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The COVID-19 outbreak is a significant global health crisis and economic crisis, to be sure. But when it comes to the stability of individual savings like yours, could the Fed’s cure be worse than the virus? In my opinion, there’s no doubt the Fed’s unprecedented quantitative easing (QE) agenda could have profound implications for the inherent value of your retirement savings.
Let’s begin examining this idea by looking at the ways our economy is hurting. Unemployment rates are positively jaw-dropping. Concerns are growing that another mortgage crisis will soon be upon us. And in the interest of “helping” the country economically survive the coronavirus, the Federal Reserve appears to be making good on its word to throw every tool it has at the financial crisis. I know they want to help, but I have to question the eventual consequences of what they’re doing.
Part of the problem is the massive size of the QE. Reuters says the Fed’s balance sheet hit a record $5.86 trillion last week – and “unlimited QE” has just begun. That includes an expansion of roughly $1.5 trillion in just three weeks. Reuters says the Fed balance sheet is “now the equivalent of a quarter or more the size of the U.S. economy before the crisis struck.” Investment banking advisory firm Evercore ISI claims the pandemic eventually could see the balance sheet expand by another $5 trillion. That would double its pre-crisis size.
We are pleased to present a special video feature on this topic in this week’s all-coronavirus Touchpoint. In the video, Augusta economic analysts Devlyn Steele and Clint Doll discuss Fed quantitative easing and the national debt – and just how big these metrics have has gotten.
Here is what’s in the news on these topics in your weekly Touchpoint for retirement savers:
- Will the coronavirus pandemic usher in another mortgage crisis? An article posted at Yahoo Finance says “mortgage lenders are preparing for the biggest wave of delinquencies in history.” Mark Zandi, Moody’s Analytics chief economist, has a particularly ominous projection if the economy’s shutdown persists at least through the summer. He estimates that up to 30% of Americans with home mortgages could just stop paying on those loans. Protections have been put in place for borrowers, but mortgage servicers could be on dangerously thin ice. If roughly 30% of their customers stop making payments, few have the capital necessary to cover obligations to the bondholders according to Quicken’s Jay Farner. And if that happens, well, here we go again with a new mortgage crisis.
- The coronavirus unemployment figures have been truly mind-boggling so far. But some analysts say we haven’t seen anything yet. Pantheon Macroeconomics Chief Economist Ian Shepherdson made a frightening projection during his appearance last Friday on CNBC’s “Squawk Box Europe.” Shepherdson’s research suggests to him that as many as 8 million more Americans filed for unemployment just last week. Economist Carl Weinberg expressed to CNBC his grave concern over the implication of that many jobless Americans to the financial system: “If people don’t pay their rent, then the landlords can’t pay their mortgages. The banks would have to write off the mortgages…the asset-backed securities then fall into a dark hole.”
- Independent economic analyst Jesse Colombo is one of the relative few who predicted the 2008 financial crisis. And he has been saying for some time that another significant downturn – like the one unfolding before our eyes – was looming. For Colombo, one of the telling pieces of data is the tremendous surge in household wealth as a portion of nominal gross domestic product. According to MarketWatch, that figure reached 473% at the housing bubble’s peak and has averaged 371% since 1951. Colombo tells MarketWatch that his analysis reveals the number hit 545% in the fourth quarter of 2019. He says the soaring figure is attributable to a massive overvaluation in the price of risk assets owned by Americans. Colombo suggests the current collapse has been long overdue and the pandemic is simply the trigger. He believes the markets have much further to fall before they even begin to reach a level of fair value. So what is he putting his money in through the foreseeable future? “What I believe in this point is hard assets and alternative assets…physical gold, physical silver,” Colombo says.
- Experts said the worst of the pandemic would be over by the second quarter’s end. After that, America’s economy would return quickly to her pre-outbreak robustness. Well, it seems that more than a few of these experts are changing their tune now. With a medical resolution to the health crisis still out of reach, there is no pending resolution to the economic crisis. In this case, they are one and the same. Exacerbating the increasingly worrisome economic outlook is the growing threat that another COVID-19 outbreak will erupt in the fall. If the turmoil continues through the foreseeable future, could gold be a potential source of portfolio relief? For insight, read the latest blog article from Augusta Precious Metals.
Just as a resolution to the coronavirus health crisis remains uncertain, so, too, does a resolution to the associated economic crisis. Only weeks ago, the hit to the global economy was predicted to be sharp but brief. Now, observers are lining up to say the fallout could prove catastrophic.
Where does a retirement saver go from here? In anticipation of worsening economic conditions, one option worth considering is physical gold. Even with recent volatility, gold’s safe-haven reputation remains intact. And some of the most respected names in economic analysis believe gold’s value will shoot skyward in the months to come due to the Federal Reserve’s massive, coronavirus-cued quantitative easing agenda.
Are you ready to learn how gold and silver could help rescue your portfolio in the months to come? Call Augusta Precious Metals at 800-700-1008 or visit Augustapreciousmetals.com. Find out how easy it is to buy physical gold and silver – even for your IRA. And if you have a portfolio worth at least $100,000, ask about reserving your seat for Augusta’s live Profit & Protect Web Conference. This presentation is hosted by Augusta senior economic analyst and Harvard Business School member Devlyn Steele. It’s the very presentation that convinced Hall of Fame quarterback Joe Montana to become an Augusta customer and now our corporate ambassador!
We look forward to hearing from you.