Inflation is in the Wings, it Will Come…

Inflation is in the Wings, it Will Come…

The world economy will see inflationary pressure as it emerges from the C-19 coronavirus chaos, with government spending bolstering demand even though the related unemployment is at depression levels.

What makes the economic shock from the C-19 coronavirus different from the Great Depression is that shuttering industries to control the disease has not brought on a decline in purchasing power, as governments, principally the US, have stepped in to subsidize wages.

And in Europe the support may have saved about 40-M jobs. So, prices will be pushed up.

As the developed economies come out of lock-down, there is going be inflation, it is waiting in the wings.

And the market is anticipating it, as we can see it the gold price action, a clear break and hold over 1800 oz will confirm it. The Key technical indicators are flashing Bullish to Very Bullish in here.

Central banks in advanced economies, which could not raise inflation after the 2007/2008 global financial crisis, are now grappling with fast deep recessions and again a dive in Crude Oil prices.

It is my expectation that strong support for demand coming from fiscal and monetary easing (QE), that plus the temporary disruption to the supply side, as production and transportation of goods are disrupted, will lead to higher prices.

Yes, some degree of inflation will help governments meet the cost of their massive aid/relief programs. Or you could actually tax openly just by increasing the tax rate, which is not likely now.

The response to the C-19 coronavirus chaos blurred the lines between fiscal and monetary policy, as central banks keep borrowing costs down to help governments spend their way out of the health crisis.

Again, the consequence of the money expansion will be a rise in prices.

We all know that governments with their own central banks can get (print) enough money to spend whatever they want.

Further, a note from economist Bruce WD Barren, Chairman of The EMCO/ Hanover Group:

Gold prices are rising steady – up 15+% over the last 6 months, government deficit spending is out of control due to Covid-19, real estate prices are flat or declining in most geographical markets yet our population will continue to increase, supply of essential products, such as food and imposed restrictions on restaurant eating, will become concerning as the Government opens up our economy  and the stock market continues to rise in spite of recent poor earnings reports

All are Key indicators for inflation which is an underlying characteristic of the American consumer

Except this time, unlike the post war era of the 1940’s, 1950’s and the 1980’s under Ronald Reagan, I believe that inflation will be even stronger than the United States has ever seen before.”

Why?

Well, because there is be a pent-up, underlying demand for leisure goods which is well on the horizon and the American people are a consumer-spending nation. The indicators are growing daily. We are already seeing it especially in the food and other essential product supply chain.

Have a healthy day, Keep the Faith!

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