Inflation is a very loose term, and people measure it in various ways. Some famous economists compare the new methods of doing it with the 1980s version to show discrepancies. In the end, it comes down to pricing products and services, in general; or measuring the cost of living, in the other.
In other words, one includes the price of homes, for example, to highlight that housing prices could be getting too expensive, while the other focuses on the cost of a mortgage or of rents, since that’s what the average person will choose, if housing is too expensive. What I like to follow is the cost affordability of 3 items:
- Cost of Effective Education: This has gotten out of hand in America and in various other western countries. Government schools are bullshit. People end up on the street, lacking motivation and interest in the capitalistic system. Aside from this high school disaster, higher education is for the rich alone, for the most part. Student debt is killing average Millennial.
- Cost of Skill Retraining: This is the cost of finding a new profession, of taking time to re-focus, and it’s not an easy feat at all.
- Cost of Running A Competitive Household: This is the cost of making sure that the family avoids rough areas, where the influence of the environment is negative. It also includes the cost of giving children opportunities.
Smart Money simply doesn’t buy the inflation story, as you see from the chart above. This has allowed central banks to continue printing and has assured that governments can keep paying unfunded liabilities to citizens and to build up mountains of debt, uninterrupted.
When the Great Recession was ending, the only fear was that deflation would come. In 2012, the fear altered into inflation, but it never materialized.
Globally, central banks have purchased a whopping 126 tons of gold so far this quarter, the fastest rate since 1971.
Because they’re doing much of the buying, their interest is to make sure prices stay tamed.
Take a look:
Courtesy: U.S. Global Investors
Europe and Latin America are showing signs of distress, and of a clear slowdown. President Trump and his economic adviser, Larry Kudlow, don’t want the disease in the rest of the world to interrupt their plans, so they are adamant that the FED cut rates by 50 bps, or 0.5%, immediately.
What’s happening here is astonishing. On one hand, you have the most powerful central bank in the world pursuing more inflation. On the other hand, you have Washington, the most powerful government ever, proclaiming that inflation is not an issue they’re concerned with – so cutting rates won’t introduce unknown risks.
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Standing between central banks and governments is the average person, who has been squashed by these two entities in the currency war. Every year, the wealth becomes more concentrated at the top, as a result.
All this is leading me to believe that the next U.S. recession will cause major societal changes, from postponing the retirement age and cutting back on entitlements, to exposing pension program underfunding. It’s ALL going to come into question.
In the great game of confidence, the USD is still winning, since other regions are even worse – but that’s no way to build a secure future.
The big problem is that no one wants to pursue a career in public service anymore. No one wants a career in government when given the choice between the private sector and the public one (which is part of this country’s problem).
But the bigger issue on the table these days is the current division in and between countries. When you’re not unified, it’s extremely challenging to make real progress, as a nation.
It seems we’re reaching the end of the rope in terms of our modern-day democracies.
People don’t find common ground with their fellow citizens. It’s a big mess and it is going to require strong leadership to turn things around.
Bottom line, America will need to fight in order to retain supremacy. Their longstanding allies are shaking hands with the Asians. Money is flowing to the East and nothing is off the table.
Personally, I’m taking steps to diversify internationally.
I’ll be investing in real estate outside of the U.S. this year. Additionally, I’ll be storing precious metals in Europe and Asia.
Thirdly, I’m looking into European stocks for the first time in my career.
It’s dirt-cheap and EVERYONE hates that region.
While America is booming, Europe is being laughed at – but don’t count them out.
Their companies are major partners with the Chinese, and they will flourish going forward.
More updates coming!
Research Partner, PortfolioWealthGlobal.com
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Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!