From Birch Gold Group
Recent data shows worrisome inflation activity. Markets are in denial, but Americans are starting to feel the squeeze. While this is a cause for concern, there’s a way to protect the spending power of your savings, and even use this strange activity to your advantage.
Inflation Breaks Post-Recession Ceiling
Two major price indexes used to calculate inflation are rising at their fastest rate since the last recession. Meanwhile, U.S. inflation just hit a four-year high.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
Jumping from 1.9% to 2.5% between January and February, the Consumer Price Index (CPI) experienced its fastest increase in over three years, according to the Bureau of Labor Statistics. Movement in the Institute for Supply and Management Price Index (ISM) was even more dramatic, leaping from 65.5% to 69% over the same period. That’s the sharpest increase since 2011.
Aside from putting pressure on U.S. consumers and sapping their savings, this kind of spike in inflation activity has a high correlation with recession onset.
The following chart overlays inflationary spikes with historic U.S. recessions:
Source: inflationdata.com
As you can see, there’s a strong connection between economic distress and the kind of activity we’re witnessing now.
Prepare for Fed to Hike Rates, Early and Often
The Federal Reserve is well aware of the danger in today’s inflationary explosion, and it’s ready to react with faster, more aggressive rate hikes.
Fed Chairwoman Janet Yellen is already hinting at another hike to come as early as next month. And economists from both Goldman Sachs and JPMorgan are raising their expectations for another hike in the near-term as well.
But Fed officials must strike a delicate balance in their efforts to offset runaway inflation. Even with the best intentions, their actions could easily do more harm than good.
Wolf Street reports:
The Fed is already sitting on a powder keg, after years of QE and zero-interest-rate policy that have caused mind-boggling asset price inflation, including in housing, which is filtering into the costs of living. During this period, corporations and governments have loaded up on record amounts of debt, as have many consumers. But someone owns this debt as assets. Now add a surge of inflation to the mix, along with the Fed’s reaction to that surge, to get some possibly very toxic effects along with some new groups of losers of Fed policy, or the same groups of losers, as decided by the Fed.
How Some Will Use Exploding Inflation for Profit
Finding a bright side in skyrocketing inflation is no easy task. As prices increase across the board, businesses and consumers alike will pay the price. And the risk of a painful economic constriction will be inevitable.
However, amid all this risk, there’s an obvious opportunity that most won’t see.
While financial markets historically fall into recession during times like these, there’s another class of investments known to do the polar opposite.
As dollar prices increase for goods and services, they increase equally for real assets like precious metals. That’s the reason why gold and silver trend upward during inflation while everything else falls away.
Newsmax covers Peter Schiff’s analysis:
“Gold is going up faster than the stock market,” he recently told CNBC. “Gold is up about 8 percent this year – it had a good year last year. Remember, gold started this bull market,” he said.
…
“But gold is going much, much higher. I’ve been predicting higher gold prices since the late 1990s. And gold has outperformed stocks during that period of time and it’s going a lot higher,” he said.
“Inflation is going a lot a higher as well. And so more people are going to go into gold.”
If you’re interested in guarding the spending power of your savings – while potentially reaping healthy returns in the process – gold may be the best tool for the job. With this brief window of opportunity, now may be the perfect time to act.
Massive piles of Fiat currency exist in bank accounts, in safes, and a little in ammo boxes around the globe and once the Inflation Fuse is lit, that will be the Economic TNT that blows prices sky high.
Not buying it.
If inflation (let’s define it as its symptom, rising CPI or PPI prices) gets going, who is going to accept the pittance being paid on their money (also known as interest rates?)
No. Inflation (wage, food, fuel, etc.) cannot rise. Not in any significant or sustained way, without dynamiting the BOND MARKET, which is so vast now that even small rises in interest rates destroy vast amounts of bond value. I know this is very abstract (and I struggle to explain it, even in person) but it’s the Way The World Works.
As a thought-exercise, if the Fed monetized $1 billion in T-notes and rates responded by repricing those bonds lower (thus raising rates), the ripple effect of rising rates would spread throughout ALL EXISTING BONDS, many trillions of dollars of debt, and their aggregate value would fall far MORE than the $1 billion of Fed QE.
As long as rates were falling (and social trust was intact at a maniacally high level, as revealed by very low interest rates), all new debt was counted like it was incremental wealth.
Now that it appears rates bottomed last summer, new debt may or may not ADD to total bond value. Enough could evaporate in rising interest rates to more than offset the monetary effect.
All roads lead to debt devaluation (AKA rising rates), and once that race is started, it’s all down hill until it hits the greased ice of panic, at which point it (bond value) will nosedive.
Then it will be credit collapse deflation.
When IN HISTORY has any thing of major consequence ever lined up the way the relevant authorities claimed it would?
It’s already happening, bonds have broken through major supports, so they are in a bear market. Inflation goes nicely with that….
No, inflation does not go nicely with that.
https://infogalactic.com/info/Monetarism
Rising interest rates destroy bond value. The wealth people think sits in bonds (their dreams of cushy pensions, their insurance annuities, etc.) all rest on low rates.
Rising interest rates are a clear signal that credit deflation is beginning. Given the feedback loop on the way up (read Karl Denninger’s rants on debt growth in a declining rate environment), can we doubt there’s a feedback loop in the other direction? Every increase in rates makes it more costly and difficult to roll over existing debt as it matures. The jig is up, folks, if rates truly have entered a rising trend.
All roads lead to wealth destruction, monetary contraction and eventually credit collapse. These chickens, when they come home to roost, will turn out to be buzzards gathering to pick clean the corpses soon to litter the financial, economic and ultimately real world landscape.
I’m nervously long a little gold as a pure speculation, but those who maintain that gold and inflation rise and fall together must lack a charting program.
As I see it, the charts argue that while stocks are insanely overpriced, they probably have more upside in the near-term. Gold got pretty oversold and underloved late last year so a rally of some kind was likely [I just timed it badly a couple times, being long too early at GLD= $113, it dropped to $107 (I bailed at a loss well before it got that low) and then I was smarting from the loss so I failed to get back on board in the $110-111 range when the getting was good. I’ve been up a little and down a little since I got back in.]
But I still believe that the next major move of major consequence is a major decline in stock and bond prices, a major move higher in interest rates, which will destroy vast amounts of capital wealth held in pension funds, insurance companies, etc., and usher in a sea change in how people see asset prices. This may not even begin for months, however, if it occurs at all.
Such an event most probably would also see gold prices fall, although cross-market correlations are wild guesses in the best of times.
GLD is $119 as I type this. In coming weeks it could be $119, $123, $113 or any other damn price Mr. Market chooses. Anyone who says otherwise is trying to sell you something. I might add that GLD is clearly in a daily uptrend, but the technical features of its chart are consistent with polar opposite future behavior: either this is still early in a powerful uptrend, or at least the initial move off the $107 low is nearing an end and a significant decline will materialize….and there’s no insurance that the entire $107 to $119 rally won’t be entire retraced and then some.
No one knows. I don’t. Schiff doesn’t.
I should not need to add:
1. DO NOT use my analysis as the basis for any financial decision you make.
2. Stocks could dive tomorrow. Or rally hard tomorrow. I have no idea. I’m only guessing that A) this is the 1oth day in a row of new highs, suggesting that sooner than later at least some decline is likely and B) after a short period of small-scale correction, it seems possible if not probable that at least one more final lunge higher is in the cards. Since I don’t own any common stocks and since I have ABSOLUTELY no intention of trying to make money on the downside, the current trend of the stock market is of exclusively academic interest to me.
When the Fiat Paper Dollar goes up in smoke by inflation; or The Beast outlaws it (like it did to physical silver and gold as legal money for trade about 1933), then physical silver coins will become like “gold”. Then people will give the Elite all their lead…
The money supply is banknotes and available credit.
We’ve had the credit inflation of all credit inflations ALREADY.
Shit, it’s numerically impossible to print all the credit that exists in banknotes. There isn’t enough paper on the planet.
It’s a common problem to think a crisis is pending over something that already occurred.
My guess is that a deflation cuts the value of the metals in half at some point. It wouldn’t surprise me at all if silver hit $4 again, and gold hit $600… or even much lower. But yes, if there is a credit collapse, I also think it’s likely that at some point there will be an effort to print banknotes to reflate the economy. If that occurs, precious metals might well be one possible way to protect one’s self from the Zimbabwe-style hyperinflation that ensues.
Even if that happens, I think that’s years, if not decades, away.
Gold got outlawed (domestically) not silver.
Silver lasted up through Kennedy and for a little while after his death.
I believe silver is outlawed for trade as money; you can’t buy anything with it without getting arrested to my knowledge.
Using silver to buy something is treated as barter, and the most one might worry about would be an attempt to hit you with “structuring” in order to avoid reporting a large transaction. Of course, barter is also subject to taxation as well, although I often wonder how many trillions of dollars of “barter” (contractual exchange of things like common stocks or debt) occur each year that somehow seem to dodge taxation.
As I see it, today’s accounting profession is largely a game of figuring out how to dodge tax laws or hide the strip-mining of value from public corporations by those firms’ upper management.
Blah Blah Blah.
Take care of imigration and the Demand side goes dowm. So housing isnt a hedonisic improvement but rather a place to sleep. Deflation ! Oh my Go+d ! What will people who rent their rooms for a living do?
Another buy gold article from… wait for it… Birch Gold Group. I sure hope Admin gets a few bucks from these weekly advertisements.
Silver, instead of Gold, is poised to increase in price at a much faster rate due to the use of Silver in manufacturing. Supply is going to run out if manufacturing electronics continues at or higher than the current pace.
Only downside is it’s heavier than Gold in quantity.
This is NOT investment advice 🙂
Say Barnum, stick to the circus. 🙂 Silver at $4 as the result of deflation? Would you mind explaining how you got there?
God, how I tire of explaining this.
1. Increase the supply of money in people’s hands, they run into the market and bid up the PRICES of what they buy.
2. IF what they buy is food, fuel, housing, labor (wages), etc. the IDIOT BRIGADE calls it inflation.
3. IF what they buy is IBM, T, AAPL, Farmland, Office Buildings, etc. the IDIOT BRIGADE has orgasms of glee! NO INFLATION!!! (Yes, it’s inflation, BTW.)
In 1964 the USA took silver out of coins because the expansion of the money supply reached such proportion that prices for silver were bid up past the face value of coins and it made more sense to melt the coins than to use them in commerce. Since Americans were prohibited from owning gold, this was the monetary de-metalization of US money. In 1971 Nixon stopped foreigners from doing the same thing, siphoning off the US government’s gold holdings because the world was being FLOODED with US dollar credits.
These events opened the door to rampant credit creation, but rising interest rates made it difficult to push all that much credit out that door.
Until 1981, that is. Bonds ended their bear market in August, 1981. Once interest rates began to drop (bonds in a bull market), the ability to flood US dollar credits out that open FIAT MONEY door went ape-shit. Due to a confluence of other factors, little of the vast increases in credit went into prices for food, fuel, wages, etc. and instead that credit surge fueled a surge in prices across every asset class, from commodities to stocks and collectibles to artwork. Eventually, this morphed into the largest asset mania in history, dwarfing Tulipmania, John Law’s Mississippi Scheme and the South Sea Bubble combined in both amplitude and duration.
Credit, as well as all prices for intangibles (like stocks) exists entirely as a state of mind, COLLECTIVE mind, that is. Unless you grasp that, you can’t understand markets at all.
Commodities (including commodities that have mixed industrial and monetary uses like silver) have prices that are set in a hybrid environment. Both real demand and psychological demand play a role in price-setting, but it’s psychological demand that predominates in any short-term situation. The price of a commodity can and does occasionally drop below its cost of production.
My point is that we are at the top of a roller-coaster in prices for assets as well as services because we are at the top of a roller-coaster in belief in the quantity of money (which is actually almost all credit, which is in theory unlimited when people are this maniacally optimistic.)
I believe that this folie a plusiers, this “Madness of the Many,” will end someday, possibly this year (but I thought it would end at least four times previously, so my guess is just that—-a guess.)
When it does, the collective belief that underpins nearly infinite money (in the form of credit) will collapse, and supply of credit (i.e., the willingness to lend) will collapse with it. This will radically reduce people’s willingness and ability to enter almost every market on the planet, which Econ 101 tells us will drive prices into the dirt for pretty much everything.
While silver or any other narrow market might buck this trend, I’m skeptical anything will escape. I even imagine that the cases and cases of ammo people are now stacking to their basement ceilings will eventually come to swap-meets, flea markets and gun shows to be sold for 10 cents on the original dollar, so desperate will people be to obtain money to pay for their life’s essentials.
Do you really think people in Venezuela would go hungry while sitting on a pile of silver coins, or more than a few magazines of ammo? When people are desperate, EVERYTHING they own (including their daughters’ chastity) goes up for bid.
Yes, I think eventually people will be that desperate.
Say it ain’t so , jobs pay shit wages dollar loses buying power and this is after 8 years of fixes ? Now invest in precious metal correct “lead & brass” !
Beans, bullets and band-aids. Lots of beans. Good thing I like beans.