Kevin Warsh played a critical role during the financial market turmoil of 2007 and 2008. David Wessel, a Pulitzer Prize winning economic journalist said, “Warsh established himself as the chairman’s protector in Republican circles and Bernanke’s bridge to Wall Street executives.” The biggest complaint of Warsh is that he was and remains “overly concerned” with the possibility of and potential damage to be inflicted by inflation, so his hawkish policies were seen to inhibit economic growth, which Wall Street felt could flourish with lower rates and a free market. But nearly ten years later, with interest rates still absurdly low, the anticipated growth spurt has still failed to materialize.
Nevertheless, with Powell and Taylor as the only candidates still being considered for Fed Chair, it becomes overly apparent that Wall Street and the Trump Administration have no intention of seriously tightening monetary policies. So despite the desperate need for a cushion, in the event of a market crash or increased surge in inflation, the next Fed Chair will have no tools at his disposal for adjustment. Simply put, like the rest of the global economic community, the current Administration is willing to gamble, rather than risk raising rates to an appropriate level, which would continue to increase the debt servicing cost, particularly at a time when implementation of a new U.S. tax plan could easily be adding a standalone $1.5 trillion to the national debt over the next decade.
Trump is expected to announce his decision on the new Fed Chair this week. Stanford economist John Taylor is considered to be more hawkish than Former Federal Reserve Governor Jerome Powell, but even on a gray scale, the difference is negligible. In spite of the fact that public companies have borrowed $1.9 trillion of cheap Fed money and spent $2.1 trillion on stock buyback programs, leaving nothing for infrastructure or growth, investors continue to flock to the market, like a moth to the flame.
Regardless of the President’s selection, the housing bubble, stock market bubble, and coming debt ceiling slugfest, will provide plenty of opportunities for an economic crisis of unprecedented proportions. The global economic malaise will keep a lid on bond yields, leaving the stock market as one of the few investment considerations capable of delivering growth greater than inflation, no matter how microscopic. But the opportunity to exit the market at a high, with a larger percentage than usual, and acquire precious metals 1/3 to ½ below previous highs, may never be seen again in our lifetime. It is not at all a question of if, but only when. Secure your financial legacy with precious metals, but no matter what, don’t get caught without a chair when the music stops.
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.