'Next year will be tough': Shocking inflation to create enormous disruption, commodities to rally - Almonty Industries CEO
(Kitco News) Next year will be "a tough one" with inflation and supply chain bottlenecks getting worse, according to Almonty Industries CEO Lewis Black.
Things will only get worse before they get better as the inflation rate in the U.S. accelerated to a 30-year high of 6.2% in October.
"Inflation has been created because the solution to locking everyone down was to throw money at them. Ultimately, the money you put into circulation generates inflation," Black told Kitco News. "There's a vast amount of money floating around now. It's quite extraordinary. So that's going to fuel inflation for some time."
The consumer will be the one to get hurt the most because inflation is just getting started.
"Next year, you're really going to start to feel it. It will be a tough year. There is a whole generation that has never been in an inflationary environment. And I think it's going to be shocking," Black said. "You're going to see inflation really getting its teeth, and you're going to start seeing a huge escalation of costs across the board."
Complicating things are the limited options available to the Federal Reserve and other central banks around the world due to high levels of debt and slower economic growth.
"I'm just old enough to remember inflation back in the late-1970s. And the traditional way to counter inflation is to raise rates. But if the U.S. raises rates now, it won't afford to make interest payments on its borrowed money. So they're caught between a rock and a hard place. This is a very difficult situation," Black described.
On top of this, there is a high possibility of serious disruptions and protests on a global scale.
"I can tell you what the response in Europe will be. Every union is going to go on strike, demanding inflationary raises in wages. It's going to create an enormous amount of disruption commercially in Europe. Normally, the unions demand an inflationary rise of 2%. But this time around, they're going to say we want 8%, 12%, 15%. Those kinds of levels of increases are unsustainable for the industries and sectors the unions represent. There's going to be an awful lot of distress in how to counter it," Black pointed out.
Supply chain bottlenecks are also not easing any time soon, even with the U.S. passing its much-needed infrastructure package. "You're probably looking three to four years of supply chain bottlenecks," Black said.
Plus, the infrastructure package could make things even worse by accelerating demand for materials. "Ultimately, the infrastructure package is going to fuel further inflation and shortages of building materials. If you're a supplier of cement, who you're going to supply? Your local real estate developer or the U.S. government?"
And with inflation so high right now, it might not be the wisest decision to put all that money into the system now, Black added. "They're insane to do it now because if they did it three years ago, they could have done it 30% cheaper. They should wait until things start to calm and inflation is more under control to get better value for those dollars."
From the investment perspective, commodities will be the ones to benefit the most in this environment. Black advises investors to look at steel, cement, copper, nickel, tungsten, and tin.
"The only way that you can address such disparity that's going to occur through inflation is to essentially create government works or programs that will help try and heal people from these huge increases. And that means a lot of infrastructure will be undertaken. Metals will see an extended period of demand for at least the next five years because of this infrastructure bill."
By Anna GolubovaFor Kitco News
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