Powell Fed shifted focus from inflation and employment mandate to climate change, racial discrimination, and income inequality, straying from its politically neutral economic focus similar to DOJ investigating justice based on interest rates or GDP.
Powell pushed transitory inflation myth in late 2020 for political gain to secure second term despite Fed’s own Beige Book research showing rising costs, abandoning narrative within one week of Biden’s nomination.
Fed’s senior officials profited millions from non-public policy knowledge during pandemic through insider trading, resigning without jail time or returning earnings, suggesting widespread misconduct beyond just the presidents.
Fed spent $3 billion renovating 260,000 sq ft headquarters—same cost as new 3 million sq ft NFL stadium—which Trump criticized as outrageous spending and used as excuse to target Powell.
Trump appointed Kevin Warsh as Fed chair, historically opposed to quantitative easing, while simultaneously pressuring Fed to cut rates aggressively and considering merging Treasury and Fed under presidential control, contradicting his current stance.
Trump strategically stacking the Fed to gain monetary policy control without oversight as way to accomplish goals unilaterally, with running economy hot and locking in low rates as best bet to reduce debt-to-GDP given political suicide of balancing budget.
AI stocks drove 75% of market gains since November 2023, with MAG7 accounting for 35% of S&P 500 weight, but only 50% of large companies and 7% of small companies currently using AI with just 5% of adopters seeing significant financial gains.
AI infrastructure requires massive amounts of copper, lithium, cobalt, and rare earths, with mining legend Robert Friedland warning we need to mine as much copper in next 18 years as the prior 10,000 years to meet 3% GDP growth.
Trump administration views AI supremacy as national security issue, investing heavily in mining and critical minerals to compete with China, potentially leading to inflationary pressures as infrastructure buildout accelerates.
Central banks can’t create jobs or boost incomes, only make credit cheaper to induce asset price rises creating wealth effect, with Japan’s experience since 1999 with ZIRP and QE showing they can’t create growth in K-shaped economy where top 10% account for 40-50% consumer spending.
Central banks buying 1,000 tons of gold annually, now owning more gold than treasuries as percentage of reserves for first time since mid-90s, signaling tectonic shift in gold market with miners’ cash flows significantly increasing due to higher prices.
CBO’s $63T debt projection by 2035 (120% of GDP) assumes no recession despite 1 in 5 historical odds per year, while a single recession could push deficits above $4T (vs. baseline $2.5T/year) and total debt past $70T as tax collections crash and welfare spending spikes.
Since pre-COVID, US tax revenue increased 50% but spending nearly doubled from $4T to $7T, with $16T in interest payments projected through 2035, creating a structural deficit of $23T that Congress gridlock makes politically unsolvable.
Avoiding $63T debt requires sustaining 3-4% GDP growth for 9 years versus CBO’s assumed 1.8% and current 4.4%, particularly challenging as AI threatens to displace >50% of US cubicle workforce.
Small businesses generate 5-10x more jobs per dollar than large corporations, making deregulation and tax elimination for small businesses the highest-leverage policy for achieving required 3-4% sustained growth.
Federal Reserve is expanding liquidity by $20 billion per week, pushing its balance sheet back toward $7 trillion despite claims of maintaining tight monetary policy, while the next recession could force $4-6 trillion deficits requiring the Fed to become the primary buyer of U.S. debt through outright monetization causing inflation.
Federal Reserve’s manipulation of interest rates and money supply expansion to rescue banks contradicts Article 1, Section 10 of the Constitution, which originally specified that money should be silver and gold, not fiat currency subject to unlimited expansion.
Stock market valuations at 230% of GDP versus historical norms of 80-90% of GDP require either a 50% stock market crash or doubling GDP with stagnant markets to return to sustainable levels, with housing’s price-to-income ratio now exceeding the 2008 housing bubble peak.
AI investment bubble mirrors the dot-com era with private credit and equity markets showing stress fractures, requiring monitoring of credit spreads and financial conditions as early warning indicators since these markets are opaque and illiquid compared to transparent public markets.
Hold 5-20% of portfolio in physical gold as a safe haven, with Pento actively managing gold, silver, and platinum exposure by buying on sell-offs and pullbacks, waiting for economy to sharply roll over and short-term rates to plunge before increasing allocation.
Gold remains in a long-term bull market positioned to accelerate higher as recession pressures mount and monetary expansion increases, serving as protection against the Fed’s continued balance sheet expansion and debt monetization.
Creative destruction is necessary for healthy economy where banks that overextend themselves and become illiquid should fail rather than being rescued through money supply expansion, allowing Main Street to prosper and rebalancing away from misallocated capital in overvalued assets.
Understanding long-term economic cycles explored in The Armstrong Economic Code provides investors with frameworks to prepare for future market conditions by recognizing patterns of monetary expansion, asset bubbles, and inevitable corrections.
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