Beware the Hyper-Inflating Fed

Don’t Get Quarantined in Dollars!

You do not want to risk being locked down in an incurable paper money economy.  One with no escape.  You need to be aware of just how grim the prognosis is for the Fed’s dollar.  

So today we share an observation from Tom Dyson, who writes a newsletter called Postcards from the Fringe.  Dyson is himself a veteran of the “repo” desk at Citigroup.

“The Federal Reserve’s balance sheet is about to EXPLODE higher,” he notes.  

Here’s why:

Dyson believes that between existing spending and the trillion-dollar deficit it is already running, a parade of stimulus schemers, and plunging tax revenue from a stalled economy, the Treasury is going to have to borrow another $10 trillion on top of the $23.5 trillion it already owes.  

But stand back and ask who is going to fund that debt?  Who is going to buy trillions of more treasury bonds?

Not China, says Dyson.  He’s correct.  China is up to its eyeballs in its own problems and not just the Coronavirus.  It’s a debt problem, staggering, to begin with, it grows with the health crisis and the slowdown.

Not the oil-exporting nations.  Not at these petroleum prices, for some below the cost of production.

Not emerging markets says Dyson.  They are having to dump their treasuries to support their plummeting currencies.

And not Wall Street.  “Asset managers are dumping their Treasury holdings to meet redemption requests and margin calls,” he writes.

So who does that leave?  It will be left to the Fed to “monetize the debt.”  That means magically turn the debt into money.  It must print money to buy US government bonds.  The Fed is not even making a secret of its willingness to print money until the cows come home.

“And that’s why the Fed’s balance sheet has started to hyperinflate,” says Dyson.  “It’s at $4.5 trillion now. If I’m right about the hole the government finds itself in right now, the Fed’s balance sheet will pass $10 trillion later this year… and then pass $20 trillion or $30 trillion in the next few years.”

If you don’t own gold and silver, then face it: your portfolio is quarantined in dollars.

And that is not a good place to be. 

Especially now!