All market attention is focused on the Fed’s annual symposium, beginning today in Jackson Hole, Wyoming. Seemingly overwhelming concern is being placed on financial information, economic data and interest rate plans scheduled to be released tomorrow, by Fed Chair Janet Yellen. The market’s “company line” appears to believe that an interest rate increase in September would be shocking, but a December increase on the heels of further good economic data would be expected. In either case however, this seems to be the only activity anyone is aware of or concerned with.
This anemic methodology is exactly what got us into our current predicament and in spite of global alarms going off in every corner of the world we continue to look to the Fed for direction and redemption. However, investors would probably be better served putting their entire retirement portfolio on a single black or red roulette wheel bet. That way they’d have better than a 47% chance of doubling their portfolio. If they continue betting on the Fed, one of two things is likely to happen. First, the Fed could raise interest rates in September, which will reduce loans for growth and stifle an already sluggish economy. Or second, they could increase rates in December or later, which will allow the market to continue wallowing along, with no true direction or hope, for a little longer. One expedites the inevitable, but both have no chance of long-term success.
Meanwhile, the global economy continues to dance on a steep precipice. Huge dominoes with global repercussions are ready to fall and the Fed is blind to it all. Venezuela is on the verge of bankruptcy, as is Deutsche Bank. The Brexit hangover appears to have worn off, but the true global physical damage hasn’t even begun. But the elephant in the room and superseding domino, being completely ignored by the Fed and entire financial community, is the fact that China joins the International Monetary Fund’s (IMF) basket of global reserve currencies on October 1, 2016. Keep in mind that both Russia and China have been lobbying the IMF for years, to discard the dollar form the basket and reduce its weighted percentage relative to other currencies, at the very least.
China’s slowing economy and Russia’s oil blinking contest with Saudi Arabia are the only factors that don’t make the dollar’s replacement or reduction an immediate possibility or concern. However, the IMF itself has been discussing the creation of a single IMF-sponsored “World Currency” behind closed doors for some time. That potential alone should immediately drive investors to the safety and security of gold, in higher than normal percentages. Because overnight and without warning, the IMF could implement a new global currency that would literally decimate the dollar and every American’s financial portfolio along with it.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.