GOLD AND STAGFGLATION NATION

 

If you hold Gold there is nothing better than Stagflation.  This is when the economy slows to a grind and inflation rages.  This erodes the puchasing power of the currency and turbo charges the alternate stable currency: gold.

But really, all inflation hedges such are hard assets and top grade financial assets do great under stagflation.

This is by design.

Stagflation is not an unfortunate biproduct of bad policy.  It is the policy.

Staggering debt is the unfortunate biproduct of bad policy.  

This policy started in the 1980s under Reagan and Greenspan who realized that in an economy with no debt and no inflation (thanks to Paul Volker) you can smoothe out any problem with debt.  

After 50 years, that debt is now in the hundreds of trillions if you include unfunded liabilities.  And inflation, as measured by the diminishing purchasing power of the US dollar, is so far out of control that 60 percent of Americans live pay check to pay check, and can hardly pay their monthly bills, and they have nothing left over for any type of emergency.  

That is life on the edge.

Meanwhile, the current political regime is funding their current spending spree with 1 trillion dollars of new debt every quarter.

That is life in the fast lane.

So the only policy option to deal with this ever increasing, massive debt, is Stagflation - which requires ever more debt and ever lower rates which inflates the debt away while also inflating that value of hard assets and quality financial assets - and simultaneously bankrupting the vast middle class.

The only other policy option is Deflation which requires the retiring of debt, forcing the debtors to go bankrupt when they can't pay what they owe, (nobody is to big to fail) massively cutting spending, removing liquidity from the system,  and in the process, eradicating the value of all financial assets.  But preserving the integrity of the currency and the purchasing power of the middle class.

Guess which choice the regime has chosen?

The regime is clear: they want rates at 1 percent and will get that.  And they want no debt ceiling and have gotten that.  And they will spend however much they want without constraint and they are doing that to the tune of 1 trillions dollars of new debt per quarter.

Stagflation.

And, the regime has also decided to fire or prosecute anybody who stands in the way of Stagflation, and fire or prosecute anybody who reports economic numbers that suggest there is slow growth or high inflation. 

So the policy is not only to encourage stagflation, but also to deny that it exists.

I cant comment on what this means for the economy.

But is is awesome for gold.