Headline - The Federal Reserve May Be Playing Poker With the US Dollar
With the Federal Government's recent announcement that they will be printing billions of dollars to buy back government debt, Financial Advisor Dennis Tubbergen believes it may be time to begin looking at dollar alternative investments.
Last week, the Federal Government has announced their commitment to pouring up to $1.
25 trillion into the purchase of mortgage backed bonds issued by government backed entities like Fannie Mae and Freddie Mac.
So where did the Federal Reserve discover all of this new money? They didn't, according to Tubbergen.
They are just printing it.
The Fed's goal is to keep bond prices high and interest rates low in an effort to revive lending, so it has now committed to becoming the buyer for these securities.
The feds would like to get more money flowing into the economy.
They face a challenge; however, since the fed funds target interest rate* is already at 0% - .
25%; meaning they could not realistically reduce interest rates further.
So instead, in an unprecedented move, the fed elected to simply print out more money to buy back government debt.
If you're a poker player, this move by the fed could be described as going 'all in', according to Tubbergen.
The fed bought government debt and replaced it with even more debt.
The term for the end result of this action is "monetizing the money supply.
"Although the fed's move to monetize debt may temporarily help sustain depressed interest rates, it is likely to result in inflation and higher interest rates in the long run.
Simply put, the fed is creating US Dollars almost from thin air, Tubbergen says.
After the fed's announcement, the US Dollar fell and gold prices rose.
The announcement was not well received by the international community.
Shortly after the feds announcement, China called for the creation of a new currency to replace the U.
S.
Dollar as the world reserve currency.
Russia also recently went on record stating that they are recommending that the International Monetary Fund issue the new world reserve currency.
So how might this affect U.
S.
citizens? It is Tubbergen's view that inflation, possibly even hyper inflation, could follow the fed's move in 12 - 24 months.
This is why Tubbergen believes those with accumulated wealth may need to look at dollar alternative investments and absolute returns* investment strategies.
*The fed funds target interest rate is the key rate used for regulating the U.
S.
economy, our government typically lowers it when it needs a boost and raises it when the rate of inflation is too high.
*Absolute return investment strategies aim to produce positive returns regardless of the directions of financial markets.
Investing in market related securities involves a risk of principal loss.
Having a particular investment strategy does not guarantee a profit and/or guarantee against loss.
Prior to making any investment decision, the services of an appropriate professional should be sought as investment related recommendations are dependent upon the personal financial situation of each individual investor.
Advisory services offered through USA Wealth Management, LLC, a federally registered investment advisor.
The opinions expressed herein are those of the writer and not necessarily that of the above noted company.
This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted.
Last week, the Federal Government has announced their commitment to pouring up to $1.
25 trillion into the purchase of mortgage backed bonds issued by government backed entities like Fannie Mae and Freddie Mac.
So where did the Federal Reserve discover all of this new money? They didn't, according to Tubbergen.
They are just printing it.
The Fed's goal is to keep bond prices high and interest rates low in an effort to revive lending, so it has now committed to becoming the buyer for these securities.
The feds would like to get more money flowing into the economy.
They face a challenge; however, since the fed funds target interest rate* is already at 0% - .
25%; meaning they could not realistically reduce interest rates further.
So instead, in an unprecedented move, the fed elected to simply print out more money to buy back government debt.
If you're a poker player, this move by the fed could be described as going 'all in', according to Tubbergen.
The fed bought government debt and replaced it with even more debt.
The term for the end result of this action is "monetizing the money supply.
"Although the fed's move to monetize debt may temporarily help sustain depressed interest rates, it is likely to result in inflation and higher interest rates in the long run.
Simply put, the fed is creating US Dollars almost from thin air, Tubbergen says.
After the fed's announcement, the US Dollar fell and gold prices rose.
The announcement was not well received by the international community.
Shortly after the feds announcement, China called for the creation of a new currency to replace the U.
S.
Dollar as the world reserve currency.
Russia also recently went on record stating that they are recommending that the International Monetary Fund issue the new world reserve currency.
So how might this affect U.
S.
citizens? It is Tubbergen's view that inflation, possibly even hyper inflation, could follow the fed's move in 12 - 24 months.
This is why Tubbergen believes those with accumulated wealth may need to look at dollar alternative investments and absolute returns* investment strategies.
*The fed funds target interest rate is the key rate used for regulating the U.
S.
economy, our government typically lowers it when it needs a boost and raises it when the rate of inflation is too high.
*Absolute return investment strategies aim to produce positive returns regardless of the directions of financial markets.
Investing in market related securities involves a risk of principal loss.
Having a particular investment strategy does not guarantee a profit and/or guarantee against loss.
Prior to making any investment decision, the services of an appropriate professional should be sought as investment related recommendations are dependent upon the personal financial situation of each individual investor.
Advisory services offered through USA Wealth Management, LLC, a federally registered investment advisor.
The opinions expressed herein are those of the writer and not necessarily that of the above noted company.
This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted.
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