The Federal Reserve may go on a money-printing spree by the end of the year. This is not just a scare tactic; the data is sounding the alarm!
The 'lifeline' money held by banks at the Federal Reserve now accounts for only 9.7% of GDP, below the 10% warning line. The system is running low on blood. The 'buffer' that banks used to love to save is now down to just tens of billions, almost empty.
The borrowing rate between banks is 19 basis points higher than the Federal Reserve's rate; they are reluctant to lend money, and a liquidity crisis is looming. In 2019, the Federal Reserve's balance sheet reduction faltered halfway, and now the economy is larger, money is tighter, and the situation is worse.
The Treasury issues more than 2 trillion in bonds each year, and banks have no money to take them on, forcing the Federal Reserve to turn on the money printer. Printing money is not a small affair; it could involve injecting 60 billion or even 100 billion dollars each month, flooding the market like in 2020.
Keeping money in the bank will only lead to more losses as inflation quietly erodes interest. To outpace inflation, one must keep a close eye on gold and bitcoin. Gold has risen from 2500 to over 4000 dollars, and smart money is already getting involved. The total supply of bitcoin is fixed at 21 million; no matter how much the Federal Reserve prints, they cannot create new coins, making it the ultimate inflation hedge.
New mining opportunities still exist; bitcoin halves every four years, becoming scarcer. Historically, when gold rises, bitcoin tends to follow and often does so more aggressively. Once the Federal Reserve starts printing money, the value of paper currency will decline, and gold and bitcoin will be the true assets to counteract the inflow of cash.