The Buyer and Lender of Last Resort
The Federal Reserve has become the buyer and lender of last resort. The dollar has lost 99% of its purchasing power since the inception of the Federal Reserve in 1913. People who own assets get richer or at least stay on the same level. However, those that are trading labor for currency units without the capacity to own assets are losing their shirts…financial death by 1 thousand cuts; failure that happens because of many small accumulated issues.
At the end of the year 2000, gold was valued at $273.60 while at year end 2019, gold was valued at $1519.50. That means the dollar lost 82% of its purchasing power relative to gold within that timeframe. With gold currently trading at $1957.10 as of September 18th, 2020, the dollar has lost 86% of its purchasing power relative to gold when compared to year end 2000. Most savers cannot even get ahead by saving their hard earned money because of zero bound interest rates.
Transfer of Wealth
Think of this, in 2000, $1,000,000 of 10 year treasury bonds would earn you $50,000 per year. On September 18th, 2020 it would take $ 7,246,376 of 10 year treasury bonds to earn that same $50,000 per year…and that is the reason most middle class working people keep falling behind. In addition, the cost of healthcare, groceries, home ownership, etc., just keeps going up. We may be told that inflation is low, but it is not. This is the greatest stealth transfer of wealth from the middle class to the folks in the top 1% in history. Through their monetary policy, The Federal Reserve is providing the primary mechanism that enables this to happen in this twisted environment we are in.
Ernest Hemingway was once asked:
“How did you go bankrupt? Two ways ….Gradually, then suddenly.”
We are in the beginning of the suddenly piece.
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