U.S. NATIONAL DEBT –
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Immigration Boom Triggers Inflation Nightmare – Threatens to Keep Interest Rates Sky-High

In a revealing interview with the Telegraph, Neel Kashkari, the President of the Federal Reserve Bank of Minneapolis, pointed to the surge in immigration as a significant driver behind persistent high inflation and interest rates. Contrary to the common belief that immigration helps control inflation by suppressing wages, Kashkari argues that the increased demand for housing from immigrants is actually exacerbating inflationary pressures.

Housing Market Defies High Interest Rates Due to Immigration

Despite the Federal Reserve’s high interest rates aimed at cooling the economy, the housing market remains overheated. Kashkari attributes this anomaly to a combination of factors: a significant rise in immigration, an increase in remote work, and a historical underbuilding of homes. These elements have combined to create robust housing demand that high interest rates have so far failed to dampen.

Inflation’s Stubborn Grip Tightens with Rising Housing Leases

Kashkari expressed concern that the housing sector’s resilience could delay progress on controlling inflation. He highlighted the troubling trend of new housing leases ticking up, which could take over a year to reflect in the actual inflation measurements. This delay poses a challenge to the Fed’s efforts to bring inflation back to its target level.

Decade of Housing Shortfalls Meets Growing Immigrant Demand

The backdrop of today’s housing demand includes not only a decade of insufficient home construction but also a notable increase in immigration post-pandemic. This combination has strained the already tight housing market, with new immigrants intensifying the competition for available homes.

Fed’s Monetary Policy on a Tightrope

Amid these challenges, the Federal Reserve has maintained interest rates between 5.25 percent and 5.5 percent, with inflation running at an annualized rate of 3.4 percent in the first few months of the year. Kashkari indicated that rate cuts are unlikely in the near future and suggested that the Fed might maintain current rates longer than anticipated. He emphasized the necessity for solid evidence of inflation declining towards the 2 percent target before considering any rate normalization.

Portfolio Diversification: Essential in High Inflation and Rate Era

During times of high inflation and soaring interest rates, adhering to a single retirement strategy can be risky. Here’s why smart diversification is crucial during these tumultuous economic times:

  • Beat Inflation: As prices rise, the real value of cash diminishes. Assets like gold can be particularly valuable, often gaining worth during inflation spikes and preserving the value of your investments when fiat currency falters.
  • Tackle High Interest Rates: Rising rates mean falling bond prices and increased burdens on businesses with debt, which can depress stock prices. Diversifying across various asset classes, like precious metals or sectors less sensitive to interest changes, can mitigate risks.
  • Stabilize Your Returns: High inflation and interest rates can lead to volatility in the stock market. Diversification helps smooth out these fluctuations, ensuring that one troubled area doesn’t undermine your entire retirement portfolio.

In the complex financial landscape, strategically spreading your assets across multiple avenues—not just concentrating on one—can make the difference between significant losses and substantial gains. Consulting with specialists at Priority Gold to diversify your savings with gold and silver can prepare you to weather any economic storm.


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