Prices Rising as New Dangers Point to Hard Assets / Commodities / Inflation
Abig week for precious metals markets as inflation pressures push consumer prices to painful new heights.
OnThursday, the U.S. Labor Department reported that inflation at the wholesalelevel is up 8.6% from a year ago. That’s the steepest annual advance since thedata started being reported.
Ofcourse, Americans who have shopped at a grocery store recently or tried to rentor buy a car don’t need to read a government report to discover that prices aresurging. In many respects, inflation is even worse than reported officially.
Theeconomy was supposed to get back to normal this year. But instead, supplydisruptions are spreading and driving shortages of various consumer productsfrom office furniture to computer chips.
NewsReport #1: Massivesupply chain disruptions, empty shelves in stores all across the country andrising prices for what's in stock.
NewsReport #2: Thesupply shortages and the consequent shortage of goods delivered everywhere hascaused prices to spike up.
NewsReport #3: Annualinflation now at a 13-year high. Prices for beef andbacon, used cars, gas, even furniture, all up double digits.
NewsReport #4: Thisyear has seen record-breaking price jumps for children's shoes, up nearly 12%furniture, up more than 11%.
NewsReport #5: Allthese things are going up too: car rentals, they're up already almost 43%, if you can even find one. Gas,that's true. Gas up 42%. Steak is up 22%. Lodging is up almost 20%.
BloombergCommentor: Unlessyou embrace the analytically meaningless phase of persistently transitory,which I've heard, persistently transitory, this inflation round is not transitory.
Thingswill likely get even worse for Americans struggling with costs of livingheading into the winter. The U.S. Energy Information Administration projectshouseholds will see a jump of over 50% on their heating bills compared to lastwinter.
Those who use propane, heating oil, or natural gas to keeptheir homes warm will likely see the sharpest increases. Prices for energycommodities have been rising relentlessly over the past few months.
Preciousmetals markets may now be ready to play catch-up, although they are taking abreather here on Friday.
Metalsmarkets reacted positively to minutes released Wednesday from the FederalReserve’s latest meeting. Officials signaled they may begin tapering back their$120 billion in monthly bond purchases as soon as November.
Theywill have to start making at least some gestures toward reducing monetarystimulus if they want to retain whatever credibility they have left when itcomes to inflation.
Althoughsome investors fear Fed tapering will crash the markets, the early stages of aFed tightening campaign tend to be favorable for asset appreciation. Metalsmarkets in particular often rally as the Fed begins hiking rates – contrary towhat many expect to be the case.
Ofcourse, right now central bankers are merely contemplating pulling back on bondpurchases. Rate hikes aren’t even on the table yet.
Thetime for metals investors to be fearful of the Fed is when it may be gettingready to push interest rates above the inflation rate. If that ever occurred,rates would turn positive in real terms.
Dollar-denominateddebt instruments would be viable, at least theoretically, as a place topreserve wealth. Hard assets as alternative stores of value would be vulnerableto being dumped by investors who could get compensated for holding paperinstead.
Butat the moment low-yielding debt instruments are more like certificates ofconfiscation. They are virtually guaranteed to take away purchasing power fromholders when measured against current inflation realities.
Inflationrisks and other risks face holders of deposit accounts at banks. For one. the IRS is pushing asweeping plan to track all funds over $600 flowing into and out of bankaccounts.
Theagency’s supposed objective is to identify wealthy tax cheats. But IRS snoopingat this level could lead to harassment of millions of Americans who have committedno tax fraud.
That’sjust the beginning of the Biden administration’s plans for a “Great Reset” ofthe banking system. President Joe Biden’s nomination to the head the Office ofthe Comptroller of the Currency, Saule Omarova, wants to “end banking as weknow it.”
Sheadvocates a form of socialized banking in which private bank deposits would bebrought under the direct control of the central bank.
Shecalls her radical new banking regime “the People’s Ledger.”
Alsodubbed “FedAccounts,” they would presumably be denominated in "FedCoin" – the central bankdigital currency being developed behind the scenes at the Federal Reserve toenable greater tracking of and control over citizens’ financial transactions.
Althoughsocialized banking may seem like a remote possibility in the United States ofAmerica, a financial crisis could quickly turn a central planner’s pipe dreaminto reality.
Forexample, a cascading series of bank failures that threatens to bankrupt theFDIC and wipe out millions of depositors could give the Fed all the impetus itneeds to take over the entire banking system.
Holdinghard assets outside the banking system may be the best form of insuranceagainst risks within the banking system. And precious metals, being tangibleforms of money, are at the foundation of any strategy to protect against risksinherent in the fiat currency regime.
Longbefore the Federal Reserve System came into being in 1913, gold and silver backed the U.S. dollar. And if at some point the Fed and its unlimited suppliesof unbacked dollars lose all credibility with the public, precious metals willagain provide people with ledgers of real value.
By Mike Gleason
Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2021 Mike Gleason - All Rights Reserved
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