{{First Name}}, today we’re going to dive into the second of three “Alarm Bells” that are going off in the US and countries around the world, and how you can turn it into an opportunity…

In yesterday’s email we discussed the first alarm bell which is the fact that the the Federal Reserve has lost control over the economy…

For the first time in history, they cut interest rates six times, and the cost of long-term borrowing went up instead of down which means the bond market has stopped listening to them…

Today, we’re diving into the second major problem, which is inflation… Because what the Fed would normally do to reduce inflation, isn’t working…

Most people think inflation just means "prices go up."

But that’s just the symptom…. Here's what's actually happening underneath…

Inflation means your money is losing its value. The dollar in your pocket buys less bread, less gas, and less rent than it did a year ago…

You're not getting poorer because you're earning less, you're getting poorer because the money itself is shrinking...

And the worst part is that wages almost never keep up. So even when your paycheck stays the same, you quietly fall behind every single month without doing anything wrong.

Here's what makes this current situation so dangerous...

Just two months ago, inflation had cooled all the way down to 2.4%. The Fed was finally winning the fight they'd been waging since 2022…

Then… It reversed.

April's inflation jumped back up to 3.8%, the highest reading since May of 2023. And the prices businesses pay for their raw materials (which they always pass on to you eventually) hit 6%, the fastest jump since the end of 2022.

So the relief everyone was expecting isn't coming and prices are about to climb again over the next 3 to 6 months.

The Fed has exactly two tools to “fix things” with, and right now, neither of them are working…

Option #1 is to cut interest rates…

This is what they do when they want to stimulate a weak economy or rescue a falling stock market. Cheaper borrowing means more spending, means the markets go up…

But they can't use it. Cutting rates while inflation is reaccelerating would pour gasoline on the fire…

It would crush the dollar and send prices even higher, and the bond market would panic and demand even higher yields, dramatically increasing the government’s debt payments…

So tool one is off the table...

Option #2: Raise interest rates…

This is what they do to kill inflation. Higher rates cool the economy and bring prices back down. It's the standard playbook, and it's exactly what Paul Volcker did in 1980 when he jacked rates up to 20% to break the back of inflation…

But they can't use this one either.

Why?

Because in 1980, the US national debt was just $900 billion… Today it's $39 trillion.

If the Fed raised rates aggressively the way Volcker did, the interest payments on that $39 trillion debt would explode and bankrupt the Treasury.

We're already paying over $1 trillion a year just in interest… more than the entire defense budget. Crank rates higher and that number goes parabolic.

So tool two is off the table too…

The most powerful financial institution in the world has two levers, and both of them are completely useless. They can't cut without unleashing inflation, and they can't hike without breaking the Treasury.

For the first time in modern history, the Fed is genuinely stuck, and no one at the Fed wants you or the general public to really understand the situation…

This is where it gets really interesting because when a government runs out of normal tools, they reach for the tools nobody's talking about..

And there's one escape hatch they've already started hinting at publicly…

The US Treasury holds about 261 million ounces of gold in vaults like Fort Knox, but here's the strange part…

On the government's official books, that gold is still valued at $42 an ounce which is the price that was set back in the 1970s.

At that ancient price, all of America's gold is worth a measly $11 billion.

But gold today trades around $4,500 an ounce. Which means that same pile of gold is actually worth more than $1 trillion in the real world.

That's roughly a trillion dollars of value sitting on the nation's balance sheet that isn't being counted.

In early 2025, Treasury Secretary Scott Bessent said the quiet part out loud: "We're going to monetize the asset side of the US balance sheet for the American people."

Translation… They can simply update the books to reflect what the gold is actually worth, and instantly conjure up close to a trillion dollars of financial breathing room. No tax increases. No spending cuts. No new debt. Just an accounting change.

And here's the kicker for anyone paying attention…

If the US officially revalues its gold to today's prices, it would be the loudest possible signal to the rest of the world that gold is real money again. Every other central bank on earth would race to buy more of it. Which would send the price of gold dramatically higher… potentially much higher than where it sits today.

The people in charge already know the trap they're in. And they're quietly building the escape hatch right in front of us.

The question is “when” will they pull the trigger, and unfortunately no one knows the answer…

But I continue to buy gold and a regular basis…

So let's recap where we are…

The bond market is screaming. The Fed is trapped with no good moves, inflation is eating your paycheck, and the government is quietly eyeing its gold reserves as an escape hatch…

You'd think all of this would have the stock market terrified.

It's doing the exact opposite. The S&P 500 just hit fresh all-time highs.

That's not optimism. That's a fantasy. And in the final email of this series tomorrow, I'm going to show you why the stock market is more detached from reality than it's been at any point in the last 96 years…

End exactly what I'd be doing about all of it right now…

Sincerely,

Mike Dillard ✞
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