Today, I want to address a critical topic, which the mainstream media is purposely avoiding coverage of. It is a holy cow in American policy, which no president for many years, even decades, has dared to challenge.
But, President Trump, who came in ready to bulldoze over the traditional ways, is vocally antagonizing the FED rates hikes policy.
He is, basically, hedging his bets, by making sure people know he is in favor of low-interest rates.
If the economy does well, he gets the credit. If it doesn’t, he blames the central bank for not listening to him.
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Looking at the way things are going, the Russians have figured out how the game is rigged against them.
Like the Chinese, once they realized the central bank is buying Treasury bonds, they stopped increasing their foreign USD holdings, shifting to gold, instead.
I imagine they are happy with the fact that the price has gone from $1,900 to $1,200 because they can accumulate many more ounces.
The FED is tightening, while Europe and China are still easing, which, of course, makes their currencies weaker and better priced for exports.
Europe, obviously, wants to become an important trade partner to China.
Here’s where the trouble begins, since the USD is artificially strong, in the first place, all nations must hold it. Now, it pays the highest interest rates as well.
Is it any wonder it is trading at 52-week highs? On top of this, the U.S. has mostly avoided inflation thus far, during this QE and QT experiment, so this makes holding cash an even better idea.
When bonds and cash are attractive, precious metals certainly come after, due to their higher volatility, storage costs, and ETF fees.
It comes down to this – if the FED is able, as Kaplan, a key person in the bank stated, to raise rates three or four additional times in the coming year, the USD would be the king, but if something goes wrong, the spotlight will shine on Trump and the government.
In either case, the noose is tightening around the neck of both the FED and the president, and only one will leave this as the hero.
Research Partner, PortfolioWealthGlobal.com
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