The Fed announced this morning that it is going to spend up to $2.3 trillion helping out municipalities and companies by purchasing their bonds. Where is the $2.3 trillion going to come from?
The Fed is of course just going to print the money. Yup, Jay Powell (Fed Chair) & Steve Mnuchin (Treasury Secretary) have decided to turn the Fed into a hedge fund. Munuchin will provide the capital and Powell will provide the leverage by conjuring a few trillion out of thin air. 10 to 1 leverage works for Jay.
Won’t all this money printing cause inflation? Of course it will. The Fed will deny any such thing and point to the last decade of monetary debauchery as proof that money printing doesn’t cause inflation.
But try telling that to the millions of Americans approaching retirement who were told they needed to save loads more to live the kind of retirement life they planned for.
With T-bill rates at 4% it only takes $1,000,000 to generate $40,000 in safe retirement income, but at today’s T-bill rate it takes $19,000,000 to generate that $40,000 in income.
Sounds a lot like inflation to us.
Hold your gold and silver and while the Fed’s interventions into the bond market are a long-term disaster for a variety of reasons (a post for another day), don’t let your distaste for bad monetary policy sway your investment strategy. The Fed just volunteered to become the greater fool of last resort in the corporate bond market and their supply of funds is limitless. The implications should be obvious.
