I’m sure most if not all of my subscribers know why the dollar began to lose its value in 1971, but if there is anyone reading this who doesn’t know, let me give you a hint: 1971 was the year when President Nixon said the U.S. would only “temporarily” discontinue honoring every $35 with one ounce of gold delivered upon request by foreign central banks. Because of this default, the entire western world is in big, big trouble. The only question now is when, not if, the system either implodes or explodes.
…If market interest rates begin to rise, the Fed will have to pay more to keep the banks from withdrawing deposits lodged with the Fed, but the income it receives will stay fixed. The higher the rates go, the deeper underwater the Fed’s balance sheet dives, as its losses will grow larger and larger.
The point is that once interest rates begin to rise, the losses will not only become huge for the Fed but they also will last for a very long time. That’s when we might start to literally see helicopter money that leads to the worst of all scenarios—namely, a hyperinflationary depression, because with this state of affairs it’s difficult to see how the dollar will not lose massive value. The bigger the Fed’s losses, the more it will have to print dollars at a faster and faster clip.
Read full article on kitco.com