Gold and the myth of “Fed independence”

The establishment financial media is in a tizzy this week over Trump's firing of Fed Governor Lisa Cook, a Biden appointee accused of mortgage fraud. They complain that this firing is an assault on the Fed's independence.

In reality, though, the notion of 'Fed independence' is a myth.

Most recently, the Fed played politics last year by slashing rates to stimulate the economy heading into a tough presidential election for the incumbent Democrats.

And the Fed suddenly got stingy as soon as Trump got elected -- halting rate cuts for almost a year so far.

But here's the big picture...

The Federal Reserve is an inherently political institution - not only because the seven members of its Board of Governors are appointed by the President with Senate confirmation, but also because America's entire monetary system is political in nature.

We no longer have sound money backed by gold but political money, where policymakers centrally plan the economy via market interventions -- including changes to monetary policy.

By design, the Fed engages in price fixing activity by setting the price of money (i.e., interest rates) -- and it bails out the federal government by funding its debt when market participants will not.

Since the Federal Reserve was launched in 1913, the value of the currency has plunged 99%.

On the other hand, inflation was almost non-existent throughout the first 125 years of our constitutional republic, when the dollar was defined as a particular weight of gold and silver -- and there was no permanent central bank.

It seems today the Fed 'losing its independence' is code for the Fed "cutting rates at the same time Trump wants it to do so."

In reality, though, Wall Street also desires lower interest rates right now.

The federal government appears desperate for lower rates, too, since its annual debt service costs are now well above $1 trillion and rising. After all, the Treasury needs to refinance over $10 trillion in federal debt by next year, not counting the need to finance the current budget deficit.

Lower rates are inevitable.

This means we should soon expect a period of more steeply negative real interest rates where the true inflation rate is higher than interest rates. And that's rocket fuel for gold.

The Federal Reserve System has played a key role in getting us into the current predicament of inflation, runaway federal spending, and runaway debt.

The purchasing power of the Federal Reserve Note against real assets, especially gold and silver that cannot be printed or debased, continues to be on the chopping block.

Prepare accordingly.

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