The Fed’s Overlooked Issues: A Warning Sign for Future Economic Trouble (2024)

After months of rumors and speculation, The Federal Reserve finally broke its silence at Jackson Hole. Chair Jerome Powell took the stage to discuss the state of the economy and the group’s much-anticipated interest rate cuts.

In this week’s The Gold Spot, Scottsdale Bullion & Coin Founder Eric Sepanek and Precious Metals Advisor Joe Elkjer dive into what Powell said (and didn’t say) and where there are still good buying opportunities in gold right now despite record-high prices.

What Did Powell Say?

Jerome Powell acknowledged that inflation is cooling, currently sitting at 2.89%¹, a level the Federal Reserve finds acceptable. However, he admitted that transitory inflation was a mistake – an error that we here at SBC critiqued from the onset.

While inflation is ostensibly under control, Powell pointed out that employment is cooling faster than desired, a trend that could pose new challenges. He also hinted at incoming rate cuts but refrained from providing specific details.

What Powell Didn’t Say

Interestingly, the omissions in Powell’s speech may carry even more weight than what he discussed. He vaguely attributed all inflationary pressures to the pandemic without addressing specific policies, legislation, or spending that have significantly contributed to the current economic conditions.

“We’re not talking about the exponential problems this country faces. At no point did [Powell] talk about the radical spending and unchecked balances that’s contributing to inflation.” – SBC Founder Eric Sepanek

The CARES Act

Powell’s comments on the CARES Act perfectly demonstrate his broader attitude toward the nation’s economic challenges and his seriousness when approaching these problems. While the Fed Chair praised the legislation for its $2.2 trillion stimulus package, he overlooked a crucial detail: A staggering $400 billion – over 18% of the total budget – has either been stolen or mismanaged. The Internal Revenue Service has managed to recover $9 billion of these misappropriated funds, representing only a mere 3% of the total amount lost. This glaring oversight underscores the ongoing and unaddressed issues within the economic framework.

“What the Fed isn't talking about will create bigger problems down the road.”

Eric Sepanek

SBC Founder

Smoke & Mirrors

The Fed’s annual soiree in Jackson Hole, Wyoming, is meant to give the American public a clearer picture of the country’s economic health and the government’s plans moving forward. Unsurprisingly, our fiscal czars haven’t been the most transparent over the past few years as debt levels spiral out of control and markets grow more volatile.

“The theme in Jackson Hole is a lot of smoke and mirrors.” – Precious Metals Advisor Joe Elkjer

This year, Powell tried to shift focus from inflation to unemployment. At the same time, the Fed’s nonpartisan mask is starting to slip as leaders like Janet Yellen try to make a positive economic case for illegal immigration while ignoring the downsides. Instead of a straightforward analysis of the economy, Americans were treated to a sleight-of-hand diversion.

The Exploding Debt-to-GDP Ratio

Another alarming economic trend, conveniently overlooked by the Federal Reserve, is the rapidly increasing debt-to-GDP ratio. This critical metric provides a clear measure of the nation’s ability to manage and repay its debt. Currently, the U.S. debt-to-GDP ratio stands at 123%, more than double what it was in the 1960s. This dramatic increase means it’s becoming increasingly difficult and costly for the American people to dig themselves out of this growing debt crisis.

Where Are the Deals in Gold?

Gold prices have been on a tear, recently surpassing a fresh record of $2,500/oz – another SBC prediction that ended up coming true. The yellow metal’s surge is largely attributed to rampant central bank gold demand, which has set records in 2022, 2023, and in the first half of 2024.

While central bank gold demand has remained robust, retail investors are still largely sitting on the sidelines. However, that won’t last long as economic uncertainty rises due to political strife, geopolitical tensions, and inflationary pressures.

“As we move closer to more instability, there's going to be a huge move back into precious metals.”

Joe Elkjer

Precious Metals Advisor

Buy Gold & Wait, Don’t Wait to Buy Gold

With gold spot prices at all-time highs, many investors are looking for good buys as dealer premiums rise in response. Fortunately, there are plenty of excellent entry points if you know where to look. For example, premiums on investment-grade coins are extremely low right now, offering a significant opportunity for upside potential when these add-on costs snap back.

That’s about as much of a certainty as you can get in the precious metals space. When spot prices pop, premiums tend to drop, creating a short-term buying opportunity. Once demand kicks back up due to demand, prices go much higher.

“Right now is a very good time to be looking at gold.”

Joe Elkjer

Precious Metals Advisor

If you’d like to learn how to maximize your gold and silver investments, check out SBC’s FREE Investment Grade Coins Report.