Saturday, July 20, 2024

Fed Panic Stricken About Inflation – Michael Pento

By Greg Hunter’s

Money manager and financial writer Michael Pento says the federal government is “burning the furniture to heat the house.” Pento contends, “If you are burning the furniture in your house to heat your house, guess what, you are not too far away from freezing to death.  The government is now selling its assets to try to make the fiscal situation look better.  We have so much red ink in the government today.  Our debt to GDP ratio is now way above 100%.  The budget deficits are way over $1 trillion and going much higher.  The government is forced now to sell assets to try to make it look better. . . . They’re so desperate for money that they are draining the Strategic Petroleum Reserve.  They are selling 100 million barrels and draining the Reserve down 45%. . . . That comes to $6 billion.  We are so desperate for money from any place.”

So, what does the Federal Reserve think about the U.S. economy? Pento says, “The Fed is worried about intractable inflation.  They are panic stricken. . . . What you have to understand, and these people will never understand it at the Federal Reserve, is that inflation is about a market psychology about the purchasing power of its currency.  When the market loses faith in a currency’s purchasing power, you get inflation, and it could go hyperinflation.  That’s coming down the road I believe.  It’s not coming because people are becoming prosperous and working and finding employment.”

Pento says the biggest unreported story is the skyrocketing interest rate of LIBOR. What’s that?  Pento explains, “LIBOR, and people don’t understand or talk about it, is the London Inter-Bank Offered Rate.  This rate has gone from 0.3% at the end of 2015 to 2.3% today.  The London Inter-Bank Offered Rate is the rate that is applied to $370 trillion of loans and derivatives.  I did not say “B” billion or “M” million, I said “T”.  $370 trillion worth of derivatives and loans, from credit cards, to student loans, to auto loans are priced off of LIBOR. . . .  That is the biggest reason why the stock market is rolling over because the cost of borrowing money . . . is going up very, very sharply. . . . All of this is going to hit a crescendo in October of 2018.”

Pento says gold prices will naturally be going up. Pento explains, “Why do I think gold is going to prosper?  Gold prospers most when two conditions occur.  One, the dollar rolls over compared to other fiat currencies.  I think that’s going to happen.  Even more so the case, I believe real interest rates are going to fall.  Real interest rates are going to fall along with nominal rates come October.  There is going to be a watershed epiphany on the part of the Fed that they can no longer raise rates.”

Join Greg Hunter as he goes One-on-One with money manager Michael Pento of


I have to agree that while I do see another higher high this summer the fall season looks super bearish to me.  Just on an "Elliottwave" basis we are about to start a final 5th wave up that should top out in the summer months and of course from a technical point of view I don't think I've ever seen the market up so high.

In fact in January (before the correction started) the market had spent two month above (outside of) the bollinger bands on the monthly chart.  That's something I've never seen.  It's like the market was climbing Mount Everest and when it got to the top it just walked on air for another two months... yeah, crazy!

Anyway, I bullish into the summer but after that I'm a big ol' bear again!


Here's another person that lays out some similar facts that makes me this fall is going to be very ugly for the bulls...

Author: Red

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