By Damon Geller
Now that the Fed has announced they are barely tapering their enormous stimulus program, it’s more obvious than ever that a few powerful men have hijacked our economic, financial and political structure. And here’s a news flash: They aren’t socialists or capitalists. They’re criminals. The Fed’s decision to continue buying $75 billion dollars worth of toxic banking assets and U.S. debt per month means the money-printing factory has just gone into high gear. Not only can you say goodbye to your paper-based savings and retirement, but the Fed just guaranteed $9 gas and $3800 gold.
The Fed’s Spending Spree
Every month in 2013, the Fed increased its balance sheet by $85 billion, consisting of $40 billion in mortgage-backed securities and $45 billion in 10-30 year treasuries. The Fed is on pace to monetize roughly half of the US budget deficit in 2013. Putting it all together, the Fed’s balance sheet has increased to $4 TRILLION! A total increase of $1.17 trillion in one year! And tapering to $75 billion isn’t going to change much.
The Fed has been promising to taper their stimulus program pending the improvement of the labor market. But as the labor market continues to stagnate, now the Fed has reversed course and announced that they will continue their reckless stimulus program (a.k.a “money printing”) for the foreseeable future.
So, how does Fed spending affect the value of your money? To clearly illustrate this point, let’s take a look at gold price action and debt accumulation since 2005. I can take this back all the way to 2000, or even further, and it will hold true. But then we would have to start inflation-adjusting the numbers. (The US Treasury was used to gather this debt data):
2005 US Debt = 7.6T | Gold = $430/oz. | Gas = $1.82/gallon
2006 US Debt = 8.1T | Gold = $520/oz. | Gas = $2.28/gallon
2007 US Debt = 8.7T | Gold = $635/oz. | Gas = $2.40/gallon
2008 US Debt = 10.7T | Gold = $875/oz. | Gas = $2.90/gallon
2009 US Debt = 10.6T | Gold = $855/oz. | Gas = $2.75/gallon
2010 US Debt = 12.3T | Gold = $1,100/oz. | Gas = $2.80/gallon
2011 US Debt = 14T | Gold = $1,320/oz. | Gas = $3.15/gallon
2012 US Debt = 15.2T | Gold = $1,540/oz. | Gas = $3.40/gallon
2013 US Debt = 17T | Gold = $1,580/oz. | Gas = $4.50/gallon
And here’s where we’re going:
2014 US Debt = 18.8T | Gold = $2,200/oz. | Gas = $5.00/gallon
2015 US Debt = 21T | Gold = $2,600/oz. | Gas = $6.00/gallon
2016 US Debt = 22.7T | Gold = $3,100/oz. | Gas = $6.75/gallon
2017 US Debt = 25.5T | Gold = $3,575/oz. | Gas = $7.50/gallon
2018 US Debt = 28T | Gold = $3,800/oz. | Gas = $9.00/gallon
So… we’ll surge to $28 trillion in U.S. debt by 2018. Based upon the chart above, that will put gas at $9 and gold at $3800.
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