Yesterday’s Norm, Today’s RADICAL!
I watched a terrific webinar with friend Chuck Butler, Rich Checkan and Chris Blasi. I submitted a question; “Do you think interest rates will ever return to normal?”
All emphasized we won’t see anything close to 5-6%, (the normal for decades) in our lifetime. It would take a “radical” change for worldwide governments to do so.
Radical is defined: “very new and different from the usual or ordinary – of or relating to people who favor rapid and sweeping changes in laws and government.”
Prior to the 2008 bank bailouts, 5-6% interest rates were considered “usual and ordinary”. When Congress barely passed the bailout, they said not to worry, this was temporary, interest rates would quickly return to normal. Oh really! Another broken political promise.
What is normal? A little over a decade ago, historic low interest rates, trillions in deficits and Fed market intervention would have been labeled “radical”. Today, advocates of a return pre-2008 standards are dubbed, “radical” by most of the political class.
I contacted friend Chuck Butler for his input.
DENNIS: Chuck, thanks for your time.
Your panel was discussing inflation which prompted my question. We saw Volcker tame inflation with double-digit interest rates. The panel felt a moderate increase, not even the old “normal” 5-6% was highly unlikely.
Wolf Street reports, “Dollar Purchasing Power Plunges. Inflation +6.2%. For Urban Wage Earners +6.9%, Highest in 40 years, Most Monstrously Overstimulated Economy Ever. …. Real interest rates are a negative 6%.”
The Fed says inflation is “transitory.” Wolf Street adds:
“The Fed has been saying over and over again ad nauseam for seven months that inflation will slow down somehow on its own,…the Fed has grossly underestimated the surge of inflation, and continues to do so. The Powell Fed has unleashed a monster.
…. Treasury Secretary Janet Yellen said…that she still thinks that inflation will somehow on its own go back to about 2% in 2022.”
Chuck, what is your response? What do they know they are not telling us?
What does the Fed know that they aren’t telling us? Hmmm…
I feel they don’t know Jack! Or John, or Mike…. I know that these are not unintelligent people, but they sure act like they are! Is this just a charade? They do know deep down they need to do something to squelch the rising inflation, but…. Their hands are tied, they are backed into a corner, or they’ve got their marching orders from the Gov’t. to talk down inflation….
The Gov’t has long wanted inflation to help inflate away their debts…. I first said that around 15 years ago, when the debt hadn’t reached 10 trillion yet…. The Gov’t would love to pay back their $20 debt with a $5 bill…. So…it could very well be that the Gov’t doesn’t want the Fed to fight inflation, and while rising inflation doesn’t hurt the Gov’t, or the Elite, it does major damage to the rest of us….
Until common folks start storming the Eccles Bldg. (Fed home office) carrying fire torches, ignoring inflation will continue at the Fed….
A few years ago there was a bill in Congress to audit of the Fed. Fed Chair Yellen argued that the Fed was “independent”, telling Congress this was too complicated for them or voters to understand. Congress voted against the audit. Today, I wonder how politically independent the Fed really is and what they are hiding from the public.
For instance, in 2016, Lael Brainard made public her donation to the Clinton political fund…. Perhaps Fed members may have always done these donations, but they kept them private…those days…are over!
DENNIS: You’ve regularly told us inflation is a personal thing. If meat prices rise 20% and you are a vegetarian, it might not affect you.
Many readers are receiving social security. The government announced a 5.9% Social Security cost of living increase for 2022, well short of true inflation. Our friend John Williams at Shadowstats reports it is over 10%.
CNBC reports on the 2022 Medicare premium increase.
“The standard premium for Medicare’s outpatient care coverage will jump by 14.5% for 2022, far outpacing an earlier estimate of 6.7%, according to the government.”
Wolf Street adds a cool graph; something many readers can relate with:
Real inflation is clobbering the middle class.
The government can print phony stats and the Fed can jawbone, but consumers are catching on, and hurting. True inflation is in double digits, our standard of living is declining; particularly those on fixed income. How long can this go on?
CHUCK: Well, this can go on as long as the common person allows it to continue…. First things first…. Citizens should contact their representatives telling them loud and clear – rising prices are hurting them…. If enough citizens do this, then maybe you might get some action to slow down inflation….
It most likely will fail – sorry…. Remember college sit-ins? Back in the hippie days college students would stage a sit-in and campus activities came to a halt…. Remember the Occupy Wall Street crowd? It’s going to take some sort of action like that to wake up the ruling class.
Mid-terms are coming up…. I wouldn’t want to be up for reelection with 10% inflation hanging over my shoulder…vote all the bums out if they won’t listen to you!
DENNIS: The government created the mess. If raising rates is off the table, what will it take to fix it?
CHUCK: Dennis, it’s going to take something radical by someone to change the course we are set on…. A radical person with ideas that are outside of the box…. Radical ideas that no one else has thought of….
They could ask me, and I would tell them that 1. They need to stop deficit spending…and 2. They need to stop currency printing…and 3. They need to at least jawbone interest rate hikes to put the fear of a rate hike into the minds of traders….
This last measure would get bond yields moving higher, and that would go a long way toward slowing inflation…
DENNIS: Fed nominees Herman Cain and Judith Shelton were both calling for spending restraint and fiscal responsibility. Members of Congress called them “radical”, and they didn’t get nominated. No matter who you vote for, the politicians don’t want to curtail their radical spending.
In the days of feudalism, rulers learned to keep the peasants fighting among themselves so they would never unite to overthrow the king. Our country is so politically divided, yet neither party is willing to do what is right for the citizens.
You mentioned the sit-ins, etc. When the Tea Party brought 200,000+ people to Washington, both parties said the voters were throwing a hissy fit and paid lip service to them.
Much like the Volker years, we must take a step back to move forward. Do you see any part of the ruling class willing to do the hard work to get the deficit spending and money printing under control?
CHUCK: The simple answer – NO…. But I won’t stop there! The ruling class sees no reason to do anything. Their goal is socialism, even though they know that socialism has failed everywhere it has been implemented…. But they think they know a “better way”; they personally stand to benefit.
DENNIS: With no free-market interest rates, can capitalism survive?
CHUCK: It’ll be difficult to continue as it is…. But…if the ruling class doesn’t win their goal of a move to socialism, then the only thing left is capitalism…. We started racing down the socialism road with the bailing out of the banks, mortgage companies, and insurance companies in 2008…. Then we followed with multiple stimmy checks to the population. Now we are experimenting with Child credits mailed directly to parents…. The mandates are coming from D.C. creating money to buy votes. It’s a slippery slope we’re on here folks….
DENNIS: One final question. Any politician legitimately attempting to reduce spending would have little political support. Once the pain starts, Congressional support disappears; they would be mocked; turned into a Herbert Hoover. Barring a “radical” political adjustment, Baby Boomers, well past their peak earning years, will have to fend for themselves. Social Security is not the safety net that Roosevelt promised.
What can we do to protect ourselves?
CHUCK: Dennis…it’s the same thing I keep harping about…. Got Gold? The recent webinar had a question that went like this: Besides Gold, what else can a person buy to protect their wealth? All three participants said – Silver!
Real Estate is also a good hedge, unlike Gold & Silver, it’s not very liquid….
I was stunned when I heard a very respected analyst say Gold & Bitcoin were soul mates….
What a load of crap! Bitcoin could go to zero tomorrow (it won’t, but it could.) The government is developing its own digital currency and could easily outlaw all the competition. Gold has never seen what zero looks like in 5,000 years!
Thanks again for this opportunity, Dennis…. Things are pretty messy right now and it’s going to take something or someone Radical to change the course we are on…. Got Gold?
Dennis here. I love it when Chuck just tells it like it is. Vote your conscience; however, protecting our wealth and our family is our job. We can’t count on the government, including social security. Take heed!
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On The Lighter Side
I want to say a big THANK YOU to all the wonderful readers who responded to my Thanksgiving note. It took a few days for me to sort through them all.
Unfortunately, the first round of surgery didn’t get us where we need to be. Bottom line is the prostate is huge and shutting down the ability of the bladder to empty properly. We have another round of surgery scheduled on December 3rd; hopefully that will do the trick.
Jo is doing her caregiver duties and then some. I am so blessed. We still hope to make it to Indiana by Christmas, so much is just unknown right now. I’m hoping to get another article or two done before year-end, but we will see.
I normally add a quote of the week but I want to include it in my remarks as it is so spot on and timely. My biggest concern is the possibility of having to wear a catheter for the rest of my life. While that is not fun, it has worked since late September.
I’ve had several readers comment on my ability to remain positive, despite the challenges.
It was the day before Thanksgiving. I was down, thinking to myself there are some days it can be a real challenge. The first email I look for is The Daily Pfennig. Chuck got to me with the following comments:
“Thanksgiving is a time when families and friends get together and count their blessings… Last year my family went around the table with each person saying what they were thankful for… When it was my turn, I said, ‘I’m thankful that the Good Lord has allowed me to live, so that I can be here with all of you’…”
Honestly, Chuck jolted me with that one. Despite 15 years of medical struggles, he always smiles and offers some positive encouragement. As always, he says it like it is and puts things in perspective.
I dropped him a note thanking him.
Friend Pat M. is experiencing her share of medical struggles lately. She puts things in perspective this way:
Until next time…
“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken
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