In the latest bit of ironic news out of Washington, the Federal Reserve has voiced its concern that investors are behaving too complacently in the context of our nation’s current economic situation.
That’s right. The Federal Reserve – the entity responsible for holding interest rates below 1% for the longest consecutive time in U.S. history, and the entity responsible for infusing trillions of diluted dollars into U.S. financial markets – believes that investors are overly complacent.
The minutes from the last Federal Open Market Committee (FOMC) meeting have been released, and the Fed’s statement about investor complacency is only one of the nuggets of comedic gold found within.
Another gem that was made public yesterday was the Fed governors’ concern that investors are not facing enough uncertainty in regards to our economy. You read that correctly; the people who control our money supply want us to have absolutely no idea about what is going on, or about what they will do next.
The FOMC even let us in on some of the hilarious verbiage used in its most recent meeting. St. Louis Federal Reserve President James Bullard said “financial stability has to be a top concern of the committee following the financial crisis.” Hey, Mr. Bullard, where was your concern for financial stability before the financial crisis? I guess it really is easier to ask for forgiveness rather than permission.
But President Bullard wasn’t finished with his stand-up routine. “”I have seen nothing [in the economy] to date that is so severe that I would bring it in as a top concern for monetary policy,” he babbled. You’re right, James, 300,000 people signing up for first-time unemployment claims each week is nothing that you should lose sleep over.
The Federal Reserve is controlled by sinister characters who operate in smoky back rooms, but even to outsiders the Fed’s lack of a real strategy is disconcerting. “This is the first set of minutes that have really gone into more depth about the specific tools that they’ll use when it comes to normalization,” said Banco Bilbao Vizcaya Argentaria SA economist Kim Chase. Wow, so it’s been eight years since our economy imploded and our policymakers are just now pulling out the tool box? If our economy was a car it would have been eaten up by rust and weeds by now.
The FOMC meeting’s minutes continued: “It was observed that it would be useful for the committee to develop and communicate its plans to the public later this year.” Gosh, it sure is nice of them to think about filling us in on the biggest Ponzi scheme in history. To be fair, though, if someone let you walk all over them you probably would noit respect them enough to tell them how you were going to take advantage of them next, would you?
The Federal Reserve (and us taxpayers) are the not-so-proud owners of a $4.38 trillion balance sheet, a number which is expected to grow dramatically in the coming months. Central bankers have discussed raising interest rates to about 1.1% by the end of 2015, and that number is expected to grow to 2.5% by 2016. What does this mean?
Rising interest rates indicate a tightening of the money supply, which many analysts agree is badly needed right now. The Fed has held interest rates at 0.25% for six years, and there hasn’t been a single rate increase in more than eight years. Low interest rates mean companies can borrow as much money as they want for practically nothing, and this can be beneficial for stocks. Once rates rise, however, stocks tend to fall backwards historically. Current bonds are hurt by rising interest rates as well, because newly issued bonds (with a higher rate) suddenly devalue all previous bonds.
When interest rates rose from 4% to 17% between 1960 and 1982 gold investors did extremely well. The gold spot price increased over 1000%, and silver did over 1200%. Don’t be surprised to see similar numbers in the current gold cycle, especially since rates have been so low for so long.
The Federal Reserve and the people who run it think us investors are too complacent. Let’s show them how uncontent we are with the economy and with their performance by ditching the dollar for gold and encouraging others to take advantage of the power of hard assets like gold bullion and coins. For a free gold investing guide or to ask questions about the gold market, call the official Certified Gold Exchange at 800-300-0715 and don’t forget to seize your free gold guides below.