Powell May Not See 'Stag Or -Flation' But Gold Does
Powell trumps his transitory inflation comments by saying he doesn't see 'stag or -flation.' Last time we saw stagflation it was extremely bullish for gold as it will be this time around.
Fed Chairman Powell said he doesn’t see stag or flation. He must be looking through the same rose coloured glasses that saw inflation as transitory.
If they calculated inflation the way they used to during the last bout of stagflation, it would be much clearer. Regardless of changing the calculations of inflation, consumers know what is truly happening every time they have to pay for something.
Nonetheless, he walked the tightrope of not sounding too hawkish or dovish. He said they don’t see another rate hike and that the next steps will be to lower. While also cutting back on reduction to their balance sheet. As the treasury plans to backstop the debt market by purchasing more of them. This all sounds like a stimulus to me.
They know that buyers are drying up for the debt and they need to be the buyer of last and as time moves on only resort.
Debt buyers are being less accommodative as they see the Death Spiral of Debt and politicians that don’t recognize the need to slash spending and keep making the debt crisis worse on a daily basis.
Powell et al really like to think that people are stupid. It is clear to everybody that the economy is slowing under the pressure of debt built up during the Free Money Era and that inflation is a lot higher than the government statistics would have them believe. The Fed people can ignore stagflation all they want, but that doesn’t make it go away any more than calling inflation transient made it go away.
It was odd that prior to the Fed meeting, gold softened due to concerns that the Fed won’t be lowering rates soon. But, ignored the stagflation indicators getting worse and forgot to realize that the last time there was stagflation it was extremely bullish for gold.
The bullish arguments for gold just keep piling up. In reality, I don’t see this as a short term situation. I see it as being measured in decades. The Death Spiral of Debt is a long term problem that few seem concerned about, when it is a structural problem that can only start to heal by returning to the Gold Standard.
The US dollar is now down to levels last seen in 1995 as the world’s reserve currency. It will continue to drop as the BRICS nations are in the midst of selling USD to buy more gold. Making matters worse for the USD is when more international trade is done in gold. It is coming faster than most think.
For a return to the Gold Standard, and USD losing its status as the world reserve currency and displaced as the dominant currency for international trade, will require gold to be much higher. I recently made the case of why I think we will see $20k gold within 10 years.
The Fed ignoring stagflation only makes me more confident we will hit that target. The Fed and central bankers in the G7 countries are clueless as to what is happening with the Death Spiral of Debt and will play catch up at much higher prices of gold for failing to see what the BRICS nation’s central bankers see and are preparing for.
I strongly believe that more investors should follow the lead of the BRICS countries and put themselves on the Gold Standard. Part of that should also include top quality gold stocks for those that can handle the risk. I don’t mean buying the good, bad and ugly, stick to the cream of the crop in majors, junior miners, developers and explorers as I believe they will serve you well.
Do your homework to stay ahead of the curve as a gold stock bull market is in the cards.
Heads gold wins, tails gold wins.
All the best,
Allan Barry Laboucan
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