Now that Joe Biden is on the verge of being inaugurated as the nation’s 46th President, he is beginning to ramp up the development of his policy proposals. Among the first things he hopes to do as President is pass a nearly $2 trillion stimulus package that he touts as a “rescue and recovery” package for the US economy. With previous stimulus packages having done nothing much aside from stimulating rising prices within the economy, will this next one be any different?
What Biden Is Proposing
Biden’s stimulus spending plan is a multi-pronged proposal, like those of previous spending packages. Here are some of the major features.
1. Direct Stimulus Payments
Biden would propose an additional $1,400 payment to each taxpayer, which combined with the $600 already received this year would bring the total payment to $2,000 per person. This is obviously a massive amount of money that would be spent, and it might not even be the last stimulus payment in 2021.
2. Additional Unemployment Insurance
In addition to the direct stimulus payments, those receiving unemployment benefits would receive an additional $400 per week through September. That’s essentially $20,800 per person per year in unemployment benefits on top of what each person is receiving from state agencies, which means that many could end up making more money on unemployment than they did while working.
3. Support to State and Local Governments
Biden would provide $350 billion in assistance to state and local governments and $130 billion in assistance to schools to help them reopen.
4. Raising the Minimum Wage
The federal minimum wage would be raised to $15 per hour, from its current level of $7.25 per hour. That would immediately render many state-level minimum wage increases moot, but would also raise the cost of labor in most states, adding additional costs for many businesses. As with any minimum wage increase, those at the lowest rungs of the labor market would likely see job losses, worsening their financial situation and pushing them into the ranks of unemployed.
5. Additional Expenditures
A few of the other items in Biden’s stimulus proposal include $160 billion in funding for a national vaccination program, $30 billion to support landlords, $25 billion for childcare providers, and expanded child tax credits, medical and family leave, and food assistance.
The Impact of Further Stimulus
There are two major areas of impact that this new stimulus spending will affect. The first is the economy and the second is your investments.
The federal government was already likely to sustain a trillion-dollar budget deficit in Fiscal Year 2021. The $900 billion stimulus package passed in December pushed the FY 2021 deficit figures to nearly $2 trillion. And this $1.9 trillion stimulus package, if passed, would double that to nearly $4 trillion.
That means that it’s all but certain that the national debt will hit $30 trillion this year. And rather than occurring towards the end of the year, it could occur near the beginning.
It also means that the Federal Reserve will have to step in once again with more monetary stimulus in order to soak up all this new debt issuance. Debt held by the public (which includes the Fed’s holdings) is currently at around $21.6 trillion. Add to that the $900 billion stimulus package from December plus the $1.9 trillion proposed package from Biden, and you end up with about $2.8 trillion added to the national debt held by the public, or about a 13% increase.
That increase would happen in a matter of weeks, and bond markets wouldn’t be able to absorb all of that issuance all at once. The Fed will have to step in to soak up the new debt, issuing money out of thin air to purchase it on the open market. If that happens, the Fed’s balance sheet could explode to over $10 trillion, or just a little under 50% of US GDP.
Remember how just a couple of years ago we were talking about the Fed “normalizing” its monetary policy and reducing the size of its balance sheet to pre-crisis levels? It looks like that isn’t going to be happening ever. We could be facing a new era of ultra-loose monetary policy that will make previous quantitative easing (QE) look like nothing.
With the money supply having already increased dramatically in 2020, we may see even further significant rises in 2021. We have to assume that those increases in the money supply will eventually translate into increases in prices throughout the economy, and that they could end up plunging the economy into recession.
As an investor, the combination of a weak economy, continued high unemployment, and rising inflation should set off warning bells in your head. A weak economy and excessive money creation is setting the stage for a possible return to stagflation like we haven’t seen since the 1970s. We’re likely on the cusp of a major crisis, and now is the time to prepare your defense.
How to Protect Yourself
Many investors today have chosen to protect themselves and their investments through investments in gold and silver. As traditional monetary assets, stores of value, and safe havens, gold and silver have protected investors and their assets for centuries. Through crisis after crisis, those who have owned and held gold and silver have fared better than those who didn’t.
During the last crisis in 2008, investors who owned gold and silver saw the value of their precious metal investments rise significantly, at a time when bond markets were in turmoil and stocks were sinking. Even after the recovery began, gold and silver continued to rise, while most other investment assets floundered.
This time around, gold and silver have already begun to move higher, as investors expect higher inflation and lower economic growth. Thousands of investors have already taken steps to protect their wealth through gold and silver investments. Have you?
If you have retirement savings that you want to protect against loss, it’s especially imperative that you think about protecting your assets. Could you afford to lose 50% or more of your retirement assets in a Wall Street crash?
Now is the time to start thinking about protecting your assets with gold and silver, if you haven’t already. And if you want to learn more about how to do that, just call the experts at Goldco. With years of experience helping investors just like you protect their wealth with gold and silver, Goldco’s experienced representatives can help you learn more about investing in precious metals.
Don’t let your retirement dream fall victim to another financial crisis. Contact Goldco today and get on the path to securing your financial future.