When Will Inflation Hit, And How Do We Protect Our Loved Ones From It All ?
Mar 18, 2021 04:29am
When will Inflation hit, and how do we Protect our Loved ones from it all ?
The gold market is pushing into positive territory. The Federal Reserve reiterates its stance that interest rates are not going anywhere anytime soon, even as growth and inflation expectations jump significantly. As expected, the Federal Reserve foolishly stated that interest rates unchanged within its zero-bound range. Although interest rates are expected to remain low, the central bank seemed to be deceptively optimistic about economic growth through the end of the“Following the slow pace of the recovery, indicators of economic activity and employment have turned up slightly recently, although the sectors most adversely affected by the pandemic remain weak,” the central bank said. The path of the economy will depend significantly on the virus’s course, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.”
Since the pandemic began a year ago, the term “new normal” has become part of the American lexicon. Not “new” as in better or improved. But relatively “new” in contrast to the way things used to be. Much of the mainstream discussion argues that returning to the “old” normal isn’t likely to happen. Things like pre-pandemic employment, closer-to-normal price inflation, and less economic uncertainty just aren’t on the map. The Street summed it up generously as: “Numerous chain reaction ripple impacts will delay the economic recovery.” Some of these “ripple effects” were in motion long before the pandemic hit.
For example, the Fed was already in a state of panic thanks to an out-of-control repo rate fiasco from 2019, mounting debt, and potential ineffectiveness of its main tools.
During the “old normal,” the Fed would have been able to deploy its tools to control rates and keep unemployment under control — but that might not be possible now or in the future.
Under the post-pandemic “new normal,” the potential exists for the “ripple effects” from small businesses’ state closure, developing automation, and fractures in the food supply chain to be felt more permanently.
Is the U.S. Heading for Permanently High Unemployment?
In a way, thanks to the pandemic, yes, it is. But it depends on many factors.
Wolf Richter laid out why he thinks the sudden economic shifts that happened in 2020 will take years to sort out. Now the Pandemic has forced businesses to change. There is no going back to the old normal. And these technologies impact employment in both directions. If the pandemic has forced businesses to adopt technologies that automate certain functions, then the employees that performed those functions will no longer be necessary.
You can see the current unemployment trend reflected in the official chart. Keep in mind that as more businesses adopt automation technologies to stay afloat, the unemployment rate of 6% isn’t likely to get lower; on the contrary, it will start rising again. Another example of the “new normal” comes from Naomi Prins: “People who have been telecommuting can live outside of more expensive urban areas, or just more expensive areas in general. The residential real estate frenzy of getting out of their urban areas will continue because I think more people will continue telecommuting.” This migration out of urban centers will hit commercial real estate hard. There will be fewer jobs in retail leasing, property management, construction, and sales.
One in three Americans are already on unemployment
Studies show 1 in 3 Americans are struggling to pay for food, rent, and other basics. Job losses in any sector will only make the problem worse. So will these new higher unemployment numbers trend that way permanently? It’s too soon to tell; however, since no one seems to be addressing this issue, it will be hard to deal with. With new technologies usually comes new types of jobs. After all, people still have to fly drones, educate others on new digital tech, and fix 3-D printers. But remember, the WEF called for a permanent 13% reduction in the workforce (what are those poor unfortunates supposed to do?). Who knows if the new tech will create new jobs, how well they’ll pay, or whether they’d even be based in the U.S.? On top of the “new normal” for employment comes inflation and possibly Hyper Inflation that could last for quite a while.
Rising Inflation Dead Ahead (With Even More to Come)
We have warned about the potential for a dramatic rise in price inflation for a few months now, and CNBC reveals that time could be arriving fast: Moody’s Analytics Mark Zandi believes Wall Street is significantly underestimating the seriousness of an inflation comeback. He warns it will affect every corner of the market — from big tech to cyclical trades. Inflationary pressures will develop very quickly.
Zandi warned CNBC’s Trading Nation that he sees inflation “dead ahead.” He also proclaimed that “not even stocks tied to the economic recovery will offer investors a haven. “Looks like inflation pressures are building up fast. Food inflation remains high at 3.6%. Energy price inflation has also jumped out of the gutter, increasing to 2.4%. Overall inflation is no longer “flat” as it has been since August 2020. The official tally rose to 1.7% in February, but the inflation carnage does not seem like it will end there
Both rent and gas prices are expected to skyrocket by almost 3 percent more than expectations just one month ago. Plus, the “short-term inflation expectation edged up to 3.1 percent, its highest level since July 2014.”And then there’s the “real” inflation rate. It’s figured using methodology from the 1990s, just before the Fed stopped including a realistic standard of living in its calculation. All told, that price inflation currently clocks in at almost 6 percent.
Compare that to the average interest rates on traditionally conservative, “safe” places for your savings… You’re lucky to get a 0.5% APY on cash in a savings account (should you be grateful for losing 5.5% of your buying power per year?). Or you could buy U.S. 10-year Treasury bonds – at 1.5% APY, you’re only losing 4.5% annually. We’ve said it before, and we’ll repeat it: low-interest rates are essentially a tax on your savings.
What’s worse? Jerome Powell’s Federal Reserve has made no secret of their willingness to keep rates low for as long as it takes to lower the unemployment rate. Is that even possible in the new normal, with jobs disappearing forever? We’ve already mentioned the havoc low-interest rates play on savers, but let’s not forget the other consequences of near-zero interest rates:
Encouraging risky speculation in the stock market
Inflating asset prices, also known as the “Everything Bubble.”
Wreak havoc on pension funds (maybe that is why they needed a bailout)
Laying the foundations for wealth-destructive hyperinflation Eventually, inevitably, dethroning the U.S. dollar as the reserve currency of choice The Fed’s driving the bus. There doesn’t seem to be a map, but Chairman Powell is behind the wheel. He assures us the new normal is just something we’re driving through on the way to our destination: a wonderful, magical place where everyone will have income (with or without a job) and a Social Security check to wait for them at retirement time, where inflation doesn’t eat away at savings, where unicorns dance with leprechauns every morning and the stock market goes up forever. Sounds beautiful, doesn’t it?
There’s only one problem: we’re all stuck on this bus, we can’t get off — and the bus runs on cash, lots and lots of money printed by the Fed specifically to get the bus to its magical destination… But don’t worry, right? Just trust the driver because there’s no map, and you’re just a passenger; you have zero control, might as well enjoy the ride. Right?
Or maybe you should buckle your seat belt and make sure you know where the exits are because the trip might get strange fast.
Are You Just a Passenger?
With Chairman Powell driving the bus toward unknown territory at what seems to be reckless speed, it is time for you to consider ways to secure your savings. Do not let market volatility, inflation, and shifts in the business landscape put your retirement savings in danger. Consider “packing” your retirement savings the same way you would pack a bag for an unknown destination. You would want the broadest possible diversification across cold and warm-weather clothing, formal and casual attire, assets that thrive in good times, as well as assets that protect in bad times.
Physical gold and silver can help diversify your savings and even act as a haven for your wealth as the dollar’s buying power gets relentlessly consumed to keep driving our poor lost bus down the road.
For the first time in more than a year, global investment managers are more worried about the risk of inflation on markets than they are about the risk of Covid-19, a Bank of America survey released Tuesday found, as Wall Street looks beyond the coronavirus crisis to the dangers that accompany the massive fiscal spending measures that were required to manage it. Of the 220 fund managers surveyed (who manage $630 billion collectively), 37% percent named inflation the number one “tail risk” for investors.
A vast majority (93%) of fund managers surveyed said they expect inflation to rise over the next 12 months. Those inflation fears have led to the most significant drop in exposure to risky tech stocks in 15 years, the survey found, while allocation to commodities has risen to an all-time high.
Trillions of dollars in federal stimulus spending in the United States helped set the economy on the path to recovery. Still, it’s also fueled concern on Wall Street about ballooning levels of debt and the rapid inflation that could accompany the injection of so much money into the fragile economic system; Many Americans don’t see the issues at hand either by being deeply deceived by social media, mainstream media, and the most censored content this country has ever seen, or simply a lack of common sense across this great nation. There is not a question of inflation coming; it is an issue of how high, how quick, and are we prepared as Americans and as individuals. I know no better way than to put your money where History tells us it will always hold value no matter the economic and social outcomes we arrive at. Make sure to have a portion of your portfolio into precious metals. If I am wrong, then at the end of the day, the worst possible outcome is that you have something that will continue to go up as inflation and an unimaginable amount of debt continue to climb. Still, if You do not heed my advice and I am right, then you’ll be left with nothing more than paper to start the fire to the next meal. Call 855-423-4653 now or Visit us at GoldPro.com and ask about our first time customer savings and use the Promo Code GPRO0321.