Your Survival Guy

Preparing your investments and family for when disaster strikes.

Disclosure

  • Home
  • Your Survival
    • Your Survival Guy’s Super States
    • EMP Threat
    • Tucker Explains
    • Newport Gas Outage
    • Water
      • Emergency Water Storage
      • Let There Be Water
    • Get Your Gun and Your Training Now
    • Satellite Phones
    • Navy SEAL Survival Kit
  • Your Money
    • Coronavirus Infects Stock Market
    • Looking for a Better America
    • You Invest, They Win
    • Where to Keep Your Cash
    • Paris
    • How to Buy a Boat
    • Dead or Alive? The Future of Long-Term Investing
    • Is Vanguard too Big?
    • Cryptocosm and Life After Google
    • The Last Intelligence Report
    • The Truth Behind the S&P 500
    • RAGE Gauge
    • How Many “Retirees” Will Keep Working?
    • Your Retirement Life
    • You’ll Love This if You’re Dreaming of an Active Retirement Life
  • Weapons
    • Self Defense
    • Every Family Should Own at Least One Shotgun: Here Are Three
  • About Me
    • Your Survival Guy: “Life on Main Street Hasn’t Been This Hard in a While”
    • Preparing for Times Like These
    • My Videos/Pics
    • Music
      • RIP Neil Peart: You Will Always Be Remembered as a “Modern-Day Warrior”
    • Your Survival Guy: Make Your Bed and The Hero Code
  • You
    • Our Cabin on Kodiak, Alaska
    • If You Are in Pain, this May Help. It Helped Me.
    • How to Save for a Grandchild
    • FIRE! Financial Independence, Retire Early
    • Compound Interest
    • Arithmetic of Portfolio Losses
    • Maximum Portfolio Withdrawal Rate
    • An Efficient Frontier
    • Retirement Compounders
    • Counterbalanced Total Returns
  • Survive & Thrive
    • July 2022
    • June 2022
    • May 2022
    • April 2022
    • March 2022
    • February 2022
    • January 2022
    • December 2021
    • November 2021
    • October 2021
    • September 2021
    • August 2021
    • July 2021
    • June 2021
    • May 2021
    • April 2021
    • March 2021
    • February 2021
    • January 2021
    • December 2020
    • November 2020
    • October 2020
    • September 2020
    • August 2020
    • July 2020
    • June 2020
    • May 2020
    • April 2020
    • March 2020
    • February 2020
    • January 2020
    • December 2019
    • November 2019
    • October 2019
    • September 2019
    • August 2019
    • July 2019
    • June 2019
    • May 2019
    • April 2019
    • March 2019
    • February 2019
    • January 2019
    • December 2018
    • November 2018
    • October 2018
    • September 2018
    • August 2018
    • July 2018
    • June 2018
    • May 2018
    • April 2018
    • March 2018
    • February 2018
    • Welcome

Will the Fed Stick to Its Course?

June 16, 2022 By E.J. Smith - Your Survival Guy

After decades of low-interest rates, inflation has finally caught up to the Fed. America never should have been in this position. Everyone knew that pulling demand from the future with low rates would eventually catch up to the Fed, but no one seemed to worry about that. The value of the dollar has been regularly falling since America came off the gold standard, and in the 21st Century, it’s been continuing that trend. But during the Biden era, the rate of dollar value destruction has accelerated. Now the Fed has a chance to make it right, or at least clean up some of the mess they caused.

Yesterday’s 0.75% increase by the Fed was exactly what the doctor ordered. Let’s hope the Fed has the conviction to keep it going in future meetings. There’s still a ways to go, but yields are getting more attractive.

In The Wall Street Journal, monetary economist Judy Shelton suggests that the only way the Fed can deal with all the inflation it caused is a “punishing sequence of rising interest rates.” She writes:

People may be starting to question the wisdom of wholly discretionary monetary policy as they are asked to accept a punishing sequence of rising interest rates. But a punishing sequence of rising interest rates seems to be the Fed’s only feasible option for addressing the latent inflation it enabled, which was triggered by fiscal stimulus.

Mr. Powell should note that the original inflation-targeting operating model for central banks—first put in place in New Zealand in 1990—included a provision for dismissing the top official for inadequate performance.

Accountability shouldn’t require omniscience, but neither should it excuse errors of judgment that end up harming Americans across the income spectrum. It was jarring to hear Ms. Yellen tell the Senate Finance Committee last week: “I do expect inflation to remain high although I very much hope that it will be coming down now.” You would think the former Fed chief would rely more on quantitative reasoning than wishful thinking.

The latest CPI number made it clear that inflation isn’t yet coming down—prompting the Fed to take a more aggressive stance. Contractionary monetary policy theoretically requires a nominal interest rate higher than the inflation rate. It isn’t clear the Fed is willing to go that far. In the extreme, high interest rates could cause bankruptcies and defaults. Meanwhile, a rising dollar could render dollar-denominated debt untenable for foreign borrowers with weak currencies.

All of this should cause us to rethink how the Fed intervenes in the economy. Neither artificially high interest rates nor artificially low interest rates are most conducive to productive economic growth. What a market economy needs is meaningful price signals—real interest rates.

Let’s abandon talk of hawks and doves on the Fed’s monetary policy-making committee and listen to the woodpeckers prepared to hammer away on the principle that money should provide a dependable store of value.

You should be able to rely on the value of your money. It should not be subject to the whims of central bankers. The last twenty-five years have proven the problems with that system.

Action Line: Many investors rely on the Fed always reinflating the market with easy money. The “Fed Put” as it’s known. But instead of relying on the Fed’s ability to move markets to generate returns, you should instead rely on a portfolio of individual dividend-paying stocks and interest-paying bonds. If you want to build such a portfolio but need help, let’s talk.

The following two tabs change content below.
  • Bio
  • Latest Posts
My Twitter profileMy Facebook profileMy Instagram profile

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com
My Twitter profileMy Facebook profileMy Instagram profile

Latest posts by E.J. Smith - Your Survival Guy (see all)

  • “Shooter! Run!” - July 6, 2022
  • Red States Churning Out Jobs While Blue States Lag Behind - July 6, 2022
  • “Talk to Me, Goose!” Time Flies in Top Gun: Maverick - July 5, 2022
  • Common Sense Conservative Values for Main Street America - July 5, 2022
  • Rich Grandchild, Poor Grandchild - July 5, 2022

If you enjoyed this post, email it to a friend:

  • Email
  • Print
  • Facebook
  • LinkedIn
  • Twitter
  • WhatsApp

Related Posts

Money 101

Trending

  • This State Leads America in Gun Ownership
  • Time to Save, Troubles Dining Out, and Intelligence on Yellowstone
  • WATCH: New York Governor Melts Down When Asked for Facts
  • Proper School Security Stops Potential Attacker
  • Here’s Why You Need a 15-Year Retirement Investment Plan
  • Your Survival Guy: Clearing the Decks, Buying a Boat, Seeing the World and More
  • More Guns Means Less Crime in Brazil Too
  • SECRETLY INSOLVENT: Crypto Exchanges Hiding Their Troubles
  • How to Buy a Boat: Part I
  • Republicans Can't Stop Biden's Border Chaos, Yet

Must Reads

  • The Masters of the Universe Align Themselves with CHINA Using YOUR Money?
  • Tom Brady Is Proof You Shouldn’t Retire if You Still Love Your Work
  • BIDEN-FLATION: Here’s Why Prices Are Up At Your Favorite Restaurant
  • Get Out the Map, Make a Plan, and MAKE IT HAPPEN
  • Your Survival Guy: Simple Prepping for Winter Storms
  • Survival: Lost in the Woods Bending the Map
  • Some Lessons You Just Can’t Get from a Textbook
  • Parents Are the New Tea Party. Bad Schools Are the New High Taxes.
  • Your Job as an Investor Is Not What You Think
  • GET PAID: How To Invest in Biden’s Inflationary Market
Only if You’re Serious
Your Survival Guy in Paris
Your Survival Guy's Fishing Stories
Financial Independence, Retire Early
Money 101
Pandemic Creates Virtual Panopticon
Emergency Water Storage
Key West Summer Camp in March
Find Freedom in America
Second Amendment
How Can You Save Money for Your Grandchild
Great Reset
See Who's Missing the Boat
Richard  Young Reports
How You Can Save Money for Your Grandchild
Why Fidelity is Number One
The Best States for Survival
You Invest, They Win
Escape the City
Why Vanguard is Too Big for YOU
Island Life

Copyright © 2022 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.