Dear Reader,
At the July 29th Federal Reserve meeting, the vote was 9 to 3. Nine members held rates steady. Three voted to raise them. Nobody in the financial press is talking about those three.
Inside today's issue:
- The Fed's trap: Rates held at 3.5%, but three members wanted to hike. The dot plot says more may follow. September meeting is live.
- Europe is already raising: The ECB hiked in September. Eurozone inflation hit 3.3% in August. The Iran war made it happen. The U.S. is next.
- What this means for your savings: The era of cheap money did not end. It exploded. Now the Fed can't go back and can't go forward. There is a name for that. It's called a trap.
- Larry Benedict — Oil Skimming: Larry Benedict just released a new presentation on a strategy called "Oil Skimming." It's worth a look. (Brownstone Research)
THE SETUP
Everyone is watching the Fed for a rate cut. They have been watching since 2023. They are still watching.
Here is what they are missing.
At the last Federal Open Market Committee meeting, the Fed held rates at 3.5% to 3.75%. That was the headline. Fine. Rates held. Nobody panics.
But three members dissented. They didn't want to hold. They wanted to hike.
"In a shift from June's meeting, where the vote was unanimous, three out of 12 committee members voted against the monetary action, preferring to raise the target rate by a quarter percentage point."
Three dissents. In one meeting. That is not noise. That is a signal. And the dot plot from June tells you where this is going.
"The dot plot of economic projections from the June meeting showed nine members were projecting at least one hike in 2026, while eight others projected rates to remain unchanged."
NINE members projected at least one hike in 2026. Nine out of twelve. The press is writing about rate cuts. The people actually setting rates are writing about hikes.
WHY IT HAPPENED
Blame the Iran war. When the Strait of Hormuz went live earlier this year, oil surged past $110. 206 million barrels of Gulf production was disrupted. Iraq's exports fell 82%. Saudi Arabia took hits too.
Oil at $110 means everything costs more. Groceries. Shipping. Manufacturing. Inflation did not go away. It had a second act.
Europe felt it first. Eurozone inflation hit 3.3% in August. The European Central Bank responded by raising rates in September. That is not a trend. That is a preview.
THE TRAP
I have been saying this for years: when you print $10 trillion, you do not get to walk it back cleanly. There is no graceful exit.
The Fed tried to hold. Now it has three members who want to hike. The September meeting is live. The market was pricing 67 basis points of cuts for the year. That number has collapsed.
Think about what that means. Every homeowner with an adjustable rate. Every business with a floating-rate loan. Every government agency refinancing old debt at new rates. Every pension fund that assumed the Fed was done.
They assumed wrong.
WHAT I AM WATCHING
My poor dad would say: trust the system. The Fed knows what it is doing. My rich dad would say: watch what they do. Not what they say.
What they did: three of twelve voted to make your money more expensive. Nine of twelve planned to do the same at some point this year. The system they built thirty years ago is now eating itself.
Here is the history lesson: every great empire that printed its way to prosperity eventually hit this wall. The currency gets debased. Then inflation comes. Then the central bank raises rates to fight it. Then the debt becomes impossible to service. Rome did not fall in a day. It fell slowly. Then all at once.
Paper currencies fail. They always have. The escape is not in a savings account. The escape is in assets the government cannot print: gold, silver, real estate, Bitcoin.
The Fed is trapped. But before I tell you exactly what that means for the September meeting and where I think this goes next, a word from a colleague on a completely different kind of opportunity right now…
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THE CALL
The September FOMC meeting is scheduled. Three members already showed their hand. The dot plot says nine want to hike at some point this year.
If energy prices stay elevated because the Iran ceasefire is fragile, they hike. If consumer inflation re-accelerates into Q4, they hike. The base case is no longer cuts. The base case is hold, with a real chance of up.
Every paper asset prices off the risk-free rate. When that rate goes up, everything priced against it reprices down. Stocks. Bonds. Real estate valuations. Everything.
Gold and silver do not price off the risk-free rate. They price off confidence in the system. Right now, three Fed members voted to hike while nine members already projected it. That is not confidence. That is a system backed into a corner.
I have been buying hard assets since 1965. I will keep buying them. The dollar was not designed to survive what was done to it over the last twenty years. The Fed's own vote proves I am right.
To your freedom,
Robert Kiyosaki
Author, Rich Dad Poor Dad
P.S. New from Larry Benedict: a three-step approach to the oil market he calls "Oil Skimming." Click here to see how it works.