The extreme increase in the U.S. government’s budget deficits and the soaring inflation of the U.S. money supply over the past two years both signal coming major declines in the purchasing power of the U.S. dollar.
Even though the Federal Open Market Committee last week tried to pretend that inflation is only “moderately” above 2 percent, here are the 12-month price changes through June 2021 as reported in July by the U.S. Bureau of Labor Statistics and the U.S. Bureau of Economic Analysis:
• Personal Consumption Expenditures up 4.0 percent
• Consumer Price Index up 5.4 percent
• Producer Price Index up 7.3 percent
• Import Price Index up 11.2 percent
• Export Price Index up 16.8 percent
I don’t consider any of these to be only moderately over 2 percent.
By now just about everyone is aware of rising consumer prices in America and worldwide. Fed and government officials are mostly trying to get the public to believe these price increases will be “transitory.” One notable exception is former Fed chair and current U.S. Treasury Secretary Janet Yellen, who recently expressed her opinion that rising prices will reach higher and last longer than other government officials claim.
If the above information isn’t enough to get your worried about the future value of the U.S. dollar, perhaps you should consider the following:
• As of their March 2021 financial report, Japan’s Government Pension Investment Fund held $1.7 trillion in assets, the largest such fund worldwide. As of March 2020, 47 percent of this fund’s assets were held in U.S. Treasury securities. The dramatic but little reported news is that as of March 2021, this fund’s holdings of U.S. Treasury debt only made up 35 percent of total assets. This shift indicates that over the year ended March 2021, the fund had unloaded at least $200 billion in U.S. Treasuries!
• Last Wednesday, July 28, the Federal Reserve Bank issued a news release to announce the creation of two new standing repurchase (repo) agreement facilities. Under a new domestic standing repo facility, the Federal Reserve is willing indefinitely to loan large American banks up to $500 billion in overnight loans (using the banks’ holdings of U.S. Treasury securities as collateral) at an interest rate that is initially a meager 0.25 percent annually. The beneficiaries of this practically free money are only the 24 primary trading partners of the Federal Reserve Bank of New York. The Fed went on to say that coverage over time will be expanded to include other large banks. Under the new foreign standing repo facility, the Fed will loan up to $60 billion in overnight loans (against holdings of U.S. Treasury securities) to non-U.S. central banks, again at an initial interest rate of only 0.25 percent.
Why would the world’s largest pension fund be aggressively reducing their holdings of U.S. dollars? Why would the Federal Reserve Bank judge it necessary to indefinitely commit to providing banks up to more than a half-trillion dollars of overnight loans at virtually no interest costs?
Obviously, the answer is that they are worried about the future value of the U.S. dollar.
Even if you weren’t before, are you starting to get worried now?
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. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), 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, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at 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 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).