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On today\\u2019s show we\\u2019re trying to make sense out of our financial markets.

You would think that the Federal Reserve, the central bank for the world\\u2019s reserve currency is influential in the world\\u2019s monetary system. So therefore the chair of the Federal Reserve would hold the single most influential banking position in the world. You would also expect the person occupying that chair to demonstrate a modest amount of fiscal responsibility.

It used to be the case that printing of money was something that was spoken of in hushed tones. It was a bit like cheating at the black jack table. Professional card players didn\\u2019t speak about it, but everyone knew it was happening to some degree.

But now in 2021, there is no attempt to hide it. The US Federal Government brings in 1.7T in personal income taxes per year. That\\u2019s about half of the total revenues it brings in each year.

But in 2020, the Federal Reserve printed about the same amount of money that the US government collected in taxes. Nearly 1/5 of the dollars in existence since the beginning of the US as a nation were printed in 2020.

Now the latest comments from the Federal Reserve Chairman seem to focus less on any measure of inflation, but on the \\u201canchoring of inflation expectations\\u201d.

Anchoring is a concept that applies to psychology. If you believe it\\u2019s warm out, then it\\u2019s warm out. If the weatherman says the temperature is 10 degrees today, then it\\u2019s 10 degrees. The temperature has been measured and reported, irrespective of the weatherman\\u2019s opinion on the temperature. But if the weatherman says, it\\u2019s a beautiful warm day today, and the temperatures will be a nice balmy 10 degrees by mid afternoon, he is said to be anchoring an expectation.

The Fed chairman in his remarks Monday, prepared for a presentation to the House Finance Committee today, said that a short term jump in prices would not be enough to trigger a panic about inflation.

He said that as the economy emerges from the pandemic, there will be all kinds of increases in demand, and supply chain constraints, that will trigger price fluctuations. These price increases don\\u2019t concern him. He\\u2019s focused on the long term anchoring of inflation expectations at the 2% average. They intend to keep interest rates low until the economy reaches full employment and interest rates exceed the average 2% anchored expectation.

The countries with excess US dollars are starting to get worried that the US is printing too much money and therefore the value of the dollars they\\u2019re holding is declining. The international market is clearly attaching a risk premium to the US dollar. But the US continues to behave as though it can do what it wants, when it wants as if it sets the rules alone. If the Fed says interest rates are low, then rates are low, irrespective of what international investors are saying.

Other countries have tried this approach and failed. I\\u2019m thinking of modern day Argentina where interest rates are 38%. Back in 2012, their interest rate was a fairly respectable 9%. They boldly started printing their way out of their economic malaise. The memory of hyperinflation in the early 1990\\u2019s was a distant memory.

But then why would other countries be selling their US Treasury bills and using the proceeds to buy gold? Russia sold almost all its US Treasuries and bought gold instead. China has been on a gold buying binge over the past 20 years.

When I hear the word \\u201canchoring\\u201d in the same sentence as inflation, I hear that the measurement is being replaced with a narrative, in order to direct attention away from the facts.