Kennedy Financial Episode 50!

In episode 50, Phil and John discuss their appearance on GoldSilver.com and the deaths of Chyna (the 9th wonder of the world) and Prince. The brothers also cover Obama’s effective tax rate and the new $20 bill. The topic of the $20 bill stirred controversy last week, but most of the talking heads failed to understand the real significance of the White House and Treasury announcement.

When the Federal Reserve was first created in 1913, a $20 gold certificate could be traded for an ounce of gold to the bearer on demand. Through endless wars and social welfare programs, the Fed has caused the dollar to lose approximately 98% of its purchasing power in just over 100 years. An ounce of gold now costs over $1,200, and the president who opposed all this central banking nonsense is finally being unshackled from the worthless fiat paper he opposed.

If you know someone who is struggling with personal finance in the phony U.S. economy, then please have them contact us for FREE financial counseling.

The U.S. Economy Explained

The story of the Titanic shipwreck is a lesson about what happens when man’s hubris reaches epic proportions.  We’ve all heard the story about how the Titanic, thought to be unsinkable, sank to the bottom of the icy Atlantic on April 15, 1912.  The ship’s captain, Edward Smith, sought to impress the world with Titanic’s record maiden voyage across ‘the pond.’  Despite knowing his ship could strike an iceberg, he still ordered the record setting pace.  The Titanic did indeed strike an iceberg, and approximately 1,500 people lost their lives in an event that was totally preventable.

Like the Titanic, the U.S. economy has had a captain at the helm who is ignoring caution and the lessons of their trade.  That person is our Federal Reserve Chairman.  Unlike the Titanic though, the U.S. has two captains whose hubris will ensure our tragic ending.  In this Kennedy Financial video, we examine the last decade and witness the slow demise of an economy once thought to be ‘unsinkable.’

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The Fed & The Challenger

Scott Nations bet.001After the failure to launch in September, I took to Twitter to challenge Fed faithful and Peter Schiff naysayer Scott Nations.  Schiff and Nations got into a heated argument in July over whether the Fed would raise interest rates in 2015.  Nations found it absurd that Schiff could suggest that not only would the Fed not raise rates, but QE4 was still on the table.  Nations asserted that Schiff made “outlandish predictions.”

I reminded Nations that viewers like me had not forgotten what he said, and there would be no rate hike in 2015.  To prove my certainty, I bet him one ounce American Silver Eagle.  Nations, not understanding the value of real money, agreed instead to make a $50 donation to the winner’s favorite charity.  Naturally, I selected a 501(c)(3) called the Ludwig Von Mises Institute.

When December arrived, the Fed shocked me by actually doing the right thing for the first time in nine years and raising the funds rate a quarter point.  But Janet Yellen instructed the public “I think it’s important not to overblow the significance of this first move.  It’s only 25 basis points. Monetary policy remains accommodative.”  Although I lost my public Twitter battle with Nations, it became clear that the Fed and Yellen were not proud or confident in their first step.

With the dawn of 2016, the Fed will need to add more rate hikes to prove that the U.S. economy can withdraw from its long-term artificial monetary stimulus.  I believe that after such a prolonged binge on this financial heroine that our zombie financial markets will come crashing back down to Earth before ever reaching their destination.  Like the Challenger space shuttle tragedy, the liftoff for Yellen and the Fed may have received applause and awe, but these sentiments will be turning to shock when their monetary policy blows up in mid-flight.

It takes character to admit when one is wrong, and I am happy to do that here.  Now that the Fed has finally made a move, the world will get to witness the full consequence of Keynesian monetary policy.  By the Fed’s second or third meeting of 2016, it should be clear that the U.S. economy can’t handle increasing rates anymore than the Challenger could handle frozen O-rings.  My $50 bet with Scott Nations was a small price to pay for admission to this upcoming spectacle.