The “official” inflation rate has been so low, for so long, that I’m going out on a limb to warn readers. Inflation is coming on hard and fast. If you’ll give me a chance, I’ll lay out the facts On coming Inflation in the U.S. that could prove to be quite rewarding to you.
The last time anyone thought about inflation was maybe 2011 when the government reported U.S inflation at 3%. Prices haven’t risen above 5% since 1990. July 2020 inflation was a mere 1% annualized.
Low inflation is about to go away, hold on, get ready for a wild ride!
Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.
Inflation is Guaranteed When…
Milton Friedman famously said, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”— Jul 2, 2012
The Federal Reserve is currently engaged in proving it can control inflation… unfortunately they will encourage inflation to rise rapidly. The Fed Chair Jerome Powell formally announced he’s going to let inflation loose.
Previously, the Fed’s inflation goal was 2%. That meant the Fed would raise interest rates if inflation peaked above 2%. Powell’s announcement shocked many of us. He’s saying even if inflation rises above 2%, he will still keep interest rates ridiculously cheap. That’s dangerous consider the massive amount of new currency that’s just been issued.
Historic Monetary Move
We just learned that the U.S Government printed more money in June 2020 than it did in the previous 203 year history of America. I know, we’re in a pandemic, so Washington must do something. And that something is to approve more than $10 Trillion Dollars in Covid stimulus.
Using all the Gutenberg printing presses in the world, it would be impossible to create $10 Trillion Dollars and spread hundred dollar bills across America. Thanks to technology, a few computer keystrokes can fill the banks, brokerages, the pharmaceutical involved in vaccines, and loans that don’t have to be paid back to hundreds of thousands small businesses.
There’s even a little money left over to help the xx million Americans who were unemployed by Covid19 to survive. Don’t get me wrong, I’m not saying we didn’t need a huge stimulus program. I am just looking ahead of the unintended consequences.
Hello Inflation, Goodbye ??
With great confidence I can predict INFLATION IS COMING WITH A VENGANCE. The Federal Reserve says they want inflation, they expect inflation, and they will do nothing to stop it. After all, inflation is a secret tax used to steal money without shame or pity.
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
– John Maynard Keynes, (1919) “The Economic Consequences of the Peace” Chapter VI, pp. 235-236.
My opinion about inflation really does not matter. When the Federal Reserve chairman says inflation is coming— you should begin to build a wall of defense around your assets. Buy Gold, buy Silver, buy Tips zzzx, trade into Stocjs ???
If the U.S. government can shut down businesses for months and simply replace that forever lost Gross Domestic Production by creating money out of thin air— well we’re all for it! Why do any of us need to go to work?
When 200 years’ worth of paper U.S. Dollars are printed in a brief few months, the impact is shocking. This total distortion of the free market economy will boomerang back as years of uncontrolled inflation.
Take a peak and you’ll see U.S. Stocks have been soaring, real estate is on fire thanks to nearly interest free loans, Gold has traded to all time highs, Silver spiked 18% higher in August alone.
Inflation is just beginning to echo through the grocery stores with higher meat prices and fresh vegetables.
Amazon prices seem higher to me lately. The Walmart’s, Costco’s, and Targets are creating tremendous profits due to increased sales and higher prices. The brunt of Covid19 will come with inflation rains down on the middle class, the poor, our children and our grandchildren.
It’s not that inflation hasn’t already been around— it’s just that the pandemic offers cover to Washington politicians. When inflation pops to 5% in coming months, then creeps to 10% thereafter, the question that faces us— can the Federal Reserve prevent an inflation disaster.
Let’s face facts— A $10 Trillion Dollar injection into the economy can only end in a disaster of Jimmy Carter type proportions. From x yo y, inflation rose ?? Not born then? Well, the skyrocketing price of oil and scarcity of gasoline shook the foundations of our economy. There was inflation shock in the a bond Markets, the Stovk Markets, gokd rose to top xxx in 1980. Silver peaked at…
Inflation Loves Gold and Silver
Now, let’s look a year or two into the future. The impact of COVID19 physically and mentally will continue to cast a shadow over our nation’s confidence.
We may have a Covid19 vaccine next year. Sadly, the Food and Drug Administration said in July it would authorize a Covid-19 vaccine that is at least 50% effective.
A survey conducted in late July by Yahoo News and YouGov found that just 42% of Americans plan to get vaccinated for Covid-19.
My point is simple: The Covid19 pandemic will last longer than two years and require more stimulus programs— producing waves if inflation.
We are blessed that Oil is trading around a very low $43 a barrel today.
All of that money sloshing around is inflationary. We’re already seeing it in the markets – stocks and real estate are on fire.
I expect we’ll see it in everyday prices as well. Money will join other limited goods and services – particularly as hundreds of thousands of businesses around the U.S. close for good.
This may be the first time you’ve thought about inflation in years. By the time you start hearing about it in the media, it may be too late to defend your portfolio from inflation.
With inflation coming, the U.S. Dollar will decline, major sectors of the U.S Stock Market will have corrected down from nosebleed levels, Gold will be much more expensive to hoard, Silver prices may double, but will surely travel from today’s xx level back to surpass the all time high of xx we saw in yyyy.
What Not To Do About Inflation
Despite our optimism for inflation driving up Gold and Silver, do not go out and sell every Stock and buy up precious metals. Neither should you sell Stocks and head to Zales to buy a big Gold rings and Silver bracelets for the gals in your life.
Buy Gold Bullion, buy it cheap. Buy Silver Dollars, preferably American Eagles. Buy from a coin dealer everyone trusts, a firm that’s been in the business for 30 years— and is honest as the day is long.
We recommend Austin Rare Coins & Bullion. Margins are narrow, the BBB has given them A+ approval ratings for decades, and you can always sell your Gold Coins and Silver Dollars anytime you are ready.
U.S. Inflation Calculator
July 2020 Food Inflation 4.1%
Core inflation less food and energy a modest 1.6%