LONG RATES BACKING UP WHILE THE FED CUTS: GOLDEN ROCKET FUEL

 

This will happen:

As the funding needs of the US government spiral out of control while the tax income is slashed, only one outcome is possible: The US goverment will be forced to issue massive new debt and the markets will demand ever higher rates at the long end.

Meanwhile the Republican Majority supports the president taking over the responsibility for setting short rate policy (That used to be the Domain of the Fed).  And he has made it very clear he wants rates lower, preferably back to zero.  That will be a tremendous benefit to his real estate holdings.  It will be a disaster for inflation.

Period.  End of Story.  This answers the question Cui Bono?  Who  benefits?  The person setting rate policy benefits.  The Billionaire class holding reals estate, gold, art, pop culture memorabilia, and other hard assets, and also some crypto (not a hard asset but an asset favored at the moment by Billionaires in charge of the government.)

Who doesn't benefit?  Anyone who lives and works dependent on job income to feed and house and nurture their families.  Without hard assets their income buys less and less.

And the Fed loses all credibility which will be a disaster for the dollar even further damaging purchasing power for wage earners.

Of course the government will come out with statistics showing Inflation has come back down.  But all that means is that the rate that things are inflating has slowed.

Nothing will ever be cheaper than it is today.  Except Fad Impulse assets.

Insurance, education, housing, food, energy, medical costs  will always inflate under a regime that refuses to raise rates above the real rate of inflation which is close to 10 percent

The last regime with the courage to do so was Carter/Volker even though they knew it was political suicide.  They took rates to 20 percent and caused first a terrible recesion but then a boom that lasted 50 years as each successive regime simply cut rates whenever anything economically challenging occured.  

But Volker raised rates when the US was a creditor nation.  Now we are a massive debtor nation.  So raising rates will be much more painful for everyone who financed purchases at zero and then has to roll over their debts at 7,8,9,10 percent.  All private equity and private lending would go broke.  That's the shadow banking system crashing.  It will not happen.

So inflation must continue to spriral out of control.

And hard assets, especially gold will spiral ever upward.