Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Inflation ‘A mirror image of the early 1980s’

Economics / Inflation Jun 10, 2020 - 03:25 PM GMT

By: Michael_J_Kosares

Economics

“To propose a return of inflation is to be inflammatory,” writes Lightman Investment Management’s Rob Burnett in an opinion piece for the Financial Times.  “Investors are committed to a deflationary thesis — and such is their fervor that many believe inflation cannot return in any circumstance. Yet if we look beyond today’s demand shock from the Covid-19 crisis, the forces driving the disinflation of the past 40 years appear to be in retreat. … [T]oday appears like a mirror image of the early 1980s. We have moved from inflation peak to deflation trough.”

Evidence is beginning to mount that the new paradigm Burnett describes – moving from disinflation to inflation – might not be too far off the mark. During the financial crisis that began in 2008, the Fed sterilized its money creation by routing money back to its coffers in the form of commercial bank excess reserves – a strategy that kept the inflation rate from running out of control. As you can see in the first chart, the current level of sterilization, at least in the short term, is greater than what occurred in the 2008-2014 period. At the same time, as you can see in the second chart, the rapid growth in the money supply this time around goes beyond anything that occurred during the prior crisis. Whether or not Burnett is correct and the growth in the money supply translates to price inflation down the road remains to be seen. (Please take note that the growth in the money supply began roughly a year ago – well before the onslaught of the coronavirus pandemic.)


To understand what gold’s role might be in a historical shift of this magnitude, we turn to Atlantic House Fund Management’s Charlie Morris. “The point,” he says in a report published recently in The Alchemist quarterly review, “is that there is a rational framework from which you can understand the dynamics of the gold market. Owning gold does not mean you have to fly blind. The current gold premium is telling us that higher inflation is coming. The implications for asset classes are immense. Higher inflation implies a weaker dollar, which implies higher commodity prices and a surge in emerging market equities. It will make bonds unattractive and potentially drive down equity valuations in the developed world. The last time we saw this was in the 1970s. Those that thrived owned gold.” 

The third chart in our grouping supports Morris’ thesis. Since late 2019, gold and the money supply have risen in tandem hinting that perhaps the inflation genie might yet escape the bottle.

Source:  Federal Reserve Bank of St. Louis

Source:  Federal Reserve Bank of St. Louis

Source:  Federal Reserve Bank of St. Louis, ICE Benchmark Administration (IBA)


A Mirror Image of the Early 1980s is the lead article for the June edition of USAGOLD’s monthly client letter. This month’s edition also includes a detailed look at current and future gold demand in three important sectors – funds and institutions, central banks and individual investors; why it is important to understand the amygdalotomy policymakers performed on Wall Street; how the Fed chairman Powell spilled the beans on money printing in a 60 Minutes interview; a bit of history on when the United States owned the largest hoard of gold on Earth and why it is important today …… and much more including our usual array of timely charts and cartoons.

Up-to-the-minute gold market news, opinion and analysis as it happens. If you appreciate NEWS & VIEWS, you might also take an interest in our Daily Top Gold News and Opinion page.

By Michael J. Kosares
Michael J. Kosares , founder and president
USAGOLD - Centennial Precious Metals, Denver

Michael J. Kosares is the founder of USAGOLD and the author of "The ABCs of Gold Investing - How To Protect and Build Your Wealth With Gold." He has over forty years experience in the physical gold business.  He is also the editor of Review & Outlook, the firm's newsletter which is offered free of charge and specializes in issues and opinion of importance to owners of gold coins and bullion.  If you would like to register for an e-mail alert when the next issue is published, please visit this link

Disclaimer: Opinions expressed in commentary e do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

Michael J. Kosares Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in