The Great Fiat Money Experiment - Nathan McDonald (April 9, 2020)

April 9, 2020

Gold and silver bullion have once again resumed their now inevitable trend higher, spiking throughout today's trading session as country after country unleashes wave after wave of fiat money creation.

(Chart source, goldprice.org)

Never before have we witnessed such a global phenomenon, in which so much fiat money was created out of thin air and injected into the system, whether it be through businesses being bailed out or by directly placing it in consumers’ hands.

As COVID-19 continues to spread across the world, with countries such as the United States, Italy, and the United Kingdom being hit particularly hard, government officials have little to no choice in the matter unless they wish to see the virus run out of control, possibly killing millions in the process.

The latter is simply not a scenario they are willing to preside over, and who can blame them? Would you want to be remembered in the history books as the leader who sacrificed millions of your citizens’ lives?

Unfortunately, the harsh reality is that the decision to sacrifice the economy over peoples’ lives is not without consequences itself. Millions of people are suffering financial hardship due to forced closures and government actions taken in the hopes of stopping the spread of COVID-19.

This is particularly true for small-to-medium-sized businesses, many of which have been forced to shutter their doors—knowing they are unlikely to ever reopen them again—as they watch their finances waste away due to a lack of sufficient income.

There are many other economic consequences, and I believe one in particular will have dire ramifications in the coming years, even though the general population seems blissfully unaware of it.

Helicopter Money Goes Global

With each passing day, another government around the globe announces another stimulus, bailout, injection—whatever you want to call it—program, in which billions to trillions of dollars are added to the system in an attempt to help keep the economy churning along as best it can.

Many of these programs are akin to sticking your finger in a dam. However, the amount of fiat money simply being created out of thin air cannot be ignored—and thus WILL not be ignored.

(Image Source, Pixabay)

Take for example the bazooka fiat money shot just fired by the Federal Reserve, which has stated they will do whatever it takes to keep the economy moving, announcing an additional $2.3 trillion in loans.

As per the Fed's most recent press release:

The Federal Reserve on Thursday took additional actions to provide up to $2.3 trillion in loans to support the economy. This funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.

"Our country's highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus," said Federal Reserve Board Chair Jerome H. Powell.

"The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible."

(Chart source, Bloomberg)

This apparently was the straw that broke the camel’s back. The USD dropped lower as investors finally came to their senses, realizing just how historic this fiat money-printing experiment truly is.

Before this announcement, many other bailout programs had been issued by the Federal Reserve. However, the US Dollar Index continued to hold strong.

What makes this move truly shocking is the fact that similar scenarios are being repeated all across the world, such as in the United Kingdom, where the Bank of England has stated they will directly finance the UK government, a move that is akin to letting the genie out of the bottle—and it may possibly never be put back in.

This is a massive move, and the Bank of England is the first Central Bank to do so. However, I suspect others may soon be forced to join their ranks, as they continue to promise ever increasing amounts of fiat money to their citizens with no real means of doing so other than simply creating the money out of thin air.

Meanwhile, the Canadian government has tipped over into socialism, choosing to engage in numerous bailout programs, which will directly support its citizens by sending them large sums of money for many months if they have found themselves out of work due to the COVID-19 crisis.

The Great Fiat Reckoning

As I've stated many times before, I do not envy the position our government officials have been placed in, and I can understand exactly why they are doing what they doing, even if I do not agree with each and every action.

However, what you as an individual need to understand is the fact that the consequences of printing this much money, of debasing your currencies in such a voracious manner, are very real and will only truly manifest themselves in the coming years.

Fiat currencies are being debased like never before and the printing presses are working in overdrive, injecting money into the system, hoping to keep our fragile economies afloat.

Will they be successful? This is yet unknown, as nothing like this has ever been attempted before.

Regardless, there is one thing I am certain of. One thing has stood the test of time, over and over again in these times of crisis, in these times of debasement. Precious metals.

Precious metals—most notably, physical gold and silver bullion—are going to move higher.

They are going to continue to be sought after for the protection that only they can offer in a time of crisis, and they will inevitably account for and adjust to this drastic increase in the fiat money supply, the likes of which we have never before seen.

Keep stacking, keep safe.