The Fed Will Do What It Has To Do!
Inflate!
If there were no Federal Reserve System or other government central bank engaged in legalized counterfeiting, there would be no need for you to invest in gold. Your money would be gold, gold-based, or gold-backed, as it was before the creation of the Fed and for a few years thereafter. So investing in gold would be like investing your money in money. It would make no sense.
But today it makes perfect sense as this 2009 – 2026 chart helps illustrate.
The white line shows total U.S. government debt in billions of dollars (right axis). It rises steadily from roughly $10 trillion in 2009, accelerates sharply after 2020, and reaches approximately $39.3 trillion by mid-2026, with an arrow explicitly labeling “Debt Keeps Growing.”
The red line tracks the Federal Reserve’s ownership of total outstanding U.S. Treasuries as a percentage (left axis). It begins near 8 percent in 2009, climbs during post-Global Financial Crisis quantitative easing (QE) rounds to peaks above 19 percent around 2014–2015, then declines.
A dramatic spike to roughly 25 percent occurs in 2020–2021 as the Fed aggressively purchased Treasuries during pandemic stimulus. Since quantitative tightening (QT) began in 2022, the red line has fallen steeply to about 14.17 percentby June 2026. A yellow circle marks this recent low point on the red line with the label “Ultimate Buyer of Last Resort,” underscoring that the Fed remains a critical backstop even while shrinking its relative holdings.
The chart therefore highlights a striking divergence: absolute federal debt continues its relentless climb toward $40 trillion, yet the central bank’s share of that debt has contracted markedly. Washington’s borrowing has reached astronomical new heights. It is the world’s biggest debtor. Continuing to borrow is existential.
Yet the challenges to its borrowing are growing by leaps and bounds. Rising interest rates reflect those challenges. There is a growing distrust in the dollar since it has been used as a weaponized tool of America’s erratic foreign policy. De-dollarization is a result. That is not solely politically motivated. One need not be an American rival to seek to avoid large exposure to the U.S. dollar. Every foreign central banker worth his salt knows that the U.S. can only pay its creditors with freshly printed (actually digitally-created money) of no inherent value.
At the same time China is turning itself into a global gold center.It is the world’s largest gold producer and continues acquiring gold in reported and off-the-books accounts.That highlights gold as a rising and visible challenge to the unbacked dollar. As gold becomes an ever greater alternative to the dollar, the US Treasury will find itself forced to pay higher interest rates to attract creditors.
At this fork in the road, the Fed’s percentage of debt monetization (the red line) is not at an all-time high. It is ten points below its 2020-21 high. Based on this recent precedent, it has plenty of overhead room to step in to its role as the buyer of last resort.
Fed Chair Warsh was not appointed by President Trump because he has the reputation of being an inflation hawk. Trump wanted to dump Powell for being too restrictive. Warsh is there to keep the economy on life support when we come to the crossroads of Inflate or Die.
The Fed will do what it always does.Inflate.
That is why people own gold.
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