While central bankers warn about deflation, the real danger for consumers is inflation, and more specifically stagflation—a combination of price inflation and low growth or no growth. Stagflation is the reality of the US economy right now.
Shadowstats says that inflation has run 4% to 8% since 2012. During much of this period, the US economy has been in recession. Eight percent inflation plus low or no growth certainly sounds like stagflation.
After all, how could deflation be a threat when banks regularly print billions, if not trillions, of dollars? While there may be a time lag, inflation is the inevitable consequence of printing. And now it’s hitting Canada.
The Fed had four rate hikes planned for the US this year to dampen growing price inflation. But market reaction to the first has been so bad, it’s more likely additional quantitative easing is on the table.
As for the vaunted US recovery, the country has been in a recessionary environment since 2001, when the dollar began to move down against gold. The Fed revved up the printing presses at that time and created a series of asset bubbles, including the great subprime bubble that collapsed in 2008.
There was no recovery. The economy was goosed, and the resultant monetary debasement was so significant that the whole world was plunged into a quasi-depression. The crises are manufactured; each one brings the economic environment closer to a terminal breakdown. When it comes, there will be elaborate plans for a more centralized monetary and banking system.
In the meantime, central banks have taken to buying gold. It’s something that investors should take note of.
The economy is not recovering. Deflation, going forward, is not going to be an issue. What lies ahead, just as in the 1970s, is stagflation. At that time, gold reached $800 an ounce, and silver was $50. Where precious metals could go this time is anyone’s guess. But if you own some, you may be happy to find out.