Wild price action and unprecedented interventions once again characterized this holiday-shortened trading week.

Oil prices whipsawed lower Thursday on concerns about expected oil
production cuts from Russia and Saudi Arabia. But the general trend for
most other assets, including metals and equities, was up – way up.

Stocks finished out the week with the major averages posting their
biggest weekly gains in decades in the space of just four trading days.
Investors went on a buying spree based on hopes that we will soon see a
definitive peak in coronavirus cases and begin the process of
restarting the economy.

The stock market also got another boost from the Federal Reserve.
Yesterday, the Fed rolled out a $2.3 trillion loan package for local
governments and businesses struggling with the current economic freeze.

Since they have a money printing press, Jerome Powell and company
have an unlimited budget to loan out and spend — and they’re now adding
junk bonds, of all things, to their shopping list. More on that later.

Despite suffering a setback during last month’s panic selling of all
assets, gold has now recouped ALL of those losses. In so doing, gold
has proven the doubters and naysayers wrong yet again – particularly
those in the deflation camp who tout U.S. dollar cash as the ultimate
safe haven.

During mass liquidation episodes like we experienced a few weeks ago,
cash is king. But such status is temporary and fleeting – lasting only
as long as it takes the Fed to implement novel and previously
unimaginable schemes to print and depreciate the currency. In the long
run under our monetary system, cash is something to avoid like the
plague.

That’s what the founder of the world’s largest hedge fund believes.
In January, billionaire hedge fund king Ray Dalio made a strong
declaration about paper money in a CNBC interview.

Ray Dalio: What do you jump into when you jump off the
train? And the issue is you can’t jump into cash. Cash is trash, because
they’re going to print money. What do you do? You get out.

CNBC Interviewer #1: So what do you do?

Ray Dalio: So what you have to do is you have to have a
well-diversified portfolio. I think that you have to have a certain
amount of gold in your portfolio, or you have to have something that’s
hard. I know I’m going to come out of here (and everyone will be) like
“Ray Dalio’s wild on gold.”

CNBC Interviewer #2: I’m going to say “cash is trash” is your headline.

Ray Dalio: But cash is trash.

Admittedly, Dalio’s call on cash looked terrible during the depths of
last month’s market crash. But a mere two weeks into April, his call
on gold looks brilliant. Gold is outperforming all forms of paper cash
this year and is now up double digits versus the U.S. dollar.

The Federal Reserve is now adding junk bonds – the riskiest, lowest
quality corporate debt instruments – to its balance sheet. Such a move
by the custodian of the world’s reserve currency would have previously
been unthinkable. It may even be illegal, but the central bank has long
since strayed from its original Congressional mandate and nobody in
Washington seems to care.

Previously in our history, the U.S. dollar was backed by gold and silver
and could not be inflated to serve any purpose, let alone to bail out
banks and private corporations. Then after the Federal Reserve was
created in 1913 and President Richard Nixon closed the international
gold window in 1971, fiat Federal Reserve notes were backed only by the
full faith and credit of the United States.

After 2008, the era of Quantitative Easing began as the Fed ballooned
its balance sheet with Treasury and agency bonds. In 2020, we are
entering a new monetary era – the era of Unlimited Easing, the era of
Federal Reserve Notes attaining the status of junk.

How rapidly the downgrading of the U.S. dollar translates into real losses of purchasing power remains to be seen.

But we could certainly see price spikes across an array of raw
materials and consumer goods once economic lockdowns are lifted and
pent-up demand is released with trillions of newly created junk dollars
circulating in the financial system.

By Mike Gleason

Mike Gleason is a Director with Money Metals Exchange,
a national precious metals dealer with over 50,000 customers. Gleason
is a hard money advocate and a strong proponent of personal liberty,
limited government and the Austrian School of Economics. A graduate of
the University of Florida, Gleason has extensive experience in
management, sales and logistics as well as precious metals investing. He
also puts his longtime broadcasting background to good use, hosting a
weekly precious metals podcast since 2011, a program listened to by tens
of thousands each week.

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