Loading ...Inflation is coming
How do we know? Because rising interest rates are here(and more to come). The only way to offset the devastating effect that has on the national debt burden, is to inflate at a higher rate than interest rates at the present time.
For example, lets say the US federal reserve brings rates to 2.5%, and the US 10yr yield then sits around 3 – 3.5%. Inflation will have to be running over 5% in order to negate the effects of a 2.5% fed funds rate on national debt.
Nominal rates(us 10yr yield) – Inflation = real rates.
In the next few years, if real rates = (-1.75%), (3.5% – 5.25% = -1.75%), then we get rocket fuel for PMs.
Think of how many asset managers & individuals are presently underexposed to PMs. Think of the demand.
The fed/USA has no other way out, IMO. Hear that sound? I’m backing up the CAT dump truck.
Not so sure inflation is on the way… Someone (wish I could remember who and give them credit) showed these two charts a while back. One shows an index that is made up of businesses that do well during inflationary times and one is made up of businesses that do well during deflationary times.
Here is the inflationary index: http://stockcharts.com/h-sc/ui?s=%21PRII&p=D&yr=10&mn=0&dy=0&id=p58649073130
Here is the deflationary index: http://stockcharts.com/h-sc/ui?s=%21PRDI&p=D&yr=10&mn=0&dy=0&id=p02949681023
Since charts usually anticipate business conditions ~6 months out, based on these indexes, I don’t really see any inflation looming on the horizon.
Appreciate the comment. But you havent disproven me by showing an index of stocks that are inflation sensitive. They also move based on a host of other factors. Nor have you named any other way the fed would deal with national debt aside from inflating away, and killing off 5% of our us dollars’ buying power every single year. This is the only option IMO. Im not saying exactly when it’ll start, but I think within 5yr. Its definitely not the time to be feeling deflationary…we’ve had 10yr of that now.
Also a nice bull flag looks to be showing on the inflationary index 🙂
lots of kinds of inflation out there, demand, currency and gov’t fees. Your currency goes down and therefore things cost more . 80k for a truck today and 20 clams for a steak mixed in with gov’t fees including crown corporations raping us(car insurance, hydro,taxes) = huge inflation. Also throw the housing boom into the pot. Story from Canada. The average home price now 700k.