The Fed Just
Told Us To
Buy Gold Much higher gold prices are inevitable. But don’t take my word for it — just listen to what the Federal Reserve is telling us now. Dear John, I was busily tapping away on my computer when I heard it over my shoulder on CNBC. A reporter mentioned it off-handedly, buried amongst a number of other quotes from a speech that San Francisco Fed President John Williams had just given. There was no sense of shock or amazement in his voice...yet I immediately whirled around to learn more.
Then nothing. They simply moved on, without comment. But what Williams had reportedly said was a stunning admission — one that backed up everything we’ve been saying about why we’ll never see “normal” interest rates again...
...And why far higher gold prices are inevitable. Interest Rates At
5,000-Year-Lows I’ve been saying over and over that we’re in — pardon the pun — a golden age for gold.
That’s because interest rates are still hovering near 5,000-year lows — the lowest in recorded history, and far, far lower than the average rate of around 6% over that time frame. With rates as low as they are, even very moderate levels of inflation mean that real rates (adjusted for inflation) will be close to zero.
And low-to-negative real rates are like rocket fuel for gold, an asset whose biggest drawback is a carrying cost combined with no yield. Not only are rates at unprecedented lows, they will stay there. We will never see so-called “normal” interest rates in the 4%-7% range for generations, unless there is a full-out sovereign debt default in the meantime.
It’s a matter of simple mathematics: Servicing today’s mountainous sovereign debts at higher rates is impossible. In the U.S., every year we’d send hundreds of billions of dollars to foreign Treasury holders before paying a penny toward entitlements or defense.
It’s not going to happen.
But don’t believe me — take it from the Fed itself. Never Normal Again As I said, we received confirmation of all this from none other than San Francisco Fed President John Williams a few days ago.
In an interview with reporters in Zurich, Williams said that “Although I do expect us to need to raise rates gradually over the next couple of years, it’s not like we need to raise rates a lot over the next couple of years.”
How much, might one ask? “My own view is that 2.5 percent is about the new normal (for the Federal Funds rate),” he said.
A personal confidant of Chair Yellen, Williams doesn’t speak out of turn. So you can bet that his view is widely shared.
Now consider what this means: The Fed’s long-term goal is an inflation rate of 2.0% and a Fed Funds rate of 2.5%. So they’re driving for a real, inflation-adjusted rate environment of 0.5% or less. That’s enormously bullish for gold, silver, mining stocks, commodities — you name it. Of course, the Fed’s goal is to always have interest rates a bit higher than inflation. But in the “new normal” wherein rates above 3% or so are fiscally unsustainable, the central bank will be powerless to combat inflation with rate hikes.
But you wonder why they’d want to fight higher inflation in any case. They actually need higher inflation to devalue the dollar, and thereby decrease the value of our towering federal debt.
It’s almost enough to make you feel sorry for our central banking overlords.
It’s definitely enough to make you want to own gold and silver. It can’t happen here?
It already has... Speaking of currency devaluation, it’s happened over and over throughout human history. Still, most Americans would say that they can’t imagine it happening here.
Well, it already has.
In many of my speeches I feature a chart of the declining purchasing power of the U.S. dollar since 1965. Why 1965, I ask my audiences?
There’s usually some gold bug (or silver bug) who knows the answer: It was in 1965 that Uncle Sam effectively removed silver from our nation’s coinage.
The result over the 52 years since? The dollar has lost about 88% of its purchasing power.
And that’s being conservative, as it’s based on the government’s own CPI numbers. Of course, we know how true to life those are. So currency devaluation not only can happen here — it’s happened before our very eyes. In my speeches I also casually note that Roman emperors were assassinated over less-severe currency devaluations. Thanks to the great team at Visual Capitalist, I can now back that up.
Visual Capitalist does an amazing job of presenting sometimes complicated concepts or stories in compelling “infographic” form. Not long ago, they produced a fascinating report and chart tracking the deaths of Roman emperors against the debasement of the empire’s coinage.
Using their chart as a rough guide, we can see that over a 50-year period from about 175 AD to 225 AD, the Roman denarius was debased by about 40%.
No less than six Roman Emperors were assassinated during this period.
Now, currency debasement may not have been the sole cause in every case, but surely it was a factor.
For example, Visual Capitalist notes that, in a much more gradual process than we experienced in the U.S., the silver content of Roman coins went from 2.7 grams to essentially zero from 235-284 AD, during a period referred to as the Crisis of the Third Century.
It was likely not coincidental that, as Visual Capitalist reports, “The average length of an emperor’s reign fell from 10.3 years to only 4.4 years during this time period.”
I’m guessing they didn’t have a comparable version of the Secret Service. Last Chance for New Orleans! If you want to protect yourself from this inevitable devaluation of the dollar...and if you want to find the best ways to profit from a rise in metals prices that’s already underway... ...You absolutely must attend this year’s New Orleans Investment Conference, being held from October 25-28 — just a few weeks from now.
Of course, you know about our stellar speaker roster, the likes of which you won’t find anywhere else.
Only in New Orleans can you hear from — and rub shoulders with — notables such as Tucker Carlson, Charles Krauthammer, Robert Kiyosaki, Peter Schiff, Dennis Gartman, Jonah Goldberg, Doug Casey, Judy Shelton, Rick Rule, Simon Black, Peter Boockvar, Nick Hodge, Chris Martenson, Adam Taggart and dozens more.
Update: We’ve just added popular economic commentator and ex-Fed official Danielle DiMartino Booth to our roster. And we’ve added a panel on “The Future of Money” featuring Booth, Doug Casey and Chris Martenson.
Plus, this year’s event will feature most of today’s top writers and analysts in metals and mining. This market is back to spinning out big gains, both in leveraged juniors with proven resources and exciting exploration companies working in red-hot new areas.
There is literally nowhere else to be in an environment such as this — no event that’s been more rewarding for junior resource investors over decades. You’re doing yourself a great disservice if you’re not here to get the best recommendations from the best experts in the field. But here’s my biggest concern at this moment: If you don’t act right now, you might not have the chance to reap the rewards of this year’s New Orleans Conference and this exciting market opportunity. That’s because our room block at the New Orleans Hilton Riverside is going to expire within a few days. Last year, the hotel sold completely out and rooms were unavailable at other hotels in the city.
Some attendees were left out in the cold. Literally.
So the clock is ticking, and you need to act immediately to secure your place. As a Golden Opportunities subscriber, you’ll also enjoy up to $400 off the on-site registration fee...plus a free upgrade to Gold Club status (a $189 value). I urge you to call us toll free at 800-648-8411 right now to lock in your discounted registration...or CLICK HERE to register online immediately. (Note: This offer is not available to everyone. To secure your special offer, click on the special link just above. Then select the green “Tickets” bar, click on “Enter Promotional Code” and use code FREEGOLDCLUB to unlock your discount). All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference | 