In June of 2020, The Federal Reserve (aka the central banks) decided to hold interest rates at near-zero and likely keep rates lowered through 2022 in support of the post-COVID-19 economic recovery. The benchmark rate today is 0%-0.25% (compared to 2.50% a year ago). This news, coupled with May’s unexpected decline in the unemployment rate to 13.3% even amidst the virus aftermath is enough for workers, shareholders, and investors alike to relax a little while working toward a full recovery.
In a recent video segment entitled “Federal Reserve Chairman Jerome Powell speaks to reporters on central bank’s latest decision,” even while there is still much unrest and uncertainty about the timeline for our economic comeback due to the pandemic, the Chairman shared a great deal of hope. His positive outlook on jobs, the economy, and the state of the country were reassuring.
The Realities of Our Current Economy
There is certainly no doubt that the pandemic (and media coverage thereof) has impacted the lives of every American and nearly everyone in the world. We are all quite aware of the most significant economic hits. Chairman Powell admitted that the pandemic outbreak was similar in many ways to a natural disaster. He stated that this setback is, in fact, the “biggest economic shock in the US and the world ever. In two months we went from the lowest level of unemployment to the highest level of unemployment in 50 years.” He shared these impacts:
Indicators of inflation and degrees of uncertainty based on virus containment
A decline in economic activity that has added to job losses
Nearly 40 million jobs lost, with a record rise in unemployment
The virus impacted industries that involve tight groups of people in the service economy
Even given these realities and the fact that “a full recovery is a way out,” Chairman Powell agrees that the economy was in an excellent position to begin with and take such a hit. The Fed has positive goals to help the US economy recover.
The Goal of The Fed
Chairman Powell spoke a great deal about The Federal Reserve’s mission and goals for our country in such a time of crisis. While he agrees the US and world economies have suffered greatly, The Fed has tools to weather this type of unexpected disaster. The message is clear. The Federal Reserve is concerned about the well-being of the economy and the people of our nation. They are committed to using all of the tools possible for our nation to ensure:
Relief and stability
A recovery that is as strong as possible
Limit to lasting damage
Lowered interest rate (0%-0.25%) that is expected to remain low
Improvement to our gross domestic product (GDP)
An inflation rate that remains below the 2% objective
Stable prices for Americans
Promotion of our financial system
The Fed has “listened” in order to create change to help as needed. They “lowered minimum loan sizes and increased maximum loan sizes – lengthened the maturity and stretched out the repayment schedule; borrowers will get a two-year delay before a principal payment is due along with a one-year delay on interest payments.” As the nation faces much unrest and several social and equality concerns, the fact is The Fed is objectively supportive of the nation, the people, and the world. Chairman Powell indicated, “there is no place for racism anywhere.” All of these assurances bring comfort to many.
A Word About the Stimulus Program
The Chairman said, “The government has been large, fast and forceful.” He believes our pre-existing healthy economy, financial system, and 50-year low unemployment rate have positioned the country well for re-opening and the building of momentum and job growth over time. In terms of the $3 trillion stimulus program, he believes “households, laid-off workers, small, medium and large businesses, hospitals, and state and local governments” benefitted and that the paycheck protection program (PPP) and unemployment benefits have been very innovative. These, coupled with the Fed’s innovations, are ALL making a difference.
A Hopeful Message for Our US Economy
Chairman Powell expressed a positive outlook for our economy based on several recent signs of stabilization since the outbreak of the pandemic in January 2020:
People going back to work following social distancing protocols
Businesses re-opening using new guidelines to protect customers and staff
Stimulus payments and unemployment benefits that seem to be helping
Inflation is below the 2% objective (weak demand hold down consumer prices)
Pleasant lending climate going forward
The Federal Reserve monetary policy “is equipped to support the economy.” They continue to study yield-curve control, gain a better understanding of the economy’s trajectory, and streamline how best to deploy tools toward economic goals. Even though the expectation is that we have months, if not years, to recover fully, The Fed believes the economy is re-opening. They “want the markets to be working,” and they “want to get the labor market back.”
Good News for Continued Investments
Now is the time to HEDGE, HEDGE, HEDGE! In this present time of uncertainty in which the value of the US dollar could plummet, some of the world’s smartest investors hedge their portfolios with physical gold and silver. This move helps them maintain purchasing power. When the dollar is at high risk, the central banks quietly increase their withholdings of physical gold on a daily, weekly, monthly, and annual basis. This strategy begs the question, “Why are you not doing the same?” With interest rates are at an all-time low, it means the US dollar is weakened. This creates an inverse (negative) relationship between currencies compared to the higher values of gold and silver. This alternative currency in the form of gold and silver is not printed but rather “organically” grown and mined out of the earth with minimal volume. Currently, the precious metal supply cannot cover today’s demand. Therefore, premiums are increasing rapidly due to shortages. Contact Reagan Gold Group today. Discover your options while this legal tender currency in the form of gold and silver is still available and before premiums increase or supply runs out.
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Due to the January 2020 coronavirus outbreak, The Federal Reserve kicked in over $3 trillion in four separate US stimulus measures between April 24 and May 22 to eliminate a US financial system’s seize-up. With another $3 trillion approved by the House and on the table in the Senate, before actually evaluating the success of the first packages, the total pandemic spending bill is well on its way to an overall cost of $10 trillion. Even with this astronomical figure in play, many recipients have doubts about whether the money targets the real areas of concern: small companies, local cities & towns, and average borrowers for positive outcomes.
Coronavirus Relief To Date
A recent report published by NPR provides a breakdown of the bills and monetary allocations made toward the coronavirus relief effort, giving added perspective on where we are today. The breakdown looks like this: $681 billion went to testing, administrative costs, state and local governments, and public health, $513 billion went to the CARES Act for tax breaks for businesses, $532 billion went to large corporations, $748 billion went to individuals (those making less than a certain amount), and $810 billion went to small businesses. The HEROES Act is pending due to several non-coronavirus related wants inserted into the bill. There is also concern that we need more data about how the previous stimulus money has helped before the Fed doles out more.
Does the Fed Print Money To Cover the Coronavirus Relief?
Technically the Fed does not print money, but the way they come up with the money for such a relief effort as the coronavirus is described another way by thebalance.com: “When people say the
Federal Reserve “prints money,” they mean it’s adding credit to its member banks’ deposits.” They remind us that today’s money is not always described as cash or coin. “When the Fed expands credit, it’s engaging in expansive monetary policy. It increases the money supply available to borrow, spend, or invest. Those three things all help end recessions.” Another example of “appearing money” is described in open market operations. “The Fed buys US Treasuries and other securities from banks and replaces them with credit. All central banks have this unique ability to create credit out of thin air. That’s just like printing money.”
The Impact for Investors and Individuals
While the goal of the “stimulus” packages was to stimulate the economy, and the $1,200 check received by many American was forthright, there are unexpected impacts to investors and individuals in terms of their checking accounts, savings, money markets, and CD accounts and especially their individual retirement accounts (IRAs). Creating money is also known to “debase” the US dollar. This, in turn, reduces its purchasing power because the money adds up to more than US products and services. Inflation could set in, and the US could find itself in a timeless debt vacuum. When we realize a spike in demand without supply, prices rise. The ultimate impact for investors and individuals is a devaluation in their money and especially their retirement accounts. According to Reuters, based on the coronavirus pandemic, Goldman Sachs “is now forecasting a real GDP sequential decline of 34% for the second quarter…” However, a more optimistic report is shared on Business Insider: “While economic indicators point to the worst recession in nearly a century, Federal Reserve Chair Jerome Powell doesn’t expect a prolonged, Great Depression-style slump.”
Smart Money — Going Toward Gold
Smart money may mean something different to the average saver than to the savvy investor, but in this time of economic crisis, smart money means gold. If you hadn’t noticed, as the Dow Jones Industrial Average goes down, the price of gold goes up! With interest rates at all-time lows and a stimulus package debasing our currency for a potential inflationary period, there is no better time to look into the reserve currency called “gold.” The only concern in doing so is that all of a sudden many investors around the globe are also looking into gold. The price is rising, the supply is dropping, and orders are becoming backlogged. While it is a trying time for many workers, families, and individuals in every corner of the globe due to COVID-19, it is an exciting time for gold. Gold trading is showing some exciting patterns since the Federal Reserve stimulus packages were issued, and it continues to fascinate those who recognize its value when the dollar is weak. It directly holds its value when other forms of currency do not.
Why Consider Gold?
There are generally many reasons to consider gold, but in a time of crisis, the reasons increase even more. Review these considerations about gold:
Gold is a coveted metal across the globe
Gold has increased 13.07% within 150 days starting Jan 1, 2020 to May 29, 2020
Gold is perfect for diversifying and hedging financial portfolios as a safe haven asset.
Gold has proven to hold its value and serve as a commodity to hedge against inflation
Gold is robust when the US dollar is weak
Gold prices rise for owners when costs of living increase
Gold supply is dwindling which means the value of your gold is increasing
Gold is a safe-haven asset while government debt plagues the nation
Gold is going to global central banks over individual financiers (668 tons in 2019, and rising every year); more challenging to get
Gold is and has shown to outperform other major currencies
Gold is called a crisis commodity in times of governmental challenges
Think about how gold may have a place in your financial future in place of your existing monetary accounts. It’s a sound investment in more ways than one. Learn more today and secure your financial assets for tomorrow while you have time, and gold is still a market commodity for all to purchase. This era may end soon. It’s your money – get the facts and act now.
The Reagan Gold Group is a privately-held company based in Los Angeles that supports clients interested in diversifying their portfolio by acquiring physical gold and silver coins, or by adding physical gold and silver to an existing IRA account.