Time to Start Thinking About Stagflation

02 Jul

Time to Start Thinking About Stagflation

It’s one thing to live in a slow-growth or no-growth economy.  That’s bad enough.

And it’s something else to live in an inflationary economy.

But it looks like it’s time to start planning for the worst of both worlds:  STAGFLATION!  That’s a combination of the stagnation of weak or no growth along with rising prices.

In the depressed growth conditions of stagflation, sales slow down, margins are squeezed, and jobs disappear. Both individual and corporate debtors become unable to pay their creditors.

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.  

The 1970s are recalled as the “stagflation decade.” The stock market collapsed, and unemployment rose, as did interest rates.  Inflation skyrocketed.

Economic conditions were severe, but even those who had dollar savings that should have gotten them through the difficulty found that the dollar’s purchasing power was failing.

People began to pull out of troubled banks and failing currencies and move into precious metals.  A great bull market in gold and silver followed.

Noah Smith, a Bloomberg columnist wrote about the growing prospects of stagflation the other day:

“If capital begins to abandon the U.S. and the dollar in large amounts, the currency will crash and Americans will find themselves paying much more for everything from cars to televisions to gasoline to imported food. Interest rates will be raised in an attempt to lure back investment capital, and the country might undergo a period of stagflation worse than the 1970s. Large-scale unrest would undoubtedly result and — in the worst-case scenario — the U.S. could collapse like Venezuela.”

“This is an outcome to be avoided at all costs.”

It is a little late to worry about it now.  It’s like a Saturday morning hangover.  The time to do something to avoid the pain was on Friday night.

Smith writes, “If the U.S. goes from rich, world-straddling colossus to floundering dysfunctional developing nation in just a few decades, it will be one of the most spectacular instances of civilizational decline in world history.”

Fortunately, there is a haven of safety and profit in an era of stagflation:  Gold.

Speak with your Republic Monetary Exchange professional advisor about stagflation.  Prepare yourself now without delay, because the excesses that create stagflation are much, much greater now than they were in the 1970s.

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