In December, Congress agreed on a second COVID-19 bailout package around $900 billion. Add a $1.9 Trillion omnibus spending package and Congress is about to spend another $2.8 Trillion Dollars in new money into existence at a time when the dollar index is showing significant weakness as you can see here.
DXY Dollar Index 1 Year 2-18-21
Consumer Price Inflation is Coming
The index came close to breaking the 2018 lows at 88.15. If that level is broken, while Congress is spending trillions more— look out below! For now, the Dollar is wobbling awaiting the $1.9 stimulus.
For us, we’re expecting a lower Dollar in weeks ahead as the economy sees the return of inflation. Inflation of the monetary base always precedes consumer inflation. During the Covid-19 pandemic, the Federal Reserve has flooded the world with newly created Dollars in a risky experiment to pump up the U.S. economy.
To the Austin Report, inflation is not a bad thing. Gold loves inflation. Silver loves inflation. A very interesting article in back in December in SeekingAlpha.com discussed the record amounts of money pouring out of savings and into checking accounts.
The money, an unbelievable $1.3 trillion, came from savings accounts. The transfer coincides with the expiration of most mortgage forbearance plans and the shipping container fiasco at international ports.
Checking deposits are used for payment, savings deposits for investment, suggesting more spending and less investment, meaning stagflation, is about to pick up in a big way.
The author forecasts a wave of consumer spending and serious consumer price inflation could be only a few short months away.
Time to Hedge With Gold and Silver
For readers without healthy positions in gold and silver, you need to consider all the facts now. There’s still time to hedge against an upside explosion in imminent consumer prices. Time is running out to buy the dips.
While Gold appears to be bottoming out, Silver is leading gold to the upside.
One has to ask the question— How much higher do precious metals prices have to go before the world catches on and the Dollar gets dumped across the world?
Every Dollar of the proposed $1.9 Trillion Dollars of new stimulus will be fake money created out of thin air! The more new Dollars that are created, the less each existing Dollar will be worth until we reach the point of no return.
This may be the year when radical changes in U.S. policy under the new Biden administration triggers a swift, unpredictable Dollar decline. As the Dollar falls, the price of Gold rises in step. Somewhere around $1,800 may be the cheapest price for Gold, measured in Dollars, we ever see.
