The Fed is going to make a major new announcement tomorrow on monetary policy, and it’s expected to be extremely bullish for gold.

August 26, 2020

Dear Fellow Investor,

Federal Reserve Chairman Jerome Powell is going to make an historic announcement tomorrow.

We know that because the Fed is saying so, at least behind closed doors.

Not only that, we’ve gathered the essential details behind what Powell’s going to say, and it boils down to this: “Inflation? Who cares about inflation?”

Of course, that’s oversimplifying it. Purely speaking, Powell is expected to codify something the Fed’s been hinting at for months, that instead of adopting a target of 2% inflation, they will aim toward an “average” of 2% over time.

In practice, this means that because inflation has remained below 2% for years, the Fed will be perfectly fine with letting inflation run hotter than 2% for a significant period of time.

As part of this policy, of course, the Fed is expected to keep interest rates pegged at zero for at least five years.

As Bloomberg reported this morning, “‘It’s perfectly conceivable it could take seven years’ before rates are increased, given how difficult it’s been for the Fed to generate faster inflation, said former U.S. central bank official Roberto Perli, who is now a partner at Cornerstone Macro LLC.”

Seven years at zero rates isn’t as radical as it might sound, since that’s how long the Fed maintained its ZIRP policy post the 2008 Great Financial Crisis. In fact, considering that the central bank has already broken all the records it set after the previous crisis, it’s easy to see it breaking this record as well.

In fact, as I’ve spelled out numerous times in these letters, simple math argues for zeroed interest rates — and negative real rates (adjusted for inflation) — essentially forever under the current monetary regime.

The reason? Debt loads today, and in particular the federal debt, have grown so large that real interest rates anywhere on the positive side of zero will explode the federal budget.

For years I’d been saying that a fed funds rate of just 3% would mean federal debt-service costs of over $1 trillion every year. With the federal debt now at $26.6 trillion (and that’s before the next stimulus outlays), those debt-service costs would rise well past $1.5 trillion.

If any of this happens, you’ll hear serious talk of defaulting on the federal debt.

The bottom line is that there have never been so many powerful factors arguing for much higher gold and silver prices, and for so many years into the future.

You simply have to be involved in this sector, not only to build your wealth but also simply to protect what you have.

Once again, I urge you to subscriber to Gold Newsletter to maximize your returns. CLICK HERE to do so now.

All the best,

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