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(Kitco News) - No matter what policy the Federal Reserve sets, Goldmoney's Head of Research Alasdair Macleod said that the fundamental reality for investors and businesses is that credit is contracting.
On May 6, 2023, Macleod spoke to Kitco at Deutsche Goldmesse in Frankfurt, Germany.
Macleod noted that it is a difficult business environment with the economy likely slowing and credit contracting. Businesses need access to more credit due to slowing sales and inventory buildup.
"Banks are trying to withdraw credit to reduce their balance sheets, which have become over leveraged over the decades, so you've got increasing demand for that credit," noted Macleod. "So what happens interest rates rise—it's as simple as that."
Macleod argues that the options for the Federal Reserve are limited. The Fed can do what it wants, adds Macleod, but the reality of the situation for businesses and investors is that credit is contracting.
"Funding government debt in the United States is now doubly difficult."
Coverage of Deutsche Goldmesse 2023 sponsored by Defiance Silver.
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