While President Biden continues to issue dozens of executive orders from the Oval Office, the legislative agenda on Capitol Hill seems to be coalescing around stimulus proposals. With the last round of $600 checks having hit bank accounts and mailboxes around the country and just now being saved or spent, the discussion in Washington is already centered around further stimulus proposals.
The first stimulus package last year cost nearly $2 trillion. This latest one cost $900 billion. The next one is forecast to cost $1.9 trillion. And after that there are still more stimulus proposals in the works. Where will this all end?
If you thought stimulus payments were a one-shot deal, think again. We’re likely going to see payment after payment, and Americans could get so addicted to this “free” money that these stimulus payments will become a permanent feature. Some have already warned that the purpose of these continued stimulus payments is to condition Americans to accept a universal basic income (UBI).
As with any inflationary actions or debt-backed spending, the negative consequences of these stimulus payments won’t be realized until much later, by which time it will be too late to do anything. But the consequences could be severe, not only for taxpayers, but also for investors.
The federal government isn’t a magic piggy bank with unlimited amounts of money that it can spend, no matter what certain members of Congress may think. Every dollar it spends has to be paid for, either by levying taxes or by issuing debt. And an increasingly large portion of that debt is being purchased by the Federal Reserve, which is monetizing that debt by creating money out of thin air.
Will the Next Stimulus Proposal Pass?
Some on Wall Street are already predicting that Biden won’t be able to pass the next phase of his stimulus at quite the same size that he is hoping. Right now the proposal is for $1,400 direct payments to taxpayers, with talk of up to an additional $1,400 for each dependent. Total cost of the package is expected to be $1.9 trillion.
While some Wall Street analysts believe that Biden will be lucky to get even half of that spending, Democrats in Congress are signaling that they’re willing to go forward without any cooperation or agreement with Republicans. In the House they’re certainly likely to be successful, but they’ll have to toe the line in the Senate with its 50-50 split. Even one defection from their ranks would kill a bill.
What Does the Future Hold?
Democrats are also lining up proposals for a possible monthly payment to families with children. Under the proposal, which would likely alter the current form of the child tax credit, families could receive $300 monthly for each child under age 6, and $250 monthly for each child between the ages of 6 and 17.
As usual, the supporters of such proposals claim that these payments could lift families out of poverty, improve the financial position of families, etc. They fail to recognize that with millions of families all receiving these payments, all that will result is more money being spent on staples like food, clothing, and fuel. Prices will inevitably rise, canceling out the supposed benefits of these payments.
Over the long term, it’s likely that millions of families will become accustomed to the “free” money, and will expect the gravy train to continue indefinitely into the future. Rising prices will erode the purchasing power of the payouts, prompting calls for ever greater payment amounts. Politicians trying to stand firm against the handouts will risk torpedoing their careers, and thus we may have to get used to stimulus payments becoming a regular feature of federal spending for a while into the future.
Some even speculate that all of this is a trial run towards a UBI scheme, and that once these stimulus payments have been shown to “work”, then it will be easier to implement a UBI. If that happens, there is no telling how much money the government would spend on such a scheme, nor is there any way to predict how badly that would affect the economy.
How Can You Protect Yourself?
If you’re an investor wondering what the effect of all this stimulus spending will be on your investments, the answer is that it won’t be good. Trillions of dollars worth of stimulus spending will likely lead to higher inflation and higher prices, reducing real returns on investments.
Debt investments such as bonds will be particularly negatively affected, as they will be repaid in dollars that are increasingly worthless. Stocks won’t necessarily be any better off, as there is no guarantee that their prices will keep up with inflation, so investment returns could end up being lower than many investors expect.
What investors need is an asset that can keep its value against inflation over time, one that can maintain their wealth through thick and thin. And one of the best assets for that purpose is gold.
Gold has maintained its value over centuries, protecting investors and their wealth through monetary crises, war, and any number of cataclysmic events. It is the standard by which all other safe haven assets are measured, so universal is its appeal and so trusted is its stability throughout history.
Modern developments in gold investing have made it easier than ever for investors to take advantage of gold’s protective abilities and put it to work in their portfolios. Through a gold IRA, investors can buy physical gold coins and bars, holding them in an IRA that has the same tax advantages as any other IRA. That allows you to benefit not only from gold’s protective abilities but also its potential future price growth, all while sheltering your assets from taxation until you take a distribution. When you take a distribution, you can choose whether to take it in cash or in gold.
When it comes to funding a gold IRA, you can do so through a rollover or transfer from an existing retirement account, such as a 401(k), IRA, TSP, or similar account. That allows you to protect the retirement savings you have already accumulated, without suffering tax consequences.
If you’re worried about the trajectory of federal spending and the threat of higher inflation, and you have retirement savings you want to protect, now is the time to start thinking about a gold IRA. The experts at Goldco can answer any questions you may have about a gold IRA, how it operates, and how it can help you.
Don’t wait any longer to protect your retirement savings. Call Goldco today and start putting gold to work in protecting your portfolio.