The Setup For a Long and Deep Crisis is In Place—Here’s How I’m Preparing Financially Jeff Clark, Senior Analyst, GoldSilver.com
MAY 8, 2020
It’s gotten to the point where reading daily news reports can induce feelings of depression and anxiety. Maybe you have similar reactions when you see a constant barrage of negative headlines. They’re everywhere, and seem like they’ll never end. If you let it get to you, Covid-19 will turn into a Covid-depression.
Having a positive frame of mind is important in times like this, but neither do we want to be blindly optimistic. Sticking your head in the proverbial sand might feel good for a while, but it could be financially devastating if you leave it there.
We can’t change what’s happened, nor can we wish the virus away, but we can decide how we’ll deal with it. We can actively choose solutions that will help us weather the pandemic and its fallout, as well as prepare us for its ending, whenever that may be and however it may look.
There is lots of advice on personal strategies, but when it comes to our finances, there are three key things I am doing to get through this and come out the other side not only intact but with a handsome profit.
My strategies may not surprise you, but they’re important to me and I share them in case you find them useful. And they all stem from a realization of one thing in particular…
The Attack on Our Purchasing Power
Nothing puts the amount of currency printing and dilution into perspective better than the following chart. It compares the amount of quantitative easing in the US and G20 from the Great Financial Crisis (GFC) in 2008 to now. Notice not just the amounts but the timeframes.
Stimulus already dwarfs great financial crisis
In just three months, as a percent of GDP, both the G20 nations and the United States have already exceeded the amount of QE done over the three full years between 2009 and 2011.
As you probably know, the amount of QE will continue to rise. It’s unlike the GFC when the Fed capped the amounts—this time, they’ve explicitly stated that QE is unlimited.
And it’s not just these easing efforts—it’s anything and everything related to our monetary system. Skim through this list and see what you think the ultimate ramifications could be to your currency…
As Mike Maloney pointed out, the US Treasury is borrowing $3 trillion in this quarter alone.
The deficit is on pace to easily eclipse the biggest shortfall in US history. It is expected to surpass $4 trillion for this year.
The Fed now says it will likely buy up to $750 billion in debt and ETFs. This is expected to start any day, and will be the first time since the 1950s it has bought corporate debt.
Incredibly, the Fed’s buying program will include junk bonds. Journalists soften it by calling them “fallen angels,” companies that have been downgraded. But many analysts support buying junk bonds, because “if unemployment remains elevated for an extended period of time, and especially if there is not additional rounds of government stimulus, we’re at some significant risk of cascading bankruptcies. A bankruptcy at one firm then infects another firm, and then that infects a third firm.”
House Speak Nancy Pelosi is pushing Democrats to be “first out of the gate” by beating Republicans to propose another multi-billion-dollar virus relief package.
And let’s not forget the prospect of negative rates. There are leading economists who believe they’re not only coming to the US, but are vehemently arguing for deeply negative rates. Kenneth Rogoff, Harvard professor and past chief economist at the IMF, wrote “Until inflation and real interest rates rise from the grave, only a policy of effective deep negative interest rates, backed up by measures to prevent cash hoarding by financial firms, can do the job. Emergency implementation of deeply negative interest rates would not solve all of today’s problems. But adopting such a policy would be a start.”
We can debate whether these extreme measures are necessary or not. But one thing is clear: These actions dilute our currency. They erode our purchasing power. The full effects may not be felt today, but they will tomorrow.
In the midst of this gross monetary negligence, however, there are solutions. Here’s what I’m personally doing about it…
Strategy #1: Physical Gold & Silver Only
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