From Peter Reagan at Birch Gold Group
For the last two years, Federal Reserve Chairman Jerome Powell has been maintaining a moderate stance on raising rates to combat a historic wave of red-hot inflation.
(Although initially, the Fed didn’t start raising rates fast enough).
But something has changed: 2024 is an election year. And there are hints that Powell could go “all in” on a Fed pivot that could mean leveraging rate cuts to buy President Biden another term by making his economy look better than it currently is.
That’s because the 2024 economic outlook isn’t pretty, so without some help, it follows that Biden is not likely to be reelected.
So let’s briefly examine why Powell appears to have blinked, why Biden needs the help, and what big sacrifice could be necessary to make it all possible.
Biden’s polls say “Pivot!”
Let’s start with the signal that reveals Powell’s Fed could be pivoting on rates sometime next year, starting with a Politico report on the situation:
Federal Reserve officials on Wednesday suggested that victory over inflation is within sight, signaling that they are likely done raising interest rates and that borrowing costs will go down somewhat next year.
Members of the central bank’s rate-setting committee agreed to hold their main policy rate steady in their last vote of the year, a reflection of mounting data showing that price spikes continue to cool. In a sign of growing optimism that inflation is largely under control, Fed policymakers even went as far as penciling in three rate cuts for 2024.
Tho Bishop explained why this sudden urge to potentially pivot on rates could be a political move rather than an economically responsible one:
Though Powell’s messaging was grounded in the same propaganda preached by the Biden Administration and a large portion of the corporate financial press – that America’s economy has exceeded expectations and policymakers have achieved their desired soft landing – it would be extraordinarily naive to ignore the influence of next year’s presidential election on the Fed’s future actions.
All you have to do is examine Biden’s job approval ratings and polling data to see quite clearly that his reelection chances are in serious jeopardy.
Bloomberg summarized the important data about Biden’s economic record so far:
- Just 34% approve of Biden’s job performance, down from 54% at the start of his presidency nearly three years ago
- Around three in 10 Americans say Biden is prioritizing the policy issues most important to them. That’s compared to 41% who reported feeling that way about former President Donald Trump this time four years ago.
- Just 12% of those polled said their financial status is improving, while 44% reported they are struggling to remain where they are financially,
In a rather weak attempt to explain away what nearly every American has been feeling for the last three years, the President’s Press Secretary chimed in with her take:
The data shows that the economy is in a better place. But we understand that Americans don’t feel it right now. There are ways that we’re going to continue to make sure that the number one thing, when it comes to Bidenomics, that the president deals with – lowering costs – we’re going to put that front and center.
It’s a little late to prioritize lowering costs “front and center” now. Better late than never, but consider the cumulative effects of rising prices since our first day under Bidenomics:
- “In the two years starting in April 2021, the average price of all goods rose 13%, according to the Bureau of Labor Statistics. The average price of food in that same period jumped a whopping 20%.”
- “The producer price index is used to measure inflation on the products and services businesses buy – sometimes called wholesale inflation – and that index has risen 17.5% since Biden took office.”
- As of December 11: “Prices are up 17.6% since Joe Biden became president, according to the Consumer Price Index… It’s the biggest increase during the first 34 months of a presidency since Jimmy Carter endured double-digit inflation from 1977 to 1979. It didn’t end well for him. Inflation is often cited as one reason Carter lost his bid for a second term in 1980.”
Now, none of these numbers agree, simply because they’re measuring different periods of time.
To put this into context:
Prices were up 6% during Donald Trump’s first 34 months. Other increases during the same period: Barack Obama, 7.2%; George W. Bush, 6.5%, Bill Clinton, 7.8%, George H. W. Bush, 13.5%.
In fact, under Bidenomics, prices have risen more in 34 months than any other American president since Jimmy Carter!
Now that voters are outraged over Biden’s utter failure on the economy, and an election is around the corner – well, you can understand why the Biden administration is getting nervous.
Is that anxiety enough to bring pressure to bear on the “independent” Federal Reserve?
Yes, it is.
On Friday December 9th, Biden gave a speech in Las Vegas where he said the latest job growth numbers were:
a sweet spot that’s needed for stable growth and lower inflation, not encouraging the Fed to raise interest rates.
Which means that inflation is conquered, right?
Whose side is the Fed on?
Official data puts headline inflation at about 50% over the Fed’s official target of 2%. That means any Fed pivot could signal abandonment of their stated mission.
But, unfortunately, it’s much worse than Powell potentially leaving working Americans in the dust, after three grueling years of struggling to put food on the table.
The Fed’s preferred measure, called Core Personal Consumption Expenditures or Core PCE for short, is running at 3.5%. That’s about 75% over the Fed’s alleged target, which also means that Biden has presided over the highest Core PCE inflation rate since 1992!
The Fed’s proposed rate cuts for 2024 just don’t look rational.
In fact, Wyoming Senator John Barrasso commented on Biden’s seemingly “selective” approach when touting how wonderful Bidenomics has been for Americans:
Joe Biden’s message is just this: He says don’t believe your lying eyes.
Should the Fed really begin slashing interest rates as forecast by their own dot plot, it would look like an attempt to “buy” Biden another term in office.
And who’d pay for it?
How much more worthless could the dollar become?
Let’s remember: The more money the federal government borrows, the more dollars enter circulation – driving down the purchasing power of every other dollar in existence.
That’s why it matters that deficit spending is off the charts:
The U.S. government on Friday posted a $1.695 trillion budget deficit in fiscal 2023, a 23% jump from the prior year as revenues fell and outlays for Social Security, Medicare and record-high interest costs on the federal debt rose.
The Treasury Department said the deficit was the largest since a COVID-fueled $2.78 trillion gap in 2021. It marks a major return to ballooning deficits after back-to-back declines during President Joe Biden’s first two years in office.
This wild spending spree came during the same period that Biden repeated ad nauseum we have a “booming” economy with a growing GDP and full employment.
But that doesn’t make sense once you think about it. If the economy were in such great shape, it wouldn’t need to be boosted by World War II-levels of deficit spending.
The total government debt has grown over $5 trillion during Biden’s term (so far).
Once you start to put the pieces together, all of this begins to feel like an outright attempt to purchase Biden another term in office (with public tax dollars).
And Powell’s Fed appears to be signaling that they will help in any way they can with loose monetary policies, potentially shredding the dollar’s purchasing power.
But there’s an even deeper price we’ll all pay…
If this scheme succeeded, then Biden’s next term would only last for 4 years. But the debt, inflation, record deficits etc. are not temporary.
Long after Biden and his Fed cronies are gone, we’ll still be potentially paying the price for his economic incompetence.
All of this to try and convince Americans that Bidenomics is finally working just in time for the general election in 2024.
Make your savings inflation (and Bidenomics)-resistant
If the Fed and the federal government continue destroying the dollar’s purchasing power, it’s smart to consider how to store your purchasing power for the long-term.
In fact, if the Fed continues to play politics with the economy to aid Biden, gold’s price will skyrocket, according to Van Eck’s Ima Casanova:
Gold is being supported by expectations that the Fed may start to cut rates soon. Markets are implying a more than 50% chance of a rate cut in March 2024.
Gold is also likely benefitting from safe haven buying as heightened global geopolitical risk persists.
So don’t wait too long. Diversify your vulnerable savings with tangible assets that are immune to both inflation and Bidenomics. You can get the information you need to consider precious metals in our free kit.