Priming The Pump

Pump priming is the action taken to stimulate an economy, usually during a recessionary period, through government spending and interest rate and tax reductions...

When I started in the trading business down on the floor of the NY exchanges some 40+ years ago, we followed many economic signals and watched how the geopolitical news impacted the price of commodities (especially gold), the US dollar, and oil prices.

Back then, inflation was a problem, and the Federal Reserve was not yet priming the pump by adding liquidity to the system.

However, the Fed began responding to crises by adding liquidity into the markets in 1987 with the October meltdown. It did it again in 2001 with 9/11 attacks, and then again in 2008-2009 with the housing and credit crisis.

In 2008-09 the Fed intervened in a dramatic fashion, and as you will see below, that has continued up to today.

In early 2020, with the surprise attack of a worldwide pandemic, all global banks throughout the world began an aggressive intervention.

In the US, the Federal Reserve and Capitol Hill intervened dramatically and have been priming the pump ever since through easy monetary policy, lowering taxes, repurchasing of debt instruments, and even buying stocks for their balance sheet.

Add to this several stimulus bills, and you now have a systematic pumping that’s adding a ton of liquidity to our banking, debt, and stock markets.

Money growth is a way for the Federal Reserve to not only keep the economy humming but also to boost inflation.  The problem is that eventually, inflation takes hold, and it can be “ugly.”

Much of the rise in Gold and Silver in the past few years is tied to this robust money growth.

See Money Supply below since the pumps were primed starting in 2001:

Unfortunately, this action does not help everyone in our society.

However, certain people benefit from it in the form of rising prices in their homes (in certain parts of the US), collectibles (expensive watches), artwork, and especially in the stock market.

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