The Destruction of Money

If you think the Federal Reserve’s struggle with its tapering problem is bad, stay tuned because you ain’t seen nothing yet. Take a look at my chart series below and in a matter of seconds you get a feel for exactly what the Fed has done for the stock market. There isn’t a shade of doubt about the direct correlation between the advance in the Dow Jones Industrial Average and the expansion of the Fed’s balance sheet.

The advance in stocks undoubtedly provides investors with a false sense of security. But when I walk around downtown Newport, RI it doesn’t feel like a vibrant economy to me. I know my observation is anecdotal but when I talk to clients around the country they give me a similar response about their own businesses—about flat year-over-year. And yet one truism is that our expenses seem to always go up.

What’s truly unsettling about this next chart is that we’re dealing with record low velocity of money. Wait until velocity picks up. If you think the Fed has painted itself into a corner so far then you ain’t seen nothing yet. Make sure you have a plan in place to deal with the coming destruction of money. It doesn’t have to be your undoing.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.

E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.