This week Fed chief Jerome Powell came out with a message to US politicians.
It is up to them to stimulate the economy. And they can throw as much money on it as they want.
Powell promises the Fed will print whatever money it needs.
It is much the same message as an ECB that indicates that it wants to solve the climate problem and financial inequality.
It is a one-way trip to soaring inflation.
Disastrous for government bonds
We are already seeing the consequences of this in the bond market. See the tweet below.
Real interest rates (so after deduction of inflation) are already below 0% on no less than $ 31,000 billion in outstanding government bonds.
Pension funds, life insurers and investment funds already suffer a guaranteed loss every year.
JP Morgan’s message to them is clear: Get used to it!
Thousands of billions towards gold and silver
Because this problem will become much bigger in the coming years.
Real interest rates will become negative on an ever-increasing amount of outstanding government bonds. And at the same time continue to fall below 0%.
As a result, many hundreds and even thousands of billions of dollars and euros will flow towards gold (and silver) in the coming years.
Because that is one of the few investments that protect against inflation and can offer protection during a sharp stock market decline.
The ECB and the Fed not only give us a guarantee that gold will rise sharply in price in the coming years.
But also that (government) bonds will generate very significant losses in the coming years.
As a result of which gold and silver will increase in price even faster.
And as a result of which the prices of gold and silver stocks will go completely through the roof.
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Source: Jack Hoogland, FED, Bloomberg.com, WSJ.com