO CRITICAL SAFETY NETS FOR THE ECONOMY, THE WRITING ON THE WALL FOR YET ANOTHER CRASH SEEMS FAR TOO APPARENT.
From L. Todd Wood
I was a fairly new employee on Wall Street, a decade and a half ago. I had only been trading about five years but I clearly remember when Sandy Weill, the architect of Citigroup, walked in my office to rally the troops during a management visit. Jamie Dimon, the currency CEO of JP Morgan Chase, dutifully followed behind with a clipboard, taking notes from the master.