Stagflation
dcarr
Posts: 8,457 ✭✭✭✭✭
Years ago I predicted a future where inflation is relatively high and economic growth becomes much more difficult to achieve. I based that on demographics. The Earth simply can not support an ever-growing human population. Pandemics, wars, scarcity of resources, increasing debt, and lower fertility rates lead to a stagnating population. Without an increasing population, there is not enough younger people willing to take on and service new debt and support older generations. As such, existing debt structures fail because there is not enough new people coming into the system to prop it up.
High interest rates go against economic growth (especially in a debt-based financial system). Now we have increasing interest rates leading to an economic slowdown, and relatively high and persistent inflation. This is the definition of "stagflation". And stagflation is the mechanism by which standards of living fall.
More than 10 years ago I coined the term "hyper-stagflation" to describe it. And here we are.
Inflating the public debt away (by printing money) can alleviate the pressure on the debt structures, but at a cost (significant inflation). Much of the inflation comes from the increased cost of labor. The only thing that I can see that can right this ship will be robots that can do a lot of the labor at low cost. This will have the effect of deflating the cost of labor which will alleviate inflation. But to reach that, robotics still has a long way to go. In the meantime, things could get difficult.
Comments
Great analysis. One thing though, things are already difficult, and they are going to get worse.
Paper money eventually returns to its intrinsic value. Zero. Voltaire. Ebay coinbowlllc
Yup...we done did it now.
Knowledge is the enemy of fear
Stocks shot up 2% this morning up to all-time highs. Their value inflates, too. Gold and silver down.
My US Mint Commemorative Medal Set
Growth in emerging markets, China, and the U.S. is strong.
It's only in Europe and countries imposing Green policies that lead to higher energy costs that nominal GDP growth sucks.
Energy costs are 2-3x higher in the EU. You think MSFT or GOOG or AMZN or any other energy-intensive business (manufacturing or AI) wants to pay double or triple ?
When ? If it takes a few years to play out, this is actionable. If it's like the 35-year bear market in bonds from 1946-81, we might be waiting DECADES before it's an investable event.
What if it takes 50 years for his scenario to play out ? Greece ramped up spending, big deficits, Socialism.....it too 30 years for a 3rd-rate economy to implode. Wanna guess how long a global reserve financial superpower can stay afloat ?
Interest rates want to go up and the Fed wants to force them down. More money creation and much more spending is at hand.
Got precious metals?
I knew it would happen.
After inflation of greater than 6% there has always been a second spike. This is what we are experiencing now.
Economic growth via less regulation and lower taxes coupled with the AI revolution is giving you a chance to make life changing returns in the stock market. Do all the homework you do reading about PMs and you too can find the great companies to invest in. My market returns are more than double what I made on gold and silver the last year (and it was a great year for PMs).
Actually, I feel a whole lot better today than I did a few days ago!