The pace of federal spending has just accelerated to levels that not even the most pessimistic analysts would’ve predicted, as President Biden is set to announce yet another multi-trillion-dollar spending plan.

The implications for Fed policy, the dollar and gold are compelling.

April 28, 2021

Dear Fellow Investor,

I predicted that the Biden administration was going to follow up its $2.3 trillion “infrastructure” plan with yet another spending binge.

But I didn’t expect them to open up the checkbook before that infrastructure plan was even approved.

In blackjack, this is called “doubling down.” In betting, however, the reason to increase your risk is to increase your pay-off. In this case, there’s no pay-off to begin with.

Let’s consider the details just rolled out this morning by the Biden administration…

Another $1.8 Trillion

In his latest spending binge, marketed as the “American Families Plan,” the administration is proposing another $1.8 trillion in spending on child care, education and paid leave.

Those are ideals that, in a vacuum, few would argue against. And I’m sure they tested very well in focus groups. I won’t go into the details of the spending plan (there really aren’t any yet) or into the politics of these proposals.

Instead, let’s delve into the clear and obvious ramifications for investors, savers and the economy.

Consider how Biden & Co. are proposing to pay for this latest spending spree:

• Raise the top income tax rate from 37% to 39.6% (for households with income above $400,000).

• Raise the top rate on capital gains from 20% to 39.6%.

• The Obamacare surcharge of 3.8% would not only be retained, but expanded to other types of income, including business and S corporations.

• Thus, the top rates on income and capital gains would rise to 43.4%, from 23.8%.

• One aspect of the “death tax” would be dramatically increased, with the elimination of the step-up in basis at time of death. Instead, assets would be immediately treated as sold — and taxable — at time of death, resulting in the forced sale of many family estates, farms and businesses.

• Real estate tax structures would be dramatically changed, with the ability to exchange properties without incurring capital-gains income being capped. As the Wall Street Journal notes, this move “could significantly alter the commercial real-estate industry.”

• The plan would double IRS enforcement staffing and require banks to report more detailed information about your personal and business banking activity, so get ready for even greater intrusions into your financial privacy.

Greater Costs…And Zero Returns

The Biden administration optimistically projects that their new tax hikes would raise $1.5 trillion over the next 10 years. Even if true, this wouldn’t pay for the first of his multi-trillion-dollar spending plans, much less this third one.

And of course, it won’t even raise that much. As the Wall Street Journal recently noted, even the Congressional Budget Office (certainly no bastion of free-market economics) estimates that any capital gains tax rate above 28% will lose more money than it returns.

Of course, there’s a very valid argument that the ideal capital gains rate is zero — but any such free-market ideals are being blown away by the force of the new “go big” gale of rhetoric coming out of Washington and the media water-carriers.

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Consider that this latest $1.8 trillion proposal comes fast on the heels of Trump’s $900 billion stimulus passed at the end of last year (way back when Congress was repelled by the “trillion” barrier)…the $1.9 trillion Biden stimulus…and the $2.3 trillion Biden infrastructure spree.

It just gets easier and easier once you get started. As I recently tweeted:

The bottom line is that whatever spending restraint there might have been, from either side of the political aisle, has now evaporated.

Simply put, the Democrats have learned their lesson from wasting the first two years of Obama’s presidency. They aren’t going to waste this crisis, or their majority in Congress, this time. They’re going to get their agenda passed, to the maximum degree, while they can.

So you can bet there’s even more coming.

Which begs the question, what will be the repercussions of this complete disregard of fiscal responsibility?

The answer is obvious. Whatever they might want to do in terms of monetary policy, the Treasury will be forced to issue ever-greater debt to pay for these monumental spending plans and the Fed will be forced to buy those securities.

In short, trillions of new dollars will be added upon the trillions already being created, exacerbating the out-of-control trends already in place.

Because of the towering size of the federal debt (and its accelerating growth rate), interest rates must remain well below the rate of inflation, essentially forever.

That means negative real rates, again essentially forever, which is in turn the recipe for much higher gold and silver prices.

If you aren’t already prepared, you need to be. As a first step, I’d recommend that you subscribe to Gold Newsletter now. I’m writing our May issue at this moment, and I’ve got no less than three exciting new junior mining stock recommendations that I’m going to reveal.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference

P.S. Coincidentally, there’s another thing you can do — attend a fantastic online event being presented tomorrow by our friends Rick Rule and Albert Lu.

Dubbed “Robinhood, Reddit and The Rise of the Retail Investor,” you can bet that they’ll also touch on the extraordinary new spending and financial privacy plans being put forth.

Rick and Albert have gathered a great group of speakers, including Doug Casey, John Hunt, David Stockman, Nick Giambruno, Tim Taschler (Sprott Global) and more, for lively presentations, panels and Q&A sessions. I’m planning on stopping in myself!

Again, this event is tomorrow. So I urge you to CLICK HERE now, or on the banner below, for more details.