(Mike Gleason, Money Metals Exchange) As the U.S. Senate moves closer to passing a trillion-dollar spending bill that includes some infrastructure priorities, critics are warning that the public is being taken for a ride.
President Joe Biden and his allies in Congress have actually claimed that the new spending won’t add to the national debt or increase pressures on inflation. Treasury Secretary Janet Yellen pitched the package as an investment in the economy.
It’s certainly true that much of the nation’s infrastructure is badly in need of upgrades. Roads, bridges, pipes, and airports across the country are in poor shape.
But the proposed spending includes lots of things that have nothing to do with actual, physical infrastructure improvements. The Wall Street Journal slammed it as a step toward a Green New Deal.
And it’s not all paid for through budgetary gimmicks, either. The nonpartisan Congressional Budget Office reported on Thursday that the infrastructure bill in its current form would increase federal budget deficits by $256 billion over 10 years.
So as with other forms of government spending, it will be paid for by creating new debt and inflating the currency supply.
Republican Senator Mike Lee of Utah blasted the bill’s fake “pay for” provisions and predicted higher inflation rates ahead:
And there are lots of good things in this bill that will help a lot of good people, that are well-deserving. Sometimes when you get so wrapped up in that, it’s easy to lose sight of the fact that the pay-fors are fake.
But if we weren’t going to provide real pay-fors, then we should have just seen from them an admission from the outset. We’re not going to pay for it. And instead they said, “It’s going to be paid for.” And then they released it and said, “It is paid for,” only there are some asterisks next to that, some footnotes that reveal that according to a lot of research that’s been done on it, as much as half of the pay-fors are just fake.
Rising deficits and the mounting debt that we’ve accumulated is not just a future problem, it’s a present problem. We’re seeing inflation, the likes of which we haven’t seen in decades. And I strongly predict, by the time the latest inflation numbers come out just a week or two from now, we’re going to see that it’s even worse.
Inflation this year has been much higher than the Biden administration and the Federal Reserve had predicted. But in recent weeks a massive disconnect has emerged in the bond market, where yields are falling rather than rising.
The 10-year Treasury yield dipped below 1.2% this week. Perhaps bond buyers are convinced that inflation pressures are transitory and that consumer prices will barely budge over the next decade.
Or perhaps the bond market is reflecting some other reality. Expectations that the Fed will continue to be the largest buyer of Treasuries may be overriding any concerns about inflation and negative real yields.
A surprising lack of inflation fear is also being reflected in the precious metals markets – at least in this summer’s trading.
Gold prices have been trading close to the $1,800 level over the past month. They need to climb above $1,840 an ounce to get some upside momentum going.
The metals complex is taking it on the chin unfortunately today. As of this Friday morning recording, gold trades at $1,769 an ounce and is down 2.8% since last Friday’s close. The silver market shows a weekly loss of 4.7% to bring spot prices to $24.36 per ounce. Platinum is off 6.4% this week to come in at $994. And finally, palladium is putting in a slight weekly loss of 0.7% to trade at $2,672 per ounce.
Precious metals investors will need to keep a long-term perspective through these choppy market conditions. Markets are inherently unpredictable from day to day. But if the goal in acquiring physical bullion is to beat inflation and maintain or grow purchasing power over time, then there are trillions of reasons to keep accumulating.
The government officially owes $28.6 trillion on the heels of a record $3.4 trillion budget deficit.
Treasury Secretary Yellen announced Wednesday she would be pursuing emergency measures to raise $126 billion and avoid breaching the Congressionally imposed debt ceiling.
The Treasury’s accounting maneuvers will, for now, avert a disastrous debt default. And, like so many times before, Congress will eventually raise the debt ceiling to enable more Biden administration borrowing.