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.