Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending

Economics / Inflation Apr 06, 2021 - 04:37 PM GMT

By: MoneyMetals

Economics

Gold and silver markets sprung higher on Thursday as April and second quarter trading kicked off. After suffering losses in the first quarter, precious metals may now be due for a spring rally.

The U.S. Dollar Index was up slightly this week. Regardless of how the dollar fares against other fiat currencies, investors can expect massive depreciation ahead in real terms. There is no end in sight to the inflationary cycle of spending, borrowing, and printing in Washington.

This week, President Joe Biden promoted a so-called infrastructure package that comes in at more than $2 trillion.  That’s on top of $1.9 trillion in bailouts and giveaways finalized last month.

Much of the proposed “infrastructure” spending has nothing to do with paving roads, building bridges, or expanding ports. These sorts of transportation upgrades are slated to only get $115 billion. Meanwhile, Biden would spend $174 billion on electric vehicle subsidies and hundreds of billions more on various “green” and racial leveling programs.


The bulk of the proposed spending appears to be very much inspired by the World Economic Forum’s Build Back Better agenda – also known as the Great Reset.

Of course, the Federal Reserve will be expected to play its part. Even though the Biden administration and Democrats in Congress are talking about raising revenues through tax hikes on corporations and investors, they will keep spending regardless of tax receipts. They will issue more debt, and the Fed will print more currency to cover it.

Although the news out of Washington is pretty grim these days from the standpoint of sound money, precious metals investors do have a few allies in the halls of Congress.

On Tuesday, Representative Alex Mooney re-introduced legislation that would remove all federal income taxation from gold and silver coins and bullion.

Mooney’s Monetary Metals Tax Neutrality Act is backed by the Sound Money Defense League. It would clarify that the sale or exchange of precious metals bullion and coins are not to be included in capital gains, losses, or any other type of federal income calculation.

Acting unilaterally, Internal Revenue Service bureaucrats have placed gold and silver in the same “collectibles” category as artwork, Beanie Babies, and baseball cards. This classification subjects the monetary metals to a discriminatory long-term capital gains tax rate of 28%.

Sound money activists have long pointed out it is inappropriate to apply any federal income tax, regardless of the rate, against the only kind of money named in the U.S. Constitution.

Furthermore, the U.S. Mint continuously mints coins of gold, silver, platinum, and palladium and gives each of these coins a legal tender value denominated in U.S. dollars. This formal status as U.S. money further underscores the peculiarity of the IRS’s tax treatment.

Under current IRS policy, a taxpayer who sells his precious metals may end up with a capital “gain” in terms of Federal Reserve Notes and must pay federal income taxes on this “gain.”

But the capital “gain” is not necessarily a real gain. It is often a nominal gain that simply results from the inflation created by the Federal Reserve and the attendant decline in the Federal Reserve Note dollar’s purchasing power.

The Monetary Metals Tax Neutrality Act would protect precious metals holders from income taxes on nominal gains when they sell.

Unfortunately, the current leadership in Congress is more interested in bills that would extract additional revenue from taxpayers. House Speaker Nancy Pelosi is unlikely to take up any sound money legislation.

But other members of Congress can be persuaded to join the fight for fairer tax treatment of precious metals and help build longer-term political momentum.

The recent surge in demand for bullion reflects growing numbers of people across the country becoming precious metals investors. Mints remain backed up and supplies of popular products remain scarce amid the buying pressure.

We have also seen a huge increase in internet activism focused specifically on silver. The Wall Street Silver Reddit forum promotes physical silver buying through clever online memes and real-world campaigns aimed at squeezing the big institutional paper market short sellers.

The “silver squeeze” movement could translate not only into much higher silver prices but much a much higher profile for sound money issues.

In the meantime, those concerned about their bullion holdings being taxed should remember that income taxes only apply upon sales. Long-term holders don’t have to worry about filing annual tax paperwork like they do with interest-bearing bank accounts or bonds.

Physical precious metals can also be held within an Individual Retirement Account, providing tax sheltering on any transactions executed within the IRA.

In other developments, you may have noticed the financial narrative in recent weeks has increasingly included concerns about inflation.  This inflationary scare comes at a time when the government is unleashing massive stimulus measures to bailout states, businesses, and consumers – all in the name of combatting the pandemic.

We’ve already seen a $1.9 trillion helicopter money drop this year, and the Biden administration appears just to be getting started.

The latest reading of government’s CPI (Consumer Price Index) continues to suggest that inflation so far remains low. Even if we do experience high inflation, government officials continue to assure, it will be transitory. Despite these weak guarantees, financial establishment luminaries are starting to sound the alarm.

Even Former Treasury Secretary Lawrence Summers along with former IMF Chief Economist Olivier Blanchard recently voiced concerns over President Joe Biden’s $1.9 trillion stimulus plan, suggesting that so much new largess on top of all last year’s large stimulus packages could cause the economy to “overheat.”

Inflation is a tax on savers, wage earners, and those without sound money or hard assets, so while the exact definition of “overheat” remains under debate, it seems clear that a sudden rise in price pressures could cause the Fed to lift rates rapidly, potentially causing job losses and other issues as the economy slows.

Such a scenario could lead to a period of higher inflation, or even 1970s-style stagflation.

Considering more than 25% of all U.S. Dollars ever printed have been printed in the last year, would anyone be surprised?

The ongoing threat of inflation – and actual inflation – will lead to more buying of gold, silver, and other hard assets. Especially since Fed chief Jerome Powell has said that the central bank would be happy to allow inflation to run hot for a while before taking any action.

This means that the central bankers will not hike interest rates or roll back bond purchases to slow things down. And when government-reported inflation rises well above 2%, while interest rates remain at lower levels, the resulting negative real interest rates will underpin gold prices.

The gold and silver markets may very well have entered a win/win scenario.

The market has already been buoyed by ultra-low interest rates, quantitative easing, and the threat of rising price pressures.
And even if the Fed ultimately hikes rates, if history is any guide, central bankers will be behind the curve – and gold and silver will benefit from real interest rates that continue to remain in negative territory.

That’s why precious metals may well rise in price regardless of what the Fed does or does not do in the years ahead.

By Mike Gleason

MoneyMetals.com

Mike 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.

© 2021 Mike 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