By now, I (Chris) am sure you’ve heard about the latest Fed interest rate cut.
After its two-day rate-setting meeting, the Fed dropped the key lending rate in the economy by a quarter point to 1.75%.
But one of the Fed’s most closely watched inflation gauges (the core Consumer Price Index) is running at 2.4%.
That leaves the real interest rate at MINUS 0.65%.
And the Fed isn’t the only central bank slashing rates. So are central banks in Europe, Japan, and China.
You can turn to the talking heads on CNBC… or the opinion pages of The Wall Street Journal… to hear from the usual “experts” about what it all means.
But as I’ll show you today, it’s not what central banks announce to the press that you should be paying attention to.
It’s what they’d rather keep on the down-low.
As they slash interest rates to devalue the fiat currencies they manage… they’re also loading up on gold.
And there’s good reason for that.
They fear their reckless policies could crash the very system they’re trying to keep propped up.
And as you’ll see today, you should follow their lead and add gold to your own investment mix.
And in the first half of this year, they snapped up $16 billion worth of the stuff.
That’s the highest pace of gold buying by central banks since 1971.
If you’re a follower of Legacy Research cofounder Bill Bonner, that year will be seared into your brain.
It marked the end of the gold-backed money system… and the start of what Bill calls the “phony-money” system we have today.
But if you’re new to Bill, here he is with more on that…
To fully understand it, we need to go back to its genesis nearly half a century ago. In 1971, the feds pulled the old switcheroo, substituting a new currency – Federal Reserve notes – for the old, reliable, gold-backed dollar.
The old dollar was handcuffed to gold at a fixed rate of $35 per ounce. Where gold went, the dollar went, too.
But the new dollar was more obedient; it went wherever its masters wanted it to go.
That leads to a puzzling question…
If central banks abandoned gold as money nearly a half-century ago, why are they buying so much of it today?
Like we do, central banks see gold as “disaster insurance.”
And the disaster they’re insuring against is one of their own making – the collapse of the dollar-based phony-money system.
It’s a theme Tom Dyson readers will be familiar with.
Tom used to work for the investment bank Salomon Brothers. But he decided to give up his high-paying job and become a newsletter writer because he was a fan of Bill’s former e-letter, The Daily Reckoning. (You can read about how Tom met Bill here.)
These days, Tom is traveling the world with his family. But he still shares Bill’s view on the fragility of the dollar-based system.
As Tom has been showing readers of his free daily newsletter, Postcards From the Fringe, he believes we’re in the middle of a “slow-motion credit crunch.”
And he warns that it will bring about the total degeneration of the world’s financial system.
It’s why Tom recently drained his bank and savings accounts and converted all his wealth into gold.
Lehman Brothers collapsed in September 2008.
That’s when folks started to fear that the financial system was on the brink of collapse.
Most folks remember that time as one in which everything fell at once. But as stocks and other financial assets plunged… the price of gold shot up.
From the stock market peak in October 2007 to the bear market bottom in March 2009, the S&P 500 plunged 57%.
But the price of gold rose 26% over the same time.
People who took out disaster insurance in the form of gold got a tidy payout.
In recent months, we’ve been warning you of the potential fallout from the global experiment in monetary manipulation central bankers are engaged in.
This includes slapping negative interest rates on savings… monetizing government debt (aka quantitative easing)… buying stocks with newly created cash (a favorite of Japan’s central bank)… even so-called helicopter money.
That’s central-banker-speak for ballooning the money supply by directly topping up people’s bank accounts.
And it’s not just central banks who are in Inflate-or-Die mode.
Meanwhile, the Trump administration is running up trillion-dollar deficits.
And that’s what makes gold so attractive right now.
The supply of the dollar… the euro… and the yen is elastic. And central banks are doing everything they can to boost supply and chip away at the currencies’ buying power.
This way, they hope to persuade us all to go out and splurge. If your money in the bank buys less each year, they reason, the more incentive you have to spend it now.
But the supply of gold is fixed.
This makes it resistant to central bank manipulation. So owning it helps preserve your buying power. Here’s Tom…
Many countries are about to weaken their currencies. And it starts with the U.S.
Look at Trump’s recent tweets. Or the U.S. government’s $22 trillion in debt (which is effectively a massive bet on the dollar losing value). America needs a weaker dollar to win back industry from overseas and keep the credit flowing.
Look at the Chinese, who want their products to seem cheap in the rest of the world. Or the Japanese and the Germans, who compete with the Chinese. Or the Brits, who are about to Brexit…
We’re entering an era of “competitive devaluations” or “currency wars.” Gold will be the only practical way to preserve your buying power.
The markets are starting to sense this. But it’s still just a trickle. Yet as more and more people buy gold, we get closer to the tipping point… the bursting dam… the avalanche.
Gold is already up 18% so far in 2019. It trades for $1,514 an ounce versus $1,282 an ounce at the start of the year.
But Tom believes gold prices will double or triple from here. In fact, as he told his readers, he sees gold hitting $4,000 an ounce.
The best way to start is by buying some physical gold… and taking personal possession of it.
If you’re new to gold, start with common one-ounce coins. Our go-to gold expert here at Legacy Research has set up a special page at Gainesville Coins with a list of discounted options.
Neither E.B. nor Legacy gets any compensation from Gainesville Coins for bringing you this offer. It’s purely something E.B. set up as a service to his readers…. and has kindly agreed to share with other Legacy folks.
For more on the other ways to own gold once you have some in your possession, you can download our free guide on how to buy physical gold here.
Regards,
Chris Lowe
October 31, 2019
Dublin, Ireland
P.S. If you believe President Trump when he tweets about this being the “Greatest Economy in American History,” you’re going to hate what I have to say…
But Trump’s claim that this is the greatest economy ever just doesn’t stack up with what we’re seeing.
We’ll have more for you on why the economy isn’t as rosy the president wants you to believe next week.