From Peter Reagan at Birch Gold Group

At their May third meeting, the Federal Reserve Committee appears to have established two key things (of their estimation).

First, the Fed continues to advertise the delusion that the banking system is “sound and resilient.”

Second, they continue to be focused on bringing inflation back all the way down to Chairman Powell’s pet goal rate of two%.

At that meeting, the FOMC members also decided to boost the federal funding rate by 25 basis points (equal to .25%). That put the official number at 4.83%, the very best rate of interest since 2007.

Taken at face value, almost anyone who doesn’t continually research economic conditions might think every little thing is heading back to normal.

But every little thing isn’t heading back to normal, removed from it.

The speed hike panicked several Democrat lawmakers, who desperately pleaded for the Fed to reverse course:

A bunch led by several outstanding Democrat lawmakers is looking on the Federal Reserve to halt rate hikes to avoid risking an excessive amount of damage to the economy.

The ten senators and representatives, led by Sen. Elizabeth Warren of Massachusetts and Reps. Pramila Jayapal of Washington and Brendan Boyle of Pennsylvania, raised their concerns in regards to the Fed’s monetary policy strategy and its “potential to throw hundreds of thousands of Americans out of labor,” in a letter Monday to Fed Chair Jerome Powell.

The benchmark federal funds rate is the very best since 2007 after nine consecutive rate increases by the Fed since last yr. The failures of Silicon Valley Bank and Signature Bank in March – combined with the “lagging impacts of the Fed’s earlier rate hikes” – have also left the U.S. economy “much more vulnerable to an overreaction by the Fed,” the lawmakers wrote.

Well, Elizabeth Warren and the remainder of Congress can higher afford the steep prices plaguing the economy right away. Like most politicians, they’re way more concerned with re-election than the value of eggs.

Here’s the rationale Chairman Powell’s Fed decided to remain the course, raising rates to fight inflation:

Inflation has proven to be more persistent than officials anticipated, borne out through the Atlanta Fed’s “sticky price” CPI that compares prices for goods and services that don’t change lots over time against those who do.

Sticky prices increased 6.6% annually in March and have been generally on the rise, while “flexible price CPI” climbed just 1.6% and has declined precipitously since peaking at 19.7% in March 2022. Sticky prices include housing.

It’s value remembering that the Federal Reserve chair is an appointed, not an elected, position. Powell can survive a period of unpopularity more easily than any member of Congress (with an election yr on the way in which).

And that’s excellent news for him, because he’s going to be unpopular within the White House (and on Wall Street) for quite a while…

A pause in rate hikes is looking unlikely this yr

Those investors, bankers, and economists who were hoping for the Fed to pivot aren’t going to love Powell’s May 3 statements…

Reporters were attempting to nail him down: Has a choice been made about “pausing” the speed hikes in June? And he was asked if there might be “rate cuts” this yr?

Over and another time, he refused to lock in a pause for the June meeting – “A choice on a pause was not made today,” he started off with. Over and another time, he said that a pause would depend upon the incoming data.

And he brushed off the rate-cut query – “If our forecast is broadly right, it might not be appropriate to chop rates; we won’t cut rates,” he said. [emphasis added]

The Fed’s official post-meeting press release guarantees a concentrate on inflation:

In determining the extent to which additional policy firming could also be appropriate to return inflation to 2 percent over time, the Committee will have in mind the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. As well as, the Committee will proceed reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective. [emphasis added]

That, not less than is sweet news. A lot for Wall Street crybabies, bankers and hand-wringing politicians attempting to pressure Powell into shifting course.

After all, that doesn’t mean there won’t be consequences.

Recession this yr “now inevitable”

Murray Sabrin, who predicted parts of the present dilemma, explained in Fortune magazine why a recession is inevitable this yr:

Recently, Goldman Sachs, a bellwether of Wall Street profitability and employment, announced layoffs of around 4,000 employees and cut bonuses. If Goldman’s announcement is a forerunner of 2023’s Wall Street’s downsizing, then higher unemployment is unfolding within the canyons of lower Manhattan – and shortly in the remainder of the country as 2023 unfolds. Facebook parent Meta and Amazon recently announced one other major downsizing of their workforces. If layoffs speed up in the subsequent few months, a recession – a readjustment to the tip of the straightforward money policies of the past few years – might be underway. [emphasis added]

The reality is, it takes the economy a protracted time to regulate to a “recent normal” where credit isn’t as abundant or as low-cost because it has been for the last 20 years or so.

Sabrin then explained why, despite Biden’s claims that the job market is the strongest in history, it’s quite likely the unemployment rate will soar quite soon:

…in accordance with a long-term chart of the unemployment rate, layoffs are inclined to begin early within the recession phase of the business cycle, after which speed up markedly as corporations realize they need to cut expenses to take care of the brand new economic reality of tight money and slowing demand.

When the unemployment rate reaches a trough because the economy peaks, it tends to “stabilize” at the bottom level of the cycle – after which it’s off to the races.

You’ll be able to see the unemployment trend that Murray described, because it has played itself out since 1950:

Also take note that the last time unemployment was 2.5% was in 1953, just before a brutal recession.

So the economy seems teetering getting ready to a deep recession.

You’ll be able to make certain that many, many more voices are going to be begging for the Fed to provide up the inflation fight within the near future.

Planning for financial security in any economic environment

Once more, looks just like the Fed is stuck between a rock and a tough place. Either the Fed resists panicking lawmakers and bankers, nudging the economy closer to the sting; or the Fed capitulates, returns to money-printing and pours gasoline on the inflation fire.

Regardless of the Fed does, the economic situation is precarious…

There’s one thing you possibly can do right away to arrange your savings to thrive in any economic environment. The SEC calls it “The Magic of Diversification.”

The practice of spreading money amongst different investments to scale back risk is often called diversification. By picking the correct group of investments, it’s possible you’ll find a way to limit your losses and reduce the fluctuations of investment returns without sacrificing an excessive amount of potential gain.

Are your savings diversified across several types of assets? Do they include physical precious metals like gold and silver, which have historically served as protected havens during times of economic uncertainty?

If you desire to add a little bit peace of mind to your financial future, it’s easy to learn more about adding physical precious metals to your savings.

When the economic outlook is as messy and unsure because it is today, what else are you able to depend on?