As was anticipated, the Federal Reserve raised the key benchmark rate 25 bps to 1.75-2.00%. The central bank appeared to have a slightly more hawkish tone in its statement, and has made clear that it will hike rates twice more in 2018. The central bank did, however, stick with its previous forecast for three rate hikes next year.
Although rates are not likely to get anywhere near levels seen in previous tightening cycles, they are expected to continue to rise gradually. The idea of higher rates presents an interesting problem, however. The rising U.S. budget deficit coupled with rising rates could present some significant challenges ahead.
Legendary investor Jeff Gundlach, often referred to as the “bond king,” was recently quoted in an article from cnn.com as saying: “We are doing something that almost seems like a suicide mission: We’re increasing the federal deficit while raising interest rates,” Gundlach, the CEO of DoubleLine Capital, said during a webcast.
He reportedly went on to state:
“That could lead to a real fiscal solvency problem, eventually,” said Gundlach, who is well-known and highly regarded for predicting the worsening of the subprime crisis back in 2007.
For sure, higher interest rates with an expansion of debt does spell trouble. It could potentially even lead to a significant decline in the dollar or even a currency debasement.
As the value of the dollar declines, so does your purchasing power. Every dollar buys less goods and services, and with more dollars being spent on the basics there are fewer dollars left over for discretionary expenditures and savings. Even the value of those savings can be eroded, as net returns decline.
The current scenario may not be sustainable. Whether it’s next week, next year, or a decade from now, the massive amount of debt will have to be dealt with at some point. One could argue that the only way to tackle such a huge pile of dent is through currency debasement.
That is just one of several reasons that right now may be the ideal time to build an allocation in asset classes that may potentially provide a hedge against a weaker dollar and potential debt crisis. Of all the potential choices available, gold arguably has the longest history and best reputation as a reliable store of wealth and value.
Adding this key asset class to your portfolio could potentially help insulate your investments from the negative effects of a weaker dollar. Not only that, but it also comes with enormous upside price potential.
Adding this key asset class to your portfolio has also never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have, and can even show you how to harness the power of an IRA account to build a significant allocation.
Don’t wait for massive inflation or for the next major debt crisis to take a bite out of your capital. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, bond king, dollar, Fed, gold, gundlach, purchasing power, rising interest rates