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Headed for Stagflation

30 Jul

Headed for Stagflation

Gold Market Discussion

“I think we’re headed for a bout of stagflation like we’ve never before seen.”  

That’s the view of well-known market analyst Michael Pento.

Pento, the author of The Coming Bond Market Collapse, has proven himself to be a knowledgeable critic of bad fiscal and monetary policy, one who understands gold.

In a recent interview, Pento said that the stagflation ahead will be like nothing we have ever experienced “in the history of this nation.”

It’s not just the Fed that is panicking, he says.  “Every other nation on earth now is panicking, too.”  Central bankers are afraid that if they can’t engineer ongoing inflation, bank assets – the housing market, stocks, low grade, and junk bonds – will all tumble and turn into a massive crash.

According to Pento, the leverage in the system is so great that if things even started to correct a little bit, it could turn very quickly into a massive banking crash.

We’re glad Pento has identified stagflation as a very likely outcome of the monetary policies of the Fed and other central bankers.  As the name suggests, stagflation combines elements of stagnation and inflation.  Stagflation could be described as the worst of both worlds, weak on non-existent economic growth, accompanied by rising prices.  

Weak growth makes it increasingly impossible for debtors – individuals and corporate – to service their massive debts.  That’s because sales slow down, margins are squeezed, businesses are forced to cut prices, pay raises don’t materialize, and jobs disappear.

At the same time inflation means the purchasing power of the currency falls, interest rates rise in compensation, and, saving money becomes pointless.  And it blows up the bond market.  

There is a haven of safety and profit in an era of stagflation:  Gold.

Some of our clients will remember the “stagflation decade,” the 1970s.  Others will have heard about it.  The stock market basically collapsed, and unemployment rose as did interest rates.  Inflation skyrocketed.

When unemployment hit 7.6%, President Carter expanded the money supply

Economic conditions were severe, and just when people most needed the money they had saved to keep afloat, it’s purchasing power failed them.

No wonder people began to pull out of troubled banks and failing currencies and moved into precious metals.  A great bull market in gold and silver followed.

It is a pattern of movement that we are seeing today:  confused central bankers flailing all about, banks dependent on Fed cronyism for their survival, foreign nations moving out of dollars and into gold.  The remarkable strength of gold and silver is only an early warning of things to come.

Pento makes a strong case that stagflation is headed our way.  Don’t delay.  Speak with your RME Gold professional today about protecting yourself and your family with gold.  If you don’t have an advisor, simply call RME Gold and you will be connected with one of our Gold Authorities.

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