Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Hottest Sports Stock Of 2020 - 23rd Sep 19
Stocks Wedge At The Edge – Front And Center - 23rd Sep 19
Stock Market Top Almost Confirmed - 23rd Sep 19
Thomas Cook COLLAPSE! 300,000 Passengers Stranded, Flights Cancelled, Planes Grounded - 23rd Sep 19
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

How to Invest in the Esports Revolution

Trump Calls for New Quantitative Easing to Prop Up U.S. Economy

Interest-Rates / Quantitative Easing Apr 12, 2019 - 03:58 PM GMT

By: MoneyMetals

Interest-Rates

As gold and silver markets continue in choppy trading this spring, bulls are hoping a dovish Fed will sink the dollar and lift the metals.

Now that the Federal Reserve is on “pause” – presumably for the rest of 2019 – perhaps investors can stop obsessing over interest rate decisions by central planners. Perhaps markets can finally trade based on actual market signals and underlying fundamentals. 

Perhaps ... not.

With 2020 election campaigns already underway, interest rate policy will be a political football in the months ahead. Incumbent administrations almost always favor lower interest rates heading into their re-election bids, and this one is no exception.


No president has more been more aggressive (or more open) in trying to nudge the Fed toward easy money than Donald J. Trump. 



He has repeatedly berated Fed Chairman Jerome Powell for pushing interest rates too high. Unsatisfied with the Fed’s recent decision to stop hiking rates, President Trump last Friday called for a new round of stimulus. “I would say in terms of Quantitative Tightening, it should actually now be Quantitative Easing,” Trump told White House reporters.

As part of Quantitative Tightening, the Fed continues to unload billions of dollars of assets every month. The program of balance sheet shrinkage will come to a premature end by September, as confirmed by recent statements from policymakers.  

On Wednesday, the central bank’s “Open Market Committee” released the minutes from its March meeting.  Participants decided the Fed will soon stop selling Treasuries and other paper assets on its $4 trillion balance sheet and stand pat on rates.

“A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,” the minutes stated.

Some policymakers, however, wanted to leave the door open to hikes in case the economy gathers strength. Futures markets aren’t giving much credence to that possibility.  In fact, they are currently pricing in virtually no chance of a rate increase and a far greater chance that the Fed moves to cut rates later this year.

In terms of near-term easing, perhaps President Trump will get his way, after all.

Trump to Fill Two Fed Seats with His Supporters

Trump is currently trying to re-shape the Fed through two “outside the box” nominations to the Board of Governors – Stephen Moore and Herman Cain.  Though they have each criticized the Fed in the past for being too loose, they now more or less embrace Trump’s calls for easy money. 

Regardless of whether they get confirmed by the Senate (where some establishment Republicans including Mitt Romney have signaled reticence), the Fed will likely continue pursuing accommodative monetary policy. Fed officials had wanted to “normalize” but stopped short of that goal.

They will likely never “normalize” unless we’re talking about the “new normal,” which is zero to negative interest rates in real terms.  The highly leveraged U.S. economy and stock market are too fragile for high interest rates.  The federal budget deficit is too large.

In March, the government spent $376 billion while taking in only $229 billion in tax receipts – a $147 billion deficit.  Uncle Sam’s tax bite actually grew at both the individual and corporate levels compared to the previous year. 

Therefore, the Trump tax cuts aren’t to blame for the deficits. But President Trump’s failure to impose spending discipline on Congress surely is. 

Despite vowing to “drain the swamp,” to date he has issued only one veto during his entire presidency. It was to uphold his emergency declaration on the border and had nothing to do with blocking wasteful Congressional outlays.

Federal Reserve Note in Trouble, Gold & Silver to Benefit

The long-term outlook for federal finances is bleak. In the years ahead, reckless U.S. fiscal policy will pressure the central bank to step in with new Quantitative Easing programs to monetize government debt.

The implications for the value of the Federal Reserve Note dollar are negative; the prospects for precious metals markets, positive. 

However, it’s worth recalling that the last round of Quantitative Easing ended up being something of a dud – no huge hit to the dollar, no runaway inflation, no super spike in gold and silver prices.  

The United States continued to be perceived as a safe haven as other countries’ central banks resorted to even more extreme measures, such as imposing negative interest rates.

The Fed hasn’t ruled out taking rates below zero during a crisis.  In such a case, a gold coin would actually produce a higher nominal yield (0%) than a Treasury bill or bank savings account!

Regardless of where nominal rates head, the rate that really matters is the “real” (inflation-adjusted) rate. When paper assets yield less than inflation, they produce a negative real return.  That scenario (negative real interest rates) tends to be quite bullish for hard assets including precious metals. 

We expect nominal interest rates on the Federal Reserve Note to return to the low levels of several years ago and head even lower from there.  Real interest rates on our fiat currency will head back into negative territory and probably stay there indefinitely.

Inflation pressures remain subdued officially, but they have been picking up this year in the real world of gasoline and other commodity prices.  Summer driving season could cause more pain at the pump.

With the Fed publicly committed to staying on pause all year, any significant uptick in broader inflation gauges would plunge the current Fed funds rate range of 2.25%-2.5% into negative territory in real terms.  

That’s one way for President Trump to get the easing he wants, and rising gold and silver prices would be a good indicator of it.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules