The Fed’s Big Lie (And What to Do Before 2025)

Here's what the Fed's latest interest rate cut means for the real economy and what you can do to hedge against inflation today.

As widely expected, the Fed cut rates for the final time this year by 25 basis points this week. That brings its total rate cuts within the past four months to 100 basis points.

In my best-selling book Collusion, I detailed how central banks collude to support the global banking system regardless of economic factors. This year underscores that behavior. After having no rate cuts from 2021 to 2023, central banks across the G10 have cut a collective 650 basis points and counting including from the ECB, Bank of England, and the Swiss National Bank. The magnitude of this year’s rate cuts nearly matches what the world experienced in 2020.

Reuters

This cut means the Fed has ‘caught’ up to other global rate moves. In addition, these cuts reflect the Fed’s forecast as conveyed earlier this year. This Fed pivot to cheaper money, even with inflation lingering, is one of the reasons that the U.S. stock market has outperformed other markets.

What you should know is that when central banks began this current rate cutting cycle, they had to project an air of victory over inflation – whether they could control inflation or not.

However, despite central bankers’ best attempts, inflation is much more dependent on geopolitics, supply chains, and consumer demands – especially with more tariff wars on the horizon.

Yes, the speed of price increases has declined over the past two years on average.

But no, that speed, as measured by core-PPI (producer price index) or CPI (consumer price index) hasn’t dropped below the Fed’s annual inflation target of 2%.

These inflation indicators haven’t and won’t move in a straight line either.

That’s why the November CPI figures showed a 2.7% increase in prices over the prior 12-month period. Grocery prices rose by half a percent over just one month. Price fluctuations like that prompted Trump to temper his promise to drop in grocery prices by telling Time magazine, “It's hard to bring things down once they're up.”

Yet, Fed Chairman Jerome Powell wants you to believe that the Fed has a hand in lowering U.S. inflation because of its raising rates by 500 basis points from March 2022 through July 2023.

That’s a lie.

You see, the price of everything from rent to your morning coffee has increased since that time of rate hikes. Yet, areas like gas prices and appliances have decreased over that time.

Thus, the truth is that the Fed’s actions had no material impact on those price movements. If anything, the Fed was reactionary to prices moving due to reasons ranging from private equity firms and extreme weather events to war and elections.

The Fed can’t print commodities, build lower cost homes or open oil reserves. And it can’t control inflation. The good news is there are things you can do to prepare for this today.

How to Protect Your Money from Inflation

One place to keep your money is in cash. If you chose to do that, make sure you diversify your bank accounts and look for low-fee, higher-interest conditions. On the plus side, cash gives you liquidity, you can use in case of an emergency or if investment opportunities arise. However, banks aren’t paying you enough to keep up with real inflation.

The second is in ‘digital cash-like’ assets such as Bitcoin. And while we’re certainly not advocating to shift your retirement in digital assets, diversification can be a good thing.

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Bitcoin has been on a tear this year, rising over 160% so far this year. There are two main reasons for that. The first driver is the possibility of friendly regulation from the incoming Trump administration. Second, BlackRock is suggesting investors allocate 1-2% of their portfolios into Bitcoin. Though we consider Bitcoin a speculative investment given its past volatility, such factors could drive the price upward.

The third way to hedge against inflation is to invest in safe-haven, wealth-preserving assets that act as an appreciating hedge against geopolitical, financial and economic volatility. That means gold, silver and other precious metal commodities that have historical value could be an option to consider.

There’s Another Metal in that Mix – Copper

What I learned on Wall Street decades ago, is that the end of the year is an optimal time to evaluate your portfolio and position yourself for the New Year. That approach is the same for professional market traders, those new to investing, or veteran investors.

At Prinsights our approach is to keep, or incrementally add, long-term investments to our model portfolio that reflect real assets and solid companies that are essential to global transformations for years to come.

We’re covering two exciting copper opportunities in our final Prinsights Pulse Premium issue of the year that’s just been delivered to Premium readers today! We’ve also just shared with Premium readers a sit down interview (along with a special offer) from legendary commodity investor, Rick Rule. Finally, we’re already working on our new semi-annual model portfolio review coming in January.

To all of you and your families, we wish you a very happy holiday season and New Year.