By Patrick A. Heller
The US government and Federal Reserve Bank are inflating the money supply, which reduces the value of the US dollar. Two Federal Reserve online reports document the scope of this inflation.
First, go to the Federal Reserve website. This shows the size of the Fed’s balance sheet from August 2007 to the latest weekly update. For instance, on Sept. 11, 2019, the Fed’s total assets were $3,769,673,000. This was just a week before the Fed began injecting tens of billions of dollars every day into bank liquidity (which is now hundreds of billions daily). As of April 6, 2020, assets had soared to $6,083,141,000! That is an increase of more than 61 percent in less than 30 weeks! $1.77 trillion of this increase has occurred in just the past month!
Obviously, only major economic turmoil would have forced Fed officials to have taken this drastic action, where assets are now more than one-third higher than they were at $4.5 trillion dollar peak during efforts to bring the US economy out of the Great Recession.
As scary as this news is, US government and Fed officials have already announced actions that could take the Fed’s balance sheet to more than $10 trillion by the end of this year!
Next, the Federal Reserve Bank of Saint Louis chart shows a table for the M2 money supply over time. At the end of the Great Recession, this definition of the money supply stood at $8,362,000,000. As of March 30, 2020, this had almost doubled to $16,668,000,000.
Now, increases in the Fed’s assets and in the money supply by themselves are not automatic proof of a decline in the purchasing power of the US dollar. For instance, if America’s output of goods and services had doubled since the end of the Great Recession, that would not necessarily mean that consumer prices would be higher today. You also need to factor in other changes such as changes in the population.
If you go to www.usinflationcalculator.com you will see that the Consumer Price Index in May 2009, the official end of the Great Recession, was at 213.856. As of March 2020, it was 258.115, which is 20.7 percent higher. As imprecise as this figure is (I think it understates the rise in consumer prices), it does confirm that the purchasing power of the US dollar has fallen significantly over the past 11 years.
Especially with the sharp recent spikes in both the Federal Reserve Bank’s balance sheet and in the M2 money supply, you are just about guaranteed an accelerated decline in the purchasing power of the US dollar.
As my friend and silver guru, David Morgan, said in a presentation at the Silver Summit in Spokane, Wash. on Oct. 24, 2014, “You cannot have real peace and prosperity unless you can absolutely trust the money.”
Sadly, the actions of the US government and Federal Reserve prove that now you absolutely cannot trust the US dollar. That is a scary sign for future peace and economic prosperity.
This is the basic reason why the price of gold is now at its highest level since late 2012 and destined to go even higher this year.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award 2012 Harry Forman National Dealer of the Year Award, and 2008 Presidential Award winner. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2019), Professional Numismatists Guild, Industry Council for Tangible Assets, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and become part of the audio and text archives posted at http://www.1320wils.com).