{"id":1449160,"date":"2022-04-21T13:11:47","date_gmt":"2022-04-21T17:11:47","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1449160"},"modified":"2022-04-21T13:14:31","modified_gmt":"2022-04-21T17:14:31","slug":"a-thorough-consider-the-inflation-crisis","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/a-thorough-consider-the-inflation-crisis\/","title":{"rendered":"A Thorough Consider the Inflation Crisis"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">12<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fa-thorough-consider-the-inflation-crisis%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1449160&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p><em>Please Follow us on\u00a0<\/em><a href=\"https:\/\/gab.com\/CreativeDestructionMedia\"><em>Gab<\/em><\/a><em>,\u00a0<\/em><a href=\"https:\/\/www.minds.com\/LToddWood\/\"><em>Minds<\/em><\/a><em>,\u00a0<\/em><a href=\"https:\/\/t.me\/CreativeDestructionMedia\"><em>Telegram<\/em><\/a><em>,\u00a0<\/em><a href=\"https:\/\/rumble.com\/c\/CDMedia\"><em>Rumble<\/em><\/a><em>,\u00a0<\/em><a href=\"https:\/\/tv.gab.com\/channel\/CreativeDestructionMedia\"><em>Gab TV<\/em><\/a><em>,\u00a0<\/em><a href=\"https:\/\/gettr.com\/user\/cdmedia\"><em>GETTR<\/em><\/a><em>\u00a0<\/em><\/p>\n<p>Decoding Politics highlighted six months ago that\u00a0<a href=\"https:\/\/creativedestructionmedia.com\/news\/markets\/2021\/12\/22\/the-politics-of-inflation-and-bidens-decisions-to-come\/\">we were likely entering a period of\u00a0permanently high,\u00a0politically driven inflation<\/a>. This is\u00a0a recurring phenomenon\u00a0for those in developing countries, but\u00a0has\u00a0not\u00a0been\u00a0seen in the US or other developed countries in the past forty years.\u00a0The first phase really started in Q1 of 2020, with massive stimulus spending by the federal government and record-breaking money printing by global central banks. This propelled consumer price inflation from below\u00a02%in 2020\u00a0to nearly\u00a09% as of March 2022.\u00a0Phase one was characterized by large amounts of money printing creating large amountsof sudden demand, which then rippled through the economy.\u00a0<\/p>\n<p>Now we are entering phase two of the inflationary episode, where people realize this is not a one-off event,\u00a0but\u00a0instead\u00a0a\u00a0new economic\u00a0configuration.\u00a0Money is still being printed at a rapid rate.\u00a0As\u00a0high\u00a0inflation expectations set in, and shortages beget inflation,\u00a0beget hoarding,\u00a0beget shortages, this process\u00a0will move\u00a0of its\u00a0own\u00a0momentum. External events, led by the war in Ukraine, are\u00a0adding pressure to the situation.\u00a0Stay prepared, both personally and\u00a0financially.\u00a0The political impact on the 2022 midterms, let alone the 2024 presidential cycle, is going to be substantial.\u00a0The highest inflation rate in 50 years is going to create a massive protest vote against anyone seen as being weak\u00a0on\u00a0inflation.\u00a0<\/p>\n<p><strong>CPI Rate<\/strong><strong>\u00a0Hits 8.5%<\/strong><\/p>\n<p>US consumer price inflation\u00a0(CPI)\u00a0has reached rates of 8.5%, and rising.\u00a0Readers\u00a0remember that historically, the Federal Reserve\u2019s target was\u00a02%\u00a0inflation. Nearly all of last year they were calling 4-6%\u00a0inflation rates\u00a0\u2018transitory\u2019.\u00a0Now we sit over 8% and they have just\u00a0raised\u00a0interest rates \u2026.to 0.25%.\u00a0<\/p>\n<figure class=\"wp-block-image size-large\"><\/figure>\n<p><strong>The Fed\u2019s Reaction<\/strong><\/p>\n<p>The Federal Reserve is the government appointed board overseeing interest rates, and indirectly, the amount of money in circulation. It\u00a0seems\u00a0to finally be reacting to\u00a0inflation.\u00a0They finally hiked interest rates at their last meeting.\u00a0Recent communications reveal they want to\u00a0<a href=\"https:\/\/creativedestructionmedia.com\/news\/markets\/2022\/04\/06\/fomc-minutes-signal-bigger-faster-than-expected-qt-multiple-50bps-hikes\/\">finally shrink their balance sheet and hike interest rates multiple times in the next year<\/a>.\u00a0One may be under the impression that they are actually dedicated to slowing inflation.\u00a0But this isn\u2019t\u00a0\u201cclosing the barn door after the horse has bolted\u201d \u2013\u00a0this is closing\u00a0the door and chasing\u00a0the horse\u00a0when it\u2019s one mile down the road.\u00a0<\/p>\n<p>Looking at real rates, that is interest rates with inflation subtracted from them, tells the\u00a0true\u00a0story. Real rates are\u00a0<em>by far<\/em>\u00a0the lowest in seventy years.\u00a0If you have a bond paying interest, your purchasing power is losing 5%+ per year.\u00a0<\/p>\n<p>Either measured by ten-year yields or\u00a0the\u00a0Federal Funds rate, monetary policy is incredibly easy. Hikes to 5%+ in Fed Funds or a move in the Treasury yield to 7% + are what are needed to make policy tight and to slow inflation. We are years away from that.\u00a0We could safely call the end of this inflationary phase\u00a0when\u00a0real rates\u00a0are in\u00a0the 2-5% range.\u00a0<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"526\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-22-1024x526-1.png\" alt=\"\" class=\"wp-image-42490\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-22-1024x526-1.png 1024w, https:\/\/creativedestructionmedia.com\/wp-content\/uploads\/2022\/04\/image-22-300x154.png 300w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-22-768x394-1.png 768w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-22-960x493-1.png 960w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-22-779x400-1.png 779w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-22-585x300-1.png 585w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-22-1.png 1114w\" \/><\/figure>\n<p><strong>Source: Yardeni.com<\/strong><\/p>\n<p><strong>Money Supply Continu<\/strong><strong>es<\/strong><strong>\u00a0to Grow<\/strong>\u00a0<\/p>\n<p>If the Federal Reserve were really serious about tackling inflation, then they would slow the rate of growth in money.\u00a0The rate of inflation and amount of money tend to track each other closely over long periods of time.\u00a0The best way to get inflation back to 2% is to\u00a0limit the\u00a0growth\u00a0of money\u00a0to\u00a02% and wait for things to calm down over 24 months. As of now, the broadest measure of money,\u00a0M2,\u00a0is growing around 11% per year. That\u00a0is still elevated, historically speaking, although it is down from\u00a0the\u00a020% rates after the pandemic. As we\u00a0will\u00a0break down later, this typically\u00a0leads\u00a0to 6-10% rates of inflation over time.\u00a0<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"569\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-21-1024x569-1.png\" alt=\"\" class=\"wp-image-42489\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-21-1024x569-1.png 1024w, https:\/\/creativedestructionmedia.com\/wp-content\/uploads\/2022\/04\/image-21-300x167.png 300w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-21-768x427-1.png 768w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-21-960x533-1.png 960w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-21-720x400-1.png 720w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-21-585x325-1.png 585w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-21-1.png 1258w\" \/><\/figure>\n<p><strong>The Inflationary Mind<\/strong><strong>s<\/strong><strong>et is Becoming Established<\/strong><\/p>\n<p>With this much money being printed,\u00a0and a Federal Reserve this far behind the curve, it\u2019s not a surprise that signs of an inflationary mindset\u00a0are\u00a0emerging in the nation.\u00a0Consumers\u2019\u00a0expectations of future prices continue to increase:<\/p>\n<p>\u201cUS consumer inflation expectations for the year ahead increased again to 6% in February of 2022, the same as a record 6% in both December and November, and reversing some of January\u2019s sharp declines. All the commodity price change expectations increased, namely for food (9.2%), gas (8.8%), medical care (9.6%), college education (9%) and rents (10.1%). Median home price expectations, on the other hand, declined (5.7%). Meanwhile, earnings growth expectations remained unchanged, while expectations about unemployment, perceived job loss, and job finding all improved and those for spending growth reached a new series high. Median three-year ahead inflation expectations also ticked up by 0.3 percentage point to 3.8%.\u00a0<a href=\"https:\/\/tradingeconomics.com\/united-states\/inflation-expectations\">less<\/a>\u201d\u00a0[Trading Economics]\n<p>With\u00a0inflation expectations this high, the highest in thirty years, people will start to embed this into future prices and services\u2019 rates.\u00a0Breaking\u00a0the cycle\u00a0will be difficult.\u00a0<\/p>\n<p><strong>Monitoring\u00a0\u00a0Velocity<\/strong><\/p>\n<p>The metric\u00a0that is best to show if we have flipped into an inflationary mindset is velocity, which is the rate at which money circulates. This has been falling since 2000, and it reached its lowest level ever in 2020. Since then,\u00a0it has begun to stabilize. It is likely that by the end of 2022, it will have begun to rise. That would confirm what other anecdotals and data points are showing- that there is a shift to an inflationary mindset.\u00a0<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"396\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-1024x396-1.png\" alt=\"\" class=\"wp-image-42488\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-1024x396-1.png 1024w, https:\/\/creativedestructionmedia.com\/wp-content\/uploads\/2022\/04\/image-20-300x116.png 300w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-768x297-1.png 768w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-1536x593-1.png 1536w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-960x371-1.png 960w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-1035x400-1.png 1035w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-585x226-1.png 585w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-20-1.png 1874w\" \/><\/figure>\n<p><strong>Credit Growth\u00a0<\/strong><strong>Remains Strong<\/strong><\/p>\n<p>The amount of credit\u00a0being extended to the private sector continues to rise. This is important because credit\u00a0ends for end use of goods of materials.\u00a0\u00a0Commercial credit is used for factories, commercial buildings or other business uses. Consumer credit is for buying a house, consumer goods, etc. Thus we know that credit growth will correlate to economic growth.\u00a0<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"673\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-19-1024x673-1.png\" alt=\"\" class=\"wp-image-42487\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-19-1024x673-1.png 1024w, https:\/\/creativedestructionmedia.com\/wp-content\/uploads\/2022\/04\/image-19-300x197.png 300w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-19-768x505-1.png 768w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-19-960x631-1.png 960w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-19-609x400-1.png 609w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-19-585x384-1.png 585w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-19-1.png 1195w\" \/><\/figure>\n<p>Credit growth is running at almost 16% in Q3 2021, and probably even higher in recent months.\u00a0This will certainly keep the inflationary and velocity pressure high.\u00a0<\/p>\n<p><strong>No Workers to Hire<\/strong><\/p>\n<p>The labor market is\u00a0very tight at the moment, and this is reflected in the rise in wages and the fall in unemployment. Hourly wages are growing at almost 6%, the highest on a sustained basis post pandemic. With all the potential workers now having a job, the only to get new workers for your business is to pay a high\u00a0wage\u00a0to get people out of the house, or bid away other\u00a0employees\u00a0with a raise.\u00a0<\/p>\n<p><strong>Average Hourly Earnings<\/strong><strong>, %<\/strong><strong>\u00a0YoY<\/strong><\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"730\" height=\"340\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-16.png\" alt=\"\" class=\"wp-image-42484\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-16.png 730w, https:\/\/creativedestructionmedia.com\/wp-content\/uploads\/2022\/04\/image-16-300x140.png 300w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-16-585x272-1.png 585w\" \/><\/figure>\n<p>Wages should continue to keep growing, because the pool of workers continues to shrink. The unemployment rate is below 4%, the level at which the past two cycles stopped. As\u00a0wags rise,\u00a0it will feed into higher prices across the economy.\u00a0Labor is the largest cost in most businesses, and when wages start to rise at high single digit rates, you can be sure prices will as well.\u00a0<\/p>\n<p><strong>Unemployment Rate<\/strong><strong>, %<\/strong><\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"730\" height=\"340\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-17.png\" alt=\"\" class=\"wp-image-42485\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-17.png 730w, https:\/\/creativedestructionmedia.com\/wp-content\/uploads\/2022\/04\/image-17-300x140.png 300w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-17-585x272-1.png 585w\" \/><\/figure>\n<p><strong>The Quantity Theory of Money<\/strong><\/p>\n<p>This is an economic term that describes the dynamics of the amount of money in circulation and how it generates inflation.\u00a0It\u2019s an accounting equation, and\u00a0therefore\u00a0it has to balance out.\u00a0<\/p>\n<p>It says that the amount of money in circulation (M) and the speed with which it circulates (Velocity\u00a0or V) is equal to the change in GDP\u00a0or\u00a0economic growth (Q) and the general level of prices (inflation rate\u00a0or P).\u00a0<\/p>\n<p>Represented as an equation, that\u2019s M*V=Q*P<\/p>\n<p>Readers may be wondering\u00a0\u2013 \u201cWhy Decoding is introducing such an egg-headed concept to a simple column on inflation?\u201d\u00a0\u00a0Well, it\u2019s because this equation can help us figure out where the future of inflation is.\u00a0Let\u2019s plug in the current economic situation to the\u00a0formula:<\/p>\n<p>M (+11%) * Velocity (steady) =\u00a0\u00a0GDP growth (2%)\u00a0*\u00a0Prices (unknown)<\/p>\n<p>Solving for the price level\u00a0gets you roughly 6% inflation, and, if velocity begins to rise, it could rapidly get to 8 or 10%\u00a0for a sustained period of time.\u00a0Restoring order and\u00a02% inflation\u00a0rates\u00a0is\u00a0<strong>not<\/strong>\u00a0happening\u00a0soon.\u00a0That would require both slow money growth and a resolute government to\u00a0force\u00a0velocity to fall again.\u00a0<\/p>\n<p><strong>The Impact of Russia and Ukraine<\/strong><\/p>\n<p>The major event of 2022, the invasion of Ukraine by Russia in February, is going to have further inflationary effects. There will be both immediate impacts and more subtle longer term impacts.\u00a0<\/p>\n<p>The immediate impact was a halt in both Russia and Ukraine\u2019s exports of several commodities, namely wheat oil, and gas. The price of wheat exploded, and oil and natural gas had large spikes. Afterwards, Russia banned exports of numerous other commodities. Many other countries sanctioned and would not import Russian products such as oil, distorting the market globally.\u00a0<a href=\"https:\/\/www.zerohedge.com\/commodities\/one-third-ukraine-farmland-may-go-unplanted-russia-begins-second-phase-war\">Ukraninan wheat plantings are down 30 to 50%<\/a>\u00a0and it\u2019s almost impossible to get transport out of the country.\u00a0These issues will continue shortages globally and keep pressure on prices.\u00a0<\/p>\n<p>In addition, Russia is one of the five countries in the world with no national debt. Its excess savings,\u00a0to the tune of hundreds of\u00a0billions of\u00a0dollars,\u00a0went into international banking systems and\u00a0funded transactions in Europe, Asia and the Americas. The removal of Russia from the international banking system (SWIFT) and the barring of its central bank from dealing internationally effectively removed those reserves from the system. This will create financing pressures for many large commodity producers and importers around the world.\u00a0\u00a0<\/p>\n<p>Taking this out of the theoretical,\u00a0let\u2019s look at one of the major casualties economically speaking, Germany. Producer prices, what companies pay for their inputs, had been rising at a 20%+ rate\u00a0<em>before<\/em>\u00a0the Ukraine invasion.\u00a0Germany is a large energy and materials importer from Russia, and there is a potential for bans or limitations on many items.\u00a0The squeeze on energy, commodities and other variables is sure to send this higher for the rest of 2022.\u00a0Energy prices are already up 100%+ on the prior year, and it could get worse.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"562\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-18-1024x562-1.png\" alt=\"\" class=\"wp-image-42486\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-18-1024x562-1.png 1024w, https:\/\/creativedestructionmedia.com\/wp-content\/uploads\/2022\/04\/image-18-300x165.png 300w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-18-768x421-1.png 768w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-18-960x527-1.png 960w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-18-729x400-1.png 729w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-18-585x321-1.png 585w, https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/image-18.png 1125w\" \/><\/figure>\n<p>This means that your new German car is going to cost at least 25% if not 50% more versus last year. Similar stories are going to come from a host of industries and countries.\u00a0<\/p>\n<p>Also, we want to remind readers, that all of this is coming after what has been a minor two month war. If this war\u00a0were\u00a0to escalate in intensity or to involve multiple participants, then everything we are saying will be multiplied by five. Major wars have always involved huge shortages and supply chain disruptions.\u00a0Furthermore, the military gets what is available first, and the civilian population\u00a0gets the rest, leading to shortages of\u00a0almost\u00a0everything.\u00a0The UK did not stop\u00a0food\u00a0rationing until\u00a0nine\u00a0years\u00a0<em>after<\/em>\u00a0<em>the end<\/em>\u00a0of\u00a0World War 2.\u00a0If a major EurAsian war develops out of the Ukraine conflict, then you will not believe how high gas prices will go \u2013 if you can find it.\u00a0<\/p>\n<p><strong>How to Manage This<\/strong><strong>\u00a0[Not Financial Advice]<\/strong><\/p>\n<p>Inevitably,\u00a0a\u00a0news story about shortages or price spikes will have a recommendation that you should not worry, this is temporary.\u00a0<a href=\"https:\/\/creativedestructionmedia.com\/news\/markets\/2021\/12\/22\/the-politics-of-inflation-and-bidens-decisions-to-come\/\">Decoding Politics readers will understand that\u00a0inflation and shortages are\u00a0consequences\u00a0of the inflationary\u00a0wave rolling through the system,<\/a>\u00a0and it will be with us for several\u00a0more\u00a0years.\u00a0Turbo-charged demand, consumers\u2019 desire to frontload spending, and the gummed up financing for the system are going to keep creating shortages.\u00a0To quote fund manager Hugh Hendry from a decade ago: \u201cWe recommend that you panic\u201d.<\/p>\n<p>In terms of financial moves, the inflationary playbook is still the\u00a0<a href=\"https:\/\/creativedestructionmedia.com\/news\/markets\/2021\/12\/22\/the-politics-of-inflation-and-bidens-decisions-to-come\/\">same as\u00a0six\u00a0months ago<\/a>. We had highlighted the poor risk reward in traditional bonds and fixed income before. Markets have begun to adjust, with the ETF which reflects long term Treasuries down 25% in the past five months. Yet even with that move lower, there is still a long way to go to reach the point at which interest rates reflect the true rate of inflation: 8 to 10%. Fixed income in a rising inflation and rising rate environment is the absolute worst place to be financially speaking. You are begging to lose money, both before and after inflation. Anything except perhaps cash is a better alternative.\u00a0<\/p>\n<p>Energy stocks, which we\u00a0were positive on, have increased by 30-60% since December. This is keeping you well ahead of inflation. We continue to think that global energy majors are a major beneficiary of the squeeze in energy markets. On the other hand, certain metals have not yet participated in the rally. As the price of everything else goes up, gold and silver are sure to follow.\u00a0\u00a0<\/p>\n<p>It\u2019s remarkable to think that silver, currently $25\/oz, reached $50\/oz in 1980\u00a0and then again in 2011. Since\u00a01980,\u00a0the\u00a0amount of dollars\u00a0in circulation\u00a0has increased at least 15 fold, so, at some point silver\u2019s price\u00a0has to catch up.\u00a0Gold, now at $2000\/oz, peaked over $800 in 1980, and so has done a slightly better job of reflecting the massive increase in money. But there is a long runway ahead of both metals as inflation picks up and fixed income globally turns into a black hole.\u00a0<\/p>\n<p>What\u00a0many investors don\u2019t know is that gold and silver can generate income too. Services like\u00a0<a href=\"https:\/\/monetary-metals.com\/\">Monetary Metals<\/a>\u00a0allow you to invest in gold backed bonds, or lease your metals out,\u00a0at rates around 3%- more than a ten year US Treasury. You get a\u00a0higheryield and inflation protection. Why do people own bonds again?\u00a0<\/p>\n<p>We think research will show\u00a0energy and mining\u00a0are attractive industries at attractive valuations. International markets exposed to stronger commodity markets should continue to benefit, except for Canada, which we plan on discussing in a future piece.\u00a0<\/p>\n<p>Regular stock\u00a0indices have traded\u00a0in a range for the past nine months. Rising rates\u2019 negative impact has\u00a0offset\u00a0higher\u00a0earnings.\u00a0We think that this pattern will largely continue in the major stock indices. And we think investors\u2019 should tilt their portfolio away from interest rate sensitive assets to ones that have the power to increase rents\/prices\/commodity prices in this cycle.\u00a0<\/p>\n<p>On the personal front, stocking up six months\u2019 supply or more of your favorites and essentials is a great move before prices spike further, or they are not there to buy. Gas, food and water are the obvious starting places. We are not saying to become preppers and go live in the woods in Montana, please don\u2019t misunderstand this. But just ask yourself seriously \u2013 what is your plan if an item you need\/rely on\/purchase regularly were out of stock for a year or tripled in price due to shortages?\u00a0\u00a0Water filters? Diesel or propane? Baby\u00a0Formula?\u00a0Certain medicines?\u00a0These items are not universally available in times of stress\u00a0and shortages.\u00a0<\/p>\n<p>Follow Decoding Politics on Twitter:\u00a0<a target=\"_blank\" href=\"https:\/\/twitter.com\/DecodingPoliti2\" rel=\"noreferrer noopener\">https:\/\/twitter.com\/DecodingPoliti2<\/a><\/p>\n<p>For Inquiries\/Comments:\u00a0<a><span class=\"__cf_email__\" data-cfemail=\"f09495939f94999e97809f9c9984999383b080829f849f9e9d91999cde939f9d\">[email\u00a0protected]<\/span><\/a>\u00a0\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Please Follow us on\u00a0Gab,\u00a0Minds,\u00a0Telegram,\u00a0Rumble,\u00a0Gab TV,\u00a0GETTR\u00a0 Decoding Politics highlighted six months ago that\u00a0we were likely entering a period of\u00a0permanently high,\u00a0politically driven inflation. This is\u00a0a recurring phenomenon\u00a0for those in developing countries, but\u00a0has\u00a0not\u00a0been\u00a0seen<\/p>\n","protected":false},"author":498,"featured_media":1449211,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1449160","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1449160","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/498"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1449160"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1449160\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1449211"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1449160"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1449160"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1449160"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}