By Sean Kelly
What to Expect from Inflation!
The financial media and commentariat has been busy discussing signs that inflation is looming large on the horizon. And why not? The Federal Reserve has been in a white heat of money printing.
A Drudge Report headline recently put it succinctly: “Fed Vows More Pump as Inflation Fears Take Hold,”
More money pumping?
Here is a graphic we have shared before that shows the Fed’s already frenzied money printing. It was of jaw-dropping proportions after the mortgage meltdown, but now, since COVID-19, it has gone stratospheric. Over the period covered by this chart, the Fed has printed $6.5 trillion dollars.
Some of the conversation about inflation has been triggered by the headline Consumer Price Index numbers which are running faster than in some years. In February, the CPI climbed 0.4 percent for the month.
Meanwhile, a team of Bank of America strategists recently observed that “2020 marked the secular low point for inflation…”
In one year, from March 2020 to March 2021, the Fed increased the money supply by about 26 percent, altogether more than $4 trillion. Stated differently, more than 20 percent of all the US money in existence has been created in the last year.
And then there is the Biden administration’s $1.9 trillion stimulus bill. Since this year’s deficit was expected to reach $2.3 trillion before the Biden stimulus bill, the additional spending will have to be funded by more printing.
We will say more about the return of inflation in future commentaries, but for now we would like to share a thumbnail sketch, only the briefest description of large events that typically occur in inflationary periods. It is a pattern of destructive government reactions that illustrates the great importance of protecting yourself, your family, and your future with gold and silver.
This oft-repeated pattern begins when monetary policies show up in rapidly rising consumer prices. People begin first to notice, and then to complain. You can expect to see reporters on the local news standing in front of grocery stores interviewing distressed shoppers about their difficulty making the household budget work.
As the temperature of consumer anger rises, politicians jump into the fray, promising to “take action” to fix the problem. Of course, it is a problem of their own making, the result of their reckless spending and fiscal irresponsibility to begin with.
But instead of acknowledging that it is the money that is failing, they scapegoat businesses and producers and offer up legislated price controls.
Never mind that businesses and individuals cannot be expected to commit economic suicide by delivering goods and services to the market at less than their cost of production, they are demonized as “exploiters.”
With the inevitable arrival of price controls, you will see TV stories of farmers letting crops go to waste in their fields. They cannot afford the cost of cultivation and harvesting at the controlled prices. Tragic footage shows ranchers faced with cruel decisions as they discover they cannot afford to feed their cattle.
For those reasons, politically mandated low prices soon mean a shortage of goods and services. Prices at the meat counter might be nice and low, but like a Soviet store, there is no meat available at those prices.
The public complaints grow more desperate. Politicians feel the heat and vow “to do something.”
Having made the problem of rising prices even worse with price controls, once again politicians move to fix the very problem they created themselves. The next step for the political classes is rationing. This really throws sand in the gears of commerce. The government decides who gets how much of goods and services at the controlled prices. As rationing becomes the order of the day, corruption and influence peddling proliferate. Primitive barter begins to supplant the use of money. Black markets become necessary for survival. An advanced and productive economy descends into chaos.
The reenactment of this tragic pattern is not limited to dystopian movies or banana republics like Venezuela or Zimbabwe. All the elements described have played out in the United States.
Although the quality of life for everyone suffers, the people who are best-off are those who moved to protect their wealth with gold and silver.
Let us provide you with a free one-on-one free consultation to show you how precious metals can protect your wealth and your retirement.