| Note to Fed: The Laws of Math Still Apply |
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John Rubino, Patrick Highsmith and Chen Lin return as guests on this week’s program.
The big Keynesian fantasy that a country can forever become wealthy by consuming more than it produces has seemed believable to Americans because we have owned the world’s fiat reserve currency. That meant for the past number of decades that the Federal Reserve could create fiat money out of thin air to enable Americans to buy foreign goods rather than Americans earning income through export sales to pay for their consumption. But alas, the Federal Reserve and America cannot defy the law of mathematics because money isn’t actually created out of thin air at all. Fiat money is manufactured with debt.
So, as decade after decade, America continued to consume more than it produced, its debt relative to income has risen to the point where the U.S. is now insolvent. Because of excessive unearned money creation by the Fed, America is now facing double-digit levels of inflation akin to 1980. But unlike 1980, when a 20% Fed Funds interest rate was required to break the back of a double-digit inflation rate, America’s debt load is so large that not even a ¼ of 1% Fed Funds rate, or a 2% 10-year Treasury rate, can occur without triggering the next stock market crash and U.S. recession. With the entire American economy now dependent on rising stock prices rather than rising GDP, the only likely option for the Fed is to continue with the money-creating Keynesian fantasy leading to hyperinflation and very possibly a global currency reset. John will opine on America’s precarious economic state and how we should prepare for what is to come.
Patrick shares exciting prospects for Firefox Gold’s exploration project in Finland and Chen gives his thoughts on the emerging precious metals markets and top biotech ideas. |
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