Fifty years ago Senator Everett McKinley Dirksen said, “A billion here, a billion there, and pretty soon you’re talking about real money.” Who would have thought that fifty years later that problem would literally be 50 times worse?
In the span of one month, central banks and governments around the world have passed roughly $10 trillion in new stimulus packages. What we have seen so far is just the appetizer. The main course is in the oven and will be served nice and hot continuously over the next several years.
Of course the one question nobody is asking about all of this new money printing is “how are we going to pay for this?” Why worry about something so trivial as that when there are far more important issues we need to take care of? It’s a mindset that won’t be wasted. The new mindset will be an onslaught of monetary and fiscal stimulus packages that will continue to be unleashed on the world in the coming years. All with little pushback.
Crisis after all, creates opportunity. What seems “crazy” in normal times becomes “necessary” in a crisis.
A month ago it would have been thought crazy that a Republican administration would directly deposit checks into the bank accounts of Americans, or that the central bank of the United States would bail out junk rated companies by buying their zombie debt, or that interest payments on student debt would be waived indefinitely. Republicans? Really? Well, in case you haven’t noticed, all the sound money people have left the building. Crisis makes change necessary.
Think of the changes born out of the major crises of the last 20 years.
In 2001, it was the Patriot Act, a 300 page bill passed in the middle of the night that virtually nobody read. It allowed privacy and freedoms of American citizens that had stood time for 200 years to be eliminated. It was done under pressure and in the name of fighting against terrorism. Anyone against it was against America.
In 2008, it was the Housing Crisis that led Congress to passing TARP, a $700 billion stimulus package for Wall Street that further led to the creation of quantitative easing. These policies allowed the central bank to create tens of trillions in new credit in the name of saving jobs. “By saving Wall Street we are saving Main Street” was the argument. This created the “everything bubble” that we currently sit within. The bill was passed under pressure. Anyone against it was against America.
Today, it’s the coronavirus Crisis that in a matter of weeks, and in an alphabet soup of new fiscal and monetary policies that nobody understands, was nearly unanimously passed. Congress and the Federal Reserve are bailing out Wall Street, again.
This time it’s not only mortgage backed securities, it’s corporate bonds, and not only companies with good credit, but the junk bonds of the zombies they’ve kept in business with their ZIRP over the last decade. It’s even worse than it sounds. Not only is the Fed buying the underlying bonds directly, they are also buying the ETF’s that own the junk bonds. JNK, the ETF that tracks subprime corporate credit, is up 20% since the announcement. Anyone against it is against America.
This takes “don’t fight the Fed” to a new extreme. Who cares if most of these companies are insolvent? If the Fed is buying we should too! The only asset that is not officially propped up currently are stocks, and now that the buyback boom is officially dead, we will soon see the Fed buying these too. If you are getting excited, you may want to see how well this idea of a managed economy has worked in Japan for the last thirty years.
When the Fed and other central banks “buy everything,” true supply and demand are eliminated. Determining the real value of paper assets in the future will be impossible.
Governments only have one thing they can do. Print more money. As they do asset prices could rise. The sad part is that most people won’t recognize they are losing their shirts because they’ll focus on the height of the tree, not the depth of the roots.
In 2018 I wrote a book called “Gold Is a Better Way.” I was called crazy when I said that gold prices would wildly outperform stocks in the coming decade. Gold prices are up more than $500 since that time and the Dow Jones is down 10%.
Remember, what seems crazy in normal times becomes necessary in a crisis. The debt crisis we are in has lasted for years, and it’ll be ongoing for years to come. The bad news is it’ll only get worse.
The Great Devaluation of the 2020s is here. The coronavirus will take the blame, but the real culprit is that massive amount of debt that will only continue to grow until the system is completely reset.
It’s why I am certain you’ll see gold prices soar to unthinkable new highs in the coming years.
After all, a trillion here, a trillion there, pretty soon you’re talking about real money.
Adam Baratta is the author of the national best-selling book "Gold Is A Better Way." He is one of the leading voices in the field of investments and precious metals today. Adam is the co-owner of Advantage Gold, the highest rated precious metal firms in the country, and the creator of an educational member site. To receive a free copy of his book, click here now.
© 2023 Newsmax Finance. All rights reserved.