When Trump Turns On “Enemy Within” Fed It May Create 1970s Style Stagflation

April 20, 2017

David McWilliams has written an interesting article in which he puts forward the case that Trump is likely to turn on the “enemy within,” the Federal Reserve and bully them into “printing money.”

He points out that this was seen in 1971 when Nixon bullied the Fed into printing and debasing the dollar. McWilliams says this would be bad for stocks markets which would fall in value as was seen in the 1970s.

This would be positive for gold as the printing of dollars, rising inflation and stagflation saw gold surge in the 1970s when it rose from $35 per ounce in 1971 to over $850 per ounce in January 1980 (see chart). Along the way there was a significant correction when gold prices fell by nearly 50% – very much akin to gold’s price falls from 2013 to 2015.

Gold in USD in 1970s

McWilliams does not expressly say that it is positive for gold but the 1970s, the historical record and the data shows that the printing of money and currency debasement is positive for gold in the long term.

McWilliams writes:

“What happens if Trump bullies the Fed into accepting his higher growth rates which he achieves by boosting government spending and borrowing billions? Could it happen in the first place?

Yes it could. In the 1970s, Richard Nixon bullied the Fed into printing money so that he could win the 1972 election. It can happen because it has happened. This would mean that all the old rules go out the window. American wages would rise much quicker than they have in the past few decades. The average guy will feel richer and then he will be persuaded to vote for Trump again.

Wall Street would wobble and the stock market fall, but the vast majority of people don’t own stocks, so they won’t care. And Trump will get his re-election and the only people who will squeal in the short term are rich bankers and investors on CNBC.

Sounds logical? That’s because it is. The Fed gets put in its technocratic place, the White House spins it as a victory for democracy over technocracy, and the Democratic Party is robbed of its electoral clothes.

From a Trumpian perspective, what’s not to love? That’s exactly why it’s likely.”

Full article here When Trump turns on the enemy within — the Fed 

Mark O'Byrne is executive and research director of www.GoldCore.com which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth. 

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