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Most politicians limit their comments about the Federal Reserve to sheer praise. Know thy master. Donald Trump has followed in the footsteps of Ron Paul, with his sharp critique of the FED and harsh words for Janet Yellen in particular.

trump fedDonald Trump has put his name firmly on this short list of politicians that dare to criticize the Federal Reserve. He told Yellen that she should be ashamed of herself for politically-motivated actions as FED Chief. In particular, Trump has accused the FED and Yellen of keeping interest rates at super low levels (barely above zero) to help President Obama and Hillary Clinton look better at handling the economy.

Fed chair Yellen said that’s absolutely not true in a press conference Wednesday. “We do not discuss politics at our meetings, and we do not take politics into account in our decisions,” Yellen said.

Trump also called out the FED for creating a ‘fake economy.’

He is right of course. The FED has created artificially low interest rates, injected stimulus, monetized massive amounts of debt and saved the largest banks from their free-market fate of failure. They have created an incredible amount of moral hazard in the process.

The FED creates or at least amplifies the boom/bust economic cycles that devastate masses of middle class citizens, while siphoning away their wealth and concentrating it in the hands of the very few. It just so happens that those on the receiving end are the banking elite and their political cronies.

The FED has created yet another set of massive asset bubbles on the precipice of bursting. They managed to create a huge stock market bubble, real estate bubble, bond bubble, student debt bubble and dollar bubble. The ‘recovery’ since the last financial crisis of 2008-09 has been driven entirely via manipulation of markets and the inflating of these various assets bubble. It is an unsustainable mirage of a recovery and this monetary experiment ends very badly.

This helps to explain why the FED has been unable to raise rates at anywhere near the trajectory that the market was expecting. At the end of 2014, the Fed was projecting that the Fed Funds rate would be 2.5% by the end of 2016 and 3.625% by the end of 2017. Today, that forecast is just 0.625% and 1.125%. 

Trump has gone as far as to say he wants to see audit the FED in his first 100 days in the White House and “replace” Yellen. It usually happens the other way around, whereby the FED chooses the President and “replaces” those that do not obey their orders. But I’d still like to see him try.

trump audit fed

You will not hear Hillary Clinton criticizing the Federal Reserve in the same way Trump has done. She is 100% an establishment insider. I am not naive enough to believe that the FED will allow Trump to challenge their power, if he is elected. A few other leaders have attempted to do so throughout history and it did not end well.

jekyll islandBut someone needs to question the FED’s unconstitutional control of the money supply in the United States. If you want a deeper background of the nefarious origins of the Federal Reserve, I recommend reading “The Creature from Jekyll Island : A Second Look at the Federal Reserve” by G. Edward Griffin.

Book Description: Where does money come from? Where does it go? Who makes it? The money magicians’ secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You’ll be hooked in five minutes. Reads like a detective story – which it really is. But it’s all true. This book is about the most blatant scam of all history. It’s all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. Creature from Jekyll Island is a “must read.” Your world view will definitely change. You’ll never trust a politician again – or a banker.

What Does It Mean for Gold Investors?

I think this divisive election season will be bullish for gold prices. Whether it is Clinton’s accommodative policies or the instability and uncertainty of a Trump Presidency, it is hard to imagine gold prices going anywhere but up in the months ahead. Some have floated theories of an October surprise by the Clinton political machine to sink Trump just prior to the elections. In a time of crisis, undecided voters are likely to go with the devil they know.

Gold could also see a rush of safe-haven demand from the bursting of any of the asset bubbles that we mentioned. This time around, any single failure could cause a domino effect and produce an economic crisis worse than the one experienced in 2008. Gold may sink initially in a rush to liquidity, but is likely to rocket to new highs shortly after the initial panic.

We are also entering the strongest seasonal months for precious metals. And unfortunately, geopolitical tensions are boiling over globally and race riots are once again exploding on the streets of America.

Even absent any major catalyst, I expect simple supply and demand fundamentals to push gold and silver prices to new highs over the next 12 to 24 months. But any number of black swan events have the potential to launch precious metals’ prices into the stratosphere.

I believe it is wise to be positioned before the election, before the strongest seasonal months, before the next financial crisis and well before any of these black swan events materialize. Investors are currently being gifted with a nice pullback in gold and silver prices and excellent opportunity to buy the dip.

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