Posted on 04/25/2023 10:37:10 AM PDT by SeekAndFind
Americans continue to deal with rising prices even as the economy deteriorates. But the US isn’t the only country with an inflation problem. As Peter Schiff explained in a recent podcast, every country has let the inflation horses out of the barn. When you couple that with the de-dollarization trend, it’s bullish for gold.
More and more economic indicators signal a looming recession. The Leading Economic Index is now lower than in the early stages of the 2008 recession. In a recent interview, Peter said we’d be lucky to escape with just a recession.
Now, we don’t just have a weak economy, we have strong inflation. We have stagflation. This is a problem that is global, and it’s not because it’s just a coincidence that all of these countries are experiencing inflation and therefore we can’t blame anybody for it because everybody is suffering from it. No. Everybody made the same mistake. All these central banks printed too much money. They all kept their interest rates too low.”
Peter singled out England. Consumer prices in that country were up over 10% on an annual basis in March, despite aggressive rate hikes in recent months.
They have a long way to go in the UK. Rates have to go a lot higher. Government spending needs to be substantially cut. None of that is happening.”
In the past, Bank of England officials worried that inflation was “too low.” Peter said nobody over there will be talking about that again anytime soon — probably for the rest of our lives.
It’s never going to be too low. It never was too low. That was just made up. That was a pretense. But now, it’s clearly much too high, and there is no way they’re going to get that inflation rate back down below 2%. They’re probably not going to get even close to 2%. And the same thing is true with all these other countries in Europe. Everybody has let the inflation horses out of the barn.”
Peter also pointed out Japan. That country has some of the lowest price inflation in the world, but it is still higher than 2% (3.2% year-over-year).
It’s not the 10% that they’ve got in the UK, but remember, not too long ago, the Japanese had stable prices. They even had a few years where prices dropped slightly. But now they’re rising. They’re rising a lot more than 2%. And these numbers are going to go up. Why? Because interest rates are still negative.”
Even with rising prices, the Bank of Japan is targeting the yield on the 10-year Japanese Government Bond at 50 basis points. Price inflation is over 300 basis points.
This requires a lot of inflation. A lot of yen has to be printed to buy up all these bonds, because who in their right mind would want to lend money to the Japanese government at half a percent if inflation is 3%? And of course, it’s not going to stay at 3%. It’s going to go up.”
The bottom line is that we didn’t have this global inflation problem that we have now during the Great Recession – the last time economic numbers were this bad.
When you couple global inflation with the continued trend toward de-dollarization, it’s bullish for gold.
If the dollar isn’t the reserve currency, if [other countries] don’t need dollars to buy oil anymore, or other commodities because nations are now de-dollarizing and setting up mechanisms for bilateral trade in other currencies, then what is everybody going to do with these dollars? Get rid of them! And what are you going to do with the proceeds of the sale? I think most sellers of dollars would rather own gold than just pick another random fiat currency. … Just look at a chart of the price of gold. Gold is in a bull market in every single currency on the planet. So, whatever currency you’re looking at, if you compare it to gold, gold is still better. And interest rates everywhere around the world, despite the fact that they’ve gone up, pretty much every country has interest rates lower than the inflation rate. So, every country is offering negative [real] interest rates. Well, how does that compete with gold?”
In effect, central banks globally are incentivizing everybody to buy gold.
Even if you factor in the cost of storing your gold and figure, OK, it’s 15 basis points per year, so I’ve got a negative yield of .15; that’s still a higher yield than any of these currencies. … Central banks around the world are divesting [dollars] and they are building up their gold reserves. That’s why you don’t have a lot of downside risk in the price of gold. There are too many buyers beneath the market looking to buy and they will take advantage of any opportunities.”
Many commentators STILL overwhelmingly agree that a weakening US dollar cannot possibly lose its status as the world’s dominant currency because there is “no alternative” on the visible horizon.
Perhaps, but don’t tell that to the many countries racing to find an alternative, and such complacency will only accelerate their search.
The prime example right now is gold, up 20 per cent in six months. Surging demand is not led by the usual suspects — investors large and small, seeking a hedge against inflation and low real interest rates. Instead, the heavy buyers are central banks, which are sharply reducing their dollar holdings and seeking a safe alternative.
Central banks are buying more tons of gold now than at any time since data begins in 1950 and currently account for a record 33 per cent of monthly global demand for gold.
This buying boom has helped push the price of gold to near-record levels and more than 50 per cent higher than what models based on real interest rates would suggest. Clearly, something new is driving gold prices.
Look closer at the central bank buyers, and nine of the top 10 are in the developing world, including Russia, India and China. Not coincidentally, these three countries are in talks with Brazil and South Africa about creating a new currency to challenge the dollar. Their immediate goal: to trade with one another directly, in their own coin.
And why are emerging nations rebelling now, when global trade has been based on the dollar since the end of the second world war? Because the US and its allies have increasingly turned to financial sanctions as a weapon.
Astonishingly, 30 per cent of all countries now face sanctions from the US, the EU, Japan and the UK — up from 10 per cent in the early 90s. Until recently, most of the targets were small. Then this group launched an all-out sanctions attack on Russia for its invasion of Ukraine, cutting off Russian banks from the dollar-based global payment system. Suddenly, it was clear that any nation could be a target.
Odd that Schiff is so eager to sell you his gold via his site.
If he believed what he is saying then why would he be so keen to take your fiat and give you gold?
“Everybody made the same mistake.”
No, it’s not a “mistake”. Just like it’s not a mistake if a doctor removes someone’s brain and the patient dies. When a supposed professional does something with such predictable results, it’s not a “mistake”. Might be malpractice, but not a “mistake”.
If I asked a plumber to run the economy, and he caused rampant inflation, then he could claim it was a “mistake”, but an economist cannot.
“it’s not a mistake if a doctor removes someone’s brain and the patient dies”
Do doctors often do that?
I used an extreme analogy to show how incompetent an economist would have to be to “mistakenly” cause rampant inflation.
He does have a long track record of decades being wrong...so there's that...
We're facing global monetary deflation - not inflation.
Yes, we have PRICE inflation in our nation due primarily to supply-chain issues, but monetary deflation is what will take us down.
Peter's precious gold and silver won't do well in deflation - so he has to pump...pump...pump...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.