<p>Thomas Sowell wrote, "There are no solutions. There are only trade-offs.”</p>
<p>This perfectly describes why the Fed cut rates last week despite lamenting "somewhat elevated" inflation. </p>
<p>In this episode of the Midweek Memo podcast, host Mike Maharrey explains the trade-offs facing the central bankers, why they made the decision they did, and how it will impact the gold and silver markets. </p>
<p>This week, Mike also shared some of the things he saw on his "field trip" to the Money Metals' offices and bullion depository last week.</p>
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<p>Mike opened the show by reminiscing about how field trips were one of his favorite things in elementary school. </p>
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<p>"Well, last week, I got to go on a field trip of sorts. I got to fly out to Eagle, Idaho, and visit Money Metals' offices and bullion depository."</p>
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<p>But before talking about what he saw during his trip, Mike provided an overview of last week's Federal Reserve meeting, beginning with an observation made by economist Thomas Sowell. </p>
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<p>“There are no solutions. There are only trade-offs.”</p>
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<p>Mike said that's exactly the situation facing the Federal Reserve. </p>
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<p>"They are stuck between a rock and a hard place, and they had to make a choice. They could hold rates steady and hope to drive down this sticky inflation situation, or they could cut to give the sagging economy a boost, recognizing that it is addicted to easy money and needs a fix. They chose the latter – meaning they chose inflation despite acknowledging “inflation has moved up and remains somewhat elevated.”</p>
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<p>The FOMC voted 11-1 to cut the federal funds rate by 25 basis points. It also projected two more cuts this year, but only one in 2026. </p>
<p>Mike said that while Powell didn't use the word, he described a stagflationary setup. </p>
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<p>“While the unemployment rate remains low, it has edged up, job gains have slowed, and downside risks to employment have risen at the same time, inflation has risen recently and remains somewhat elevated.”</p>
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<p>Low growth (as evidenced by a weakening job market), coupled with elevated inflation, is the definition of stagflation. </p>
<p>Mike noted the FOMC also released its dot plot projections of future rate movements, anticipating fewer cuts next year than the market expected. However, there was significant divergence in the forecast. Two members projected as many as four cuts in 2026.</p>
<p>Mike pointed out that while analysts tend to get all excited about these dot-plot forecasts, they are virtually meaningless.</p>
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<p>"Fed members are notoriously bad at projecting the trajectory of interest rates, even though they're the ones literally setting the rates.</p>
<p>"How bad is their track record?</p>
<p>"Fund manager David Hay analyzed past dot plots and found the FOMC only got interest rate projections right <strong>37 percent</strong> of the time. And as Hay pointed out, 'They control interest rates!'"</p>
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<p>Mike explained that while many people are excited about looser monetary policy, it has actually been loose for quite a while, as indicated by both the expansion of the M2 money supply and the Chicago Fed's own financial conditions index.</p>
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<p>But there are only tradeoffs. </p>
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<p>"It appears the central bankers have chosen to try to keep the air in the bubble economy at the risk of unleashing more inflation."</p>
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<p>Mike pointed out that this is bullish for gold because it will lead to a lower real interest rate environment. </p>
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<p>"Gold and silver are non-yielding assets. This means they don’t generally generate income from interest, dividends, or rental payments. Gold and silver’s value is derived from price appreciation alone. When interest rates are higher, there is an opportunity cost to holding gold or silver when you could own bonds that generate interest income or stocks that pay dividends. However, when real interest rates fall or turn negative, those income-producing alternatives lose their comparative advantage. In such an environment, the relative cost of holding precious gold and silver diminishes, making the metals more attractive as safe-haven and wealth-preservation assets."</p>
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<p>Mike explained how to determine the "real" interest rate. </p>
<p>Given that real rates are much lower than the stated rate, there really isn't much opportunity cost in holding gold and silver. </p>
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<p>"The truth is (although they would never say it out loud), the central bankers over at the Federal Reserve prefer negative real rates because it softens the government’s massive debt burden. As an investor, it’s crucial to pay attention to real rates. If you fail to grasp the concept of real interest rates, you can easily get fooled by media headlines. They will tout higher interest rates even when real rates are negative."</p>
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<p>Mike wraps up the show talking about the things he saw when visiting the Money Metals' offices and the bullion depository. </p>
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<p>"The depository is freakin' cool!"</p>
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<p>As a call to action, Mike urges listeners to call Money Metals at 800-800-1865 and avail themselves of the expertise of its precious metals specialist. </p>
<h2>Articles Mentioned in the Show</h2>
<p><a href="https://www.moneymetals.com/news/2025/09/21/how-will-the-fed-rate-cut-impact-the-gold-market-004352" rel="noreferrer">How Will the Fed Rate Cut Impact the Gold Market? </a></p>
<p><a href="https://www.moneymetals.com/news/2025/09/15/how-will-fed-rate-cuts-impact-gold-and-silver-hint-pay-attention-to-real-interest-rates-004339" rel="noreferrer">How Will Rate Cuts Impact Gold and Silver? Hint: Pay Attention to Real Interest Rates</a></p>
<p><a href="https://youtube.com/shorts/EhIoCrNbOaQ?si=chheGteGeJlmn7Rj" rel="noopener noreferrer" target="_blank">Which American Gold Eagle Is Fake?</a></p>
