The Fed continues to hold interest rates near zero and signaled it would probably keep them there through next year to help the U.S. economy recover from Covid-19. So, we have a year with almost zero interest rate.
The International Monetary Fund or IMF, however, said that we can’t keep our zero interest rate for much longer. We are spending way too much and it’s burying us deeper into inflation.
The IMF conducted its annual assessment of countries’ economic and financial development.
They said that the U.S. central bank likely will begin to scale back asset purchases in the first half of 2022.
Fed Chair Jerome Powell reaffirms that the recent steep increases in inflation is transitory. He expects our economy to recover fast.
So far, The personal consumption expenditures price gauge that the Fed uses for its inflation target rose 3.9% in May from a year earlier. This is the most since 2008.
Both IMF and the US government estimate that the higher U.S. spending proposed by President Joe Biden in the infrastructure-focused American Jobs Plan and the social-spending-based American Families Plan — which have yet to pass — would increase growth in gross domestic product by a cumulative value of about 5.25% from 2022 to 2024.
So how do all these numbers and development affect your investment?
Lawmakers have released a wave of pandemic-relief funds over the past 15 months. There’s the $1.9 trillion American Rescue Plan passed in March, a $900 billion package approved in December and the $2 trillion Cares Act of March 2020.
These got those trillions of dollars out of thin air. We printed money. All the while our gross domestic product went down because businesses were closed, manufacturing wasn’t moving, and even small companies shut down.
We had more money but nothing to buy. That equaled the loss of value of our money.
Since the interest rates were low to zero, that meant the government wasn’t getting their money back.
That meant more inflation.
If The Fed increases the interest rate, that will mean the government will get some of the money back and will stop printing money.
Will that stop inflation from climbing higher?
That will take more than stopping money printing.
One, we need to improve our gross domestic product. We need to produce more products.
Two, we need to actually rethink our concept of money. The mere fact that there is one agency that has all the power over our money is alarming. For as long as the government can print their way out of problems, inflation will always be there.
That means only one thing for us, as investors. We need to take care of ourselves. The system we are are on is faulty, so we need take precautions to protect our own investments.
Remember, diversify and make sure you gold is a part of your portfolio. Gold is a hedge against all economic turmoils. It is not the be all and end all of your investment but it is an important part.
You can buy gold and put it in your IRA. Gold can store the value of your wealth. When you retire, you can cash it out, live the life you want, and it will take you no more than 5 minutes to get all these done.