The Federal Reserve has a problem
The linked article discusses concerns about inflation resulting from the Federal Reserve's monetary policy in response to the 2008 global financial crisis. The author argues that the Fed's strategy of paying banks to park money at the Fed and limit its inflationary effects has resulted in a costly corner, with the Fed paying over $750 million in interest every day to financial institutions that have parked $5.7 trillion in its vaults.
The article suggests that the combination of reverse repo operations and interest on reserves has created a multitrillion-dollar attempt to minimize the inflationary impact of government spending, but the interest payments are adding to the money supply daily and working against the Fed's goal of higher interest rates to stop inflation.
The author warns that the Fed has no exit strategy, and stopping these operations would add a significant amount of liquidity to the market, potentially unleashing an inflationary tsunami. The Fed lost control of the repo market in 2019 and this suggests that financial institutions have learned that U.S. Treasuries are not risk-free and that the Fed is still in the bailout business for financial markets.
So, what can investors do to help mitigate this inflation risk? By investing in hard assets like gold, silver, real estate, commodities, inflation protected bonds, and bitcoin.
At iSectors, we provide a simple way to gain access to these asset classes in our iSectors® Inflation Protection Allocation, iSectors® Precious Metals Allocation and iSectors® CryptoBlock® Allocation models. For more information about these strategies please visit our web site at iSectors.com or feel free to reach out to Scott Jones at iSectors at 800-869-5184 for more information.