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Are You Ready For the Fed's Inflationary Holocaust?

|Includes: SPDR Gold Trust ETF (GLD)

Do you own gold yet?

As I’m sure you’re aware, starting in July 2007, the financial markets entered one of the most severe crises in history. In response to this, the Feds (Federal Reserve, Treasury Department, etc.) have tried to prop up the financial system with numerous interventions. A brief recap of their moves are as follows:

-The Fed cuts interest rates from 5.25-0.25% (Sept ’07-today)

-The Bear Stearns deal/ Fed buys $30 billion in junk mortgages (March ’08)

-The Fed opens up various lending windows to investment banks (March ’08)

-The SEC proposes banning short-selling on financial stocks (July ’08)

-Hank Paulson gets a blank check for Fannie/Freddie (July ’08)

-Hank Paulson spends $400 billion on Fannie/ Freddie spending (Sept ’08).

-The Fed takes over insurance company AIG (Sept ’08) for $85 billion.

-The Fed doles out $25 billion for the auto makers (Sept ’08)

-The Feds kick off the $700 billion Troubled Assets Relief Program (TARP) (Oct ’08)

-The Fed offers to buy commercial paper (non-bank debt) from non-financial firms (Oct ’08)

-The Fed offers $540 billion to backstop money market funds (Oct ’08)

-The Feds agree to back up to $280 billion of Citigroup’s liabilities (Oct ’08).

-$40 billion more to AIG (Nov ’08)

-Feds agree to back up $140 billion of Bank of America’s liabilities (Jan ’09)

-Obama’s $787 Billion Stimulus (Jan ’09)

And that’s a BRIEF recap.

All of these moves fall under one basic category: loose money. And of course, it was loose money (easy access to credit) that got us into this mess in the first place. Former Fed Chairman, Alan Greenspan kept the printing presses rolling and interest rates below the rate of inflation, resulting in one of the largest debt bubbles in history. His successor, Ben Bernanke, is not trying to fix that debt bubble by issuing more debt. All he’s doing is cooking up an inflationary holocaust that will erase 401ks, savings, IRAs and the like.

Don’t believe me? Have a look at the Federal Reserve’s Adjusted Monetary Base:










To give this chart some perspective, in Feb. 2008, the Federal Reserve pumped $30 billion into the financial system to prop up Bear Stearns. Compared to the Fed’s printing orgy of the last 8+ months, that $30 billion is now a microscopic bump (see the slight ripple above “2008-02” on the chart above).

Put another way, the Fed is pumping its brains out, having more than doubled the US monetary base in the last two years. Most worrisome is the fact that the Fed recently starting running the printing presses overtime AGAIN in March ‘09… even though they claim the economy and financial markets are improving.

They’re lying. Things are not getting better. If they were, the Feds wouldn’t be running the printing presses both night and day. No, the financial markets are heading for another crisis. And with the Feds feeding the debt bubble with trillions of dollars, one thing is certain:

BIG inflation is coming.

Commodities, especially Gold (NYSEARCA:GLD) will soar when they do. I suggest buying the precious metal anywhere below $900.

Good Investing,

Paul Learton

ps. I personally own gold and the gold ETF.