Fed Fires Stimulus Bazooka at Markets

The Fed’s Open Market Committee just announced today that they were going to amp up government stimulus by a minimum of $120 billion per month effective immediately.

“Effective December 17, 2020, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to continue to increase the System Open Market Account (SOMA) holdings of Treasury securities by $80 billion per month and of agency mortgage-backed securities (MBS) by $40 billion per month.”

Besides adding an astounding $1.4 trillion dollars annually to the balance sheet in Treasury securities and Mortgage-Backed Securities, the FOMC directed the SOMA desk to reinvest all of its interest income from its investments into – you guessed it – more Treasuries and Mortgage-Backed Securities.

For most, this is meaningless. These figures are so astronomical that they defy comprehension by the average citizen. And besides; that stimulus does not materialize in any way shape or form in the economy to help people in any way.

What this is, though, and why we should be concerned, is the government of the United States foisting its profligate spending ways onto the debt load of future generations. 

This is the government of the United States openly debasing its currency –  undermining every single dollar’s purchasing power – at the rate of at least $120 billion per month.

But hey! Take comfort.

This is now being called “Modern Monetary Theory” and is the fantasy world where governments no longer need to concern themselves with balanced budgets because money is no longer derived from the product of the nation, nor its asset base.

Now, money is officially conjured from thin air, and there are no limits on how much can be summoned magically into existence.

The government has now established the precedent where anyone who is facing foreclosure, taxation, or interest should concern themselves with paying it. Because the government has just legalized massive counterfeiting.

Of course, in the spirit of oppression and the authoritarian environment that has emerged from the recent political process, any individual who seeks to emulate the actions of the Fed or Treasury by fabricating the capital necessary to meet their obligations will find themselves without legal sympathy, and they will be incarcerated.

Under the cover of a pandemic, the governments of the developed world are preparing to yank the rug out from under all of our feet, and my suspicion is that there is a new currency getting ready to replace the US, Canadian, British, Japanese, Chinese, French and Italian dollars, yen, yuan, Euro franc and lira that will be heralded as the salvation of the world from the tyranny of debt.

To say that this is the shot that will fire a new explosion in the price of gold is an understatement.

The important thing for investors and citizens seeking to protect their purchasing power is that the value of gold is increasing directly in proportion to the debasement of the US dollar through this hyperinflationary policy. 

But the price of gold, as measured in US dollars, will not appear to move that much.

Don’t be fooled.

With this move, now, more than at any point in history, the importance of owning gold, and its ability to protect one’s accumulated wealth is apparent.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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