It was barely a week ago that the federal government estimated it would borrow $3.7 trillion this fiscal year due to all the Covid bailouts.
Then, only a few days later, the Treasury Department updated the estimate and announced they would in fact be borrowing $4.5 trillion this fiscal year.
That’s an increase of $800 billion in less than a week!
Not to be outdone, the Federal Reserve has printed more than $2.5 trillion in less than 50 days, expanding its own balance sheet by 62% since the start of the pandemic.
I’ve been really hammering this theme lately, but it’s critical to understand: there is no limit to the amount of money they’ll print, or to the amount of debt they’ll take on.
And this has serious implications for the dollar.
It would be foolish to expect that you can create trillions of dollars in a matter of weeks, and take on trillions of dollars in debt, without any consequences whatsoever.
I’ve already written this a number of times, but I’ll repeat it again: if printing money were the way to achieve prosperity, then Zimbabwe would already be the wealthiest country in the world.
Prosperity requires smart, talented, hardworking people efficiently producing valuable goods and services. You can’t just click a button and create that out of thin air.
But politicians don’t seem to understand this simple point.
It’s far easier for them to print money, go into debt, and bail everyone out. And when that approach doesn’t work, they resort to dismantling capitalism, brick-by-brick.
Housing authorities have ripped up centuries of contract law and told people that it’s OK to not pay their mortgages.
Politicians are attempting to pass laws to retroactively adjust insurance policies and force insurance companies to pay for pandemic-related damages that were NOT part of the contract.
Local governments have suspended property rights and forced homeowners to leave town at the point of a gun, while police agencies raid businesses to seize legally-acquired private property.
Regulators have destroyed any hint of safety and told banks to NOT report non-performing loans, all while asking depositors to keep their savings in the banking system.
There’s a never-ending list of dirty tricks that these people have used to beat the economic system to a pulp.
You can practically hear them say, “sweep the leg,” as they come up with creative new ways to wreck the economy and devalue the currency.
Look, there’s still a tremendous amount of uncertainty about how this pandemic will play out. Will they open the economy? Will anyone show up? How long will the recovery take? How many jobs and businesses will be lost for good?
There are so many unknowns.
But one thing that’s becoming completely obvious is that they don’t give a damn about the value of the currency, and they will keep printing incomprehensible amounts of money to bail everyone out.
Consider that the $2.5 trillion they printed since March is more money than they printed in the first 95 years of the Federal Reserve’s existence. That’s astonishing.
We can keep our fingers crossed and hope this won’t create devastating, long-term consequences.
But as a practical matter it makes sense to at least consider owning some real assets, including precious metals.
History tells us that whenever governments and central banks resort to such extraordinary measures, precious metals tend to be a safe haven asset.