It’s Time to Grab Your Wallet!
By Craig R. Smith and Lowell Ponte
The biggest surprise of President Donald J. Trump’s Administration might not involve congressional lawmakers, the Deep State, mobs of protestors, or foreign policy.
One part of the national policy apparatus still under liberal control is the Federal Reserve. Its Chair Janet Yellen, a grandmotherly-appearing Keynesian academic from the University of California Berkeley, will hold her position until January 2018, an election year, and says she likely will remain a member of the Fed’s Board of Governors until 2024.
For the last eight years the quasi-government Fed held interest rates near zero, making it easy for President Barack Obama’s Administration to have massive stimulus policies and run the government with nearly free and easy money.
With Mr. Trump’s election, this Fed policy immediately began to reverse. Yellen now hints that the Fed may raise interest rates perhaps 3 or even 4 times this year. In the near term, every 1% increase in the cost of borrowing money could hamper 1% of growth in the American economy, as well as add $1.6 Trillion to the government’s 10-year budget deficit.
Trump wants to jumpstart the economy and boost growth by at least 4% and perhaps 6%. The Fed under Yellen “does not want faster growth,” writes New York Times financial reporter Binyamin Appelbaum; it regards anything above 1.8% growth as unsustainable. Yellen could thwart Trump by raising rates that undermine the economy.
It might be, writes Forbes columnist Dan Dorfman, that “the Fed simply dislikes President Trump and the Republicans and does not want to be as accommodating to them as it was to President Obama.”
Yellen will also try to create deliberate inflation. And President Trump’s policies – tax breaks that will bring trillions back to the U.S., and a trillion in infrastructure spending to put Americans back to work and lift the economy that Mr. Obama left flat for 8 years, and so forth – will flood the U.S. with money. Both President Trump and Fed Chair Yellen will inevitably generate some inflation – perhaps uncontrollable – and reduce the purchasing power of our paper fiat dollars. This could harm the Trump economy.
The Fed was supposedly created in 1913 to keep partisan politics out of monetary policy, which the parties could otherwise use to enhance their re-election prospects. In fact, the Fed was created to “furnish an elastic currency,” abundant money that politicians could use to build a huge warfare and welfare state. In 104 years our “elastic,” political money has lost 98% of its purchasing power – and might soon lose even more value to inflation.
President Trump could remedy this by restoring America’s pre-1913 gold standard dollar. The Fed would no longer be needed because the metal-backed currency specified by our Constitution is self-regulating. Politicians ended the gold-backed dollar because it limited their spending. Restoring honest, hard money could limit their spending again and restore the smaller, more honest government our Framers envisioned.
Mr. Trump has spoken favorably of the gold standard, but we would have to set a new currency value of $5,000 or more dollars to one ounce of gold – a boon to those who converted a portion of their savings into this universal, ancient money for less than $5,000 per ounce. We shall see if Mr. Trump appoints pro-gold people to the Fed.
In our new study The Inflation Solution and our latest book Money, Morality & The Machine, we investigate how politicians escaped their golden handcuffs and built a gigantic government. We explore how diversifying with gold might help protect your family from future inflation.
For a fascinating interview with Craig R.Smith or Lowell Ponte, contact: Sandy Frazier firstname.lastname@example.org 516-735-5468
For a media copy of Craig R. Smith and Lowell Ponte’s study The Inflation Solution and/or their latest book, Money, Morality & The Machine: Smith’s Law in an Unethical, Over-Governed Age, contact: David Bradshaw, email@example.com 602-918-3296
Dan Dorfman, “Under President Trump The Fed Is Suddenly In A Hurry To Raise Rates,” Forbes, March 9, 2017. URL: https://www.forbes.com/sites/jeffreydorfman/2017/03/09/under-president-trump-the-fed-is-suddenly-in-a-hurry-to-raise-rates/#fd0b0e136e2f
Binyamin Appelbaum, “Trump Wants Faster Growth. The Fed Isn’t So Sure,” New York Times, March 12, 2017. URL: https://www.nytimes.com/2017/03/12/business/trump-fed-interest-rate.html
Brian Riedl, “Higher Interest Rates Could Explode Budget Deficits and Our National Debt,” National Review, March 11, 2017. URL: http://www.nationalreview.com/article/445694/interest-rate-hikes-explode-budget-deficits-national-debt
Ralph Benko, “President Trump: Replace The Dollar With Gold As The Global Currency to Make America Great Again,” Forbes, February 25, 2017. URL: https://www.forbes.com/sites/ralphbenko/2017/02/25/president-trump-replace-the-dollar-with-gold-as-the-global-currency-to-make-america-great-again/#2756cb5e4d54
John D. Mueller, “Trump’s Real Trade Problem Is Money,” Wall Street Journal, January 25, 2017. URL: https://eppc.org/publications/trumps-real-trade-problem-is-money/ or https://www.wsj.com/articles/trumps-real-trade-problem-is-money-1485302886
Nathan Lewis, “Limited Convertibility: Something New For A 21st Century Gold Standard,” Forbes, March 8, 2017. URL: https://www.forbes.com/sites/nathanlewis/2017/03/08/limited-convertibility-something-new-for-a-21st-century-gold-standard/#11264e847999