For anyone who has been paying attention to what the Fed and U.S. federal government have been doing, it must be obvious that:
- The Fed held short-term interest rates too low for too long. And at the same time, it printed too many currency units (U.S. dollars). This resulted in a foreseeable higher rate of price inflation. See here.
- In an attempt to curb the price inflation, the Fed raised interest rates and curtailed its currency-unit printing. This caused bank failures, business failures, and a coming commercial real estate problem and recession. It’s also created a shortage of U.S. dollars.
- In an attempt to soften the coming recession and influence the upcoming presidential election in the United States, the Fed will lower interest rates and print more currency units in 2024. This will also be used to bail out more businesses and banks. When this occurs, price inflation will come roaring back (just like it did in the 1970s). Consequently, the stock market, commodities, cryptos, and real estate will all explode higher in price.
- But this time it’s different. Paul Volker isn’t around to raise interest rates to 20% and the economy couldn’t withstand rates that high anyway. If you think we’re having a lot of bank failures now at 5.25%, just think what would happen if rates were 20%!
- Furthermore, this time the U.S. government will try something new. It will introduce a central bank digital currency (CBDC). While I believe this will hasten the demise of the U.S. dollar, it will do one other thing. It will make it possible for the government to more easily seize money from our bank accounts and/or make it "expire." In other words, we’ll see a new era of currency tinkering and theft by the government.
- People will flee this new CBDC by buying gold, silver, real estate, (anything tangible) and crypto assets. Some people will even look for a non-U.S. currency in which to invest…preferably one that is backed by gold? BRICS currency? Unfortunately, the same fate awaits other non-gold backed fiat currencies and their CBDCs. If none are gold-backed, we may move on to hyper-inflation.
- As the currency purchasing power erodes, civil strife and crime will rise. Law and order will break down and chaos will ensue. Some states/countries/regions will revolt. Mass migrations will occur. Wars will erupt…WW III anybody? "Strongmen" will come to power around the world. Napoleon or Hitler? Putin or Xi Jinping or Trump?
It’s hard to see beyond that. What shape will the world be in? How many people will be left if there is a world war? What will constitute money after the dollar dies? Will Einstein be right when he said, "I know not with what weapons WW III will be fought, but WW IV will be fought with sticks and stones."
Robert F. Sennholz