Federal Reserve, Central Bank Vow to Do “Whatever It Takes” in Coronavirus Recovery

LOUISVILLE, KENTUCKY – The chairman of America’s central bank – Jerome Powell – spoke on Wednesday in Washington, D.C.

He said, “The central bank is going to keep interest rates at zero for years to come… and we will print as much currency as it takes to keep America’s financial system functioning… and I don’t care how much it distorts markets.”

OK, I might have paraphrased. More below…

Camping in a Kentucky Horse Pasture

Greetings from Louisville, Kentucky…

We left Lexington and drove 40 miles west today, to Louisville.

Our hosts tonight are Douglas and his wife, Renee. They own a farm on the outskirts of Louisville and invited us to camp in their horse pasture for a night.

Here we are…

Doug runs a small industrial consulting business. He has an office in Louisville and six staff. He told me about his travails recently over a glass of Kentucky bourbon…

“With the onset of COVID, our workload disappeared, and we had to lay off 80% of our staff. I had to lay myself off, too.

“In May, the work started trickling in again. Not much, but enough that I could re-hire myself. Also, we applied for a Payroll Protection Plan loan from the government. It took six weeks for them to approve the loan. When that money came through, I had enough cash flow to cover payroll again. Two weeks ago, we were able to bring back another three employees.

“It was hard convincing some of my employees to come back because they were making as much money on unemployment as they were working for me. I know this makes it sound like we don’t pay well, but we do. Unfortunately, so does the government.

“Skilled workers would rather stay at home, collect unemployment, and do home improvement projects than go back to work. I’m in a national small business association sponsored by Goldman Sachs and in talking to other small business owners, this is a pretty common complaint.

“Anyway, next month the $600-a-week federal COVID unemployment bonus is ending, so that might change the way workers think about not working…”

This is Doug…

Back to Jerome Powell’s press conference in Washington, D.C…

A Tailwind for Gold

On Wednesday, Powell said the Fed is “strongly committed to using our tools to do whatever we can for as long as it takes.”

As part of that commitment, the Fed will buy at least $80 billion more in bonds a month, plus $40 billion in mortgage-backed securities, per the New York Fed.

If you take Powell at his word (I do)…

And you overlay it with what I wrote about yesterday – that the government is broke but won’t stop spending…

It’s easy to imagine the central bank printing $25 trillion (or even $50 trillion) over the next 10 years. (They’ve printed nearly $2.9 trillion since March 11.)

This will provide a phenomenal tailwind for gold and silver. It’ll destroy the value of currencies and bonds.

That’s why, as I wrote yesterday, Kate and I are staying in the sidelines in gold until this all blows over.

– Tom Dyson

P.S. Here we are having breakfast with Doug’s family this morning before hitting the road…

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Readers ask Tom about buying gold in the era of digital currencies… general advice on where to store gold… and how to prioritize finances for the future…

Reader comment: If your kids don’t yet appreciate what you and Kate are giving them, they certainly will in their older years… and may do the same for your grandchildren in due time. I can only imagine their essays when/if they return to public school someday and have the requisite “What I did on Summer Vacation” report to write. I do so enjoy your postcards of travel, and I have the greatest of respect for you and Kate for working together to give your children such a wonderful experience.

Reader question: With all of the talk about digital currencies, and even a U.S. digital currency, how is one able to sell their physical gold back if cash is not used anymore? How will a coin shop be able to pay you in non-digital currency? This concerns me as I build a gold reserve.

Toms’ response: Hmmm… Are you suggesting that it would be illegal to trade gold for digital currency?

Reader comment: I enjoy reading your life’s daily journeys. I grew up on a large farm, then got into excavating, then trucking around the country. Always wanted to be able to park the truck and just go see close-up the things I’d seen from the road. Today, my wife owns a small trucking company and I drive a little, but mostly do the maintenance end of things. We live just outside a little town called Hicksville, Ohio. If you get by this way, don’t hesitate to stop by for a night or two! Be safe and may the Lord go before you!

Reader question: Where does one store gold? Can you walk into a Chase bank and convert your savings to gold?

Tom’s response: No… but it’s not hard, either. Here’s the general advice I’d give all my readers… The first thing you need to figure out is where you’re going to keep your gold once you’ve bought it. You have a lot of choices.

I’d suggest starting by hiding a couple of Krugerrands, Eagles, or Maple Leafs, or some other common gold coin in the back of a sock drawer.

Then if you buy more gold, you can put it in a safety deposit box at the bank. Or you can bring it home and put it in a safe.

Finally, you can buy gold with your 401(k), IRA, and the cash in your bank account through various different vehicles in the stock market. There are also private vaulting services, but they would be for larger transactions. You’ll just need to wire them your money and you’ll own the gold in a vault somewhere.

Reader question: I enjoy all your emails! But yesterday’s one was sort of worrisome.

I don’t really have anything much in the way of savings or wealth to move anyway. So maybe that’s good. I have some real estate. And my house is well situated for a catastrophic economic failure, so likely my plan would be to stay put. My ability to retire will depend on the state pension system still existing. I have a job that is secure, even in a very depressed economy. Plus, I’m in a union, and I am employed by the state.

So anyway, I guess my question is: What should I do? If anything? Or since I don’t have savings anyway, perhaps there’s nothing to do. Curious what your thoughts are for the average Joe like me.

Tom’s response: If I were in your shoes, I’d be worrying about my pension. And I’d want a retirement nest egg that did not rely on the fiscal responsibility of the state over the next two or three decades. I’d want to be responsible for it myself. I imagine state pension systems will be one of the specific economic pain points in America in coming years. (They’ll probably be bailed out with the central bank’s printed money, though that’s hardly any solace.)

Please keep your comments coming at [email protected]. We love reading them and I’ll do my best to reply to as many as possible.