In this episode of Money Metals Midweek Notes hosted by Mike Maharie, we take a closer look at how government actions affect the economy, the Federal Reserve's role in inflation, and the strategic importance of investing in gold and silver.
Government incompetence or malice?
Maherly begins by highlighting the inefficiencies and frustrations that result from government intervention, drawing comparisons to everyday experiences like going to the DMV or using Medicare. He questions whether government failures are the result of simple incompetence or malice, concluding that it's probably a mix of both.
Inflation: Deliberate policy and incompetence
Mahary emphasizes that inflation is a deliberate policy of the Federal Reserve and the government. He argues that the failure to control inflation is a sign of government incompetence. Mahary says the idea that inflation is caused by external factors such as supply chain problems or geopolitical events is a smokescreen.
“Inflation is always and everywhere a monetary phenomenon,” Maharee said, citing economist Milton Friedman.
Why inflate a currency?
The government is devaluing its currency to finance its expanding territory and power without inciting public revolt. Mahary explains that all government spending ultimately comes out of the people's pockets through taxes and borrowing. With the national debt approaching $34.6 trillion and unfunded Social Security and Medicare liabilities reaching $175.3 trillion, the government is turning to an “inflation tax” as a hidden way to cover its spending.
How inflation impacts the economy
Maher points out that inflation acts as a hidden tax, reducing the purchasing power of savings and wages. According to economist Daniel Lacalle, “the destruction of the purchasing power of currency by governments is a policy, not an accident.”
Lacalle further writes: “Inflation is a hidden wealth transfer from savers and real wages to governments. It is a disguised tax.”
This benefits the government and its cronies at the expense of ordinary people.
Mahary has described the current state of monetary policy as like throwing darts at a dartboard, and has criticized the Fed's inconsistent and often inaccurate forecasts.
Federal Reserve Performance
Maherly, along with Fed watchdog David Hay, has highlighted the Fed's poor track record in forecasting interest rates, noting that it gets it right just 37% of the time.
For example, in March 2021, the Fed projected that interest rates would remain at zero in 2022, when actual rates were 1.75%. Inconsistencies like this undermine confidence in the Fed's ability to effectively manage monetary policy.
Monetary and price inflation
Maher emphasizes the difference between monetary inflation (an increase in the money supply) and price inflation (rising prices). While various factors can cause specific prices to rise, only an increase in the money supply can result in an overall increase in prices across the economy. He argues that the Federal Reserve is misguided in its focus on controlling price inflation while ignoring its underlying cause: monetary inflation.
The Value of Gold
Physical currency such as gold speaks volumes about government financial misconduct. Despite fluctuations, gold has risen 89% over the past five years, outperforming the S&P 500, which has risen 85%.
Maharry cites economist Daniel Lacalle, who argues that gold remains extremely cheap given the ongoing devaluation of fiat currencies.
According to Lacalle, “holding cash is dangerous and accumulating national debt is reckless, but to reject gold is to deny the reality of money.”
summary
In this week's Midweek Note from Money Metals, host Mike Maharry criticizes government economic policies, focusing in particular on inflation, which the Federal Reserve is deliberately using to devalue the currency and control the debt. He argues that while governments profit from inflation, it also erodes the purchasing power of people's savings and wages, acting as a hidden tax.
Mahary points out the Federal Reserve's poor track record in predicting and containing inflation and emphasizes the need for individuals to protect their wealth through investments in gold and silver, which remain undervalued amid ongoing monetary and fiscal mismanagement.
