Palisades Gold Radio
Jun 14, 2022
Tom welcomes Lyn Alden, Financial Newsletter Editor & Publisher, back to the show.
Lyn discusses global central bank policies and their effects on inflation. We now have a much different environment than what we had five years ago. The famous Powell pivot of 2018 may have been caused by the credit markets freezing up and not equities. They tried to raise rates until the risk of a recession ballooned.
It’s most likely that countries will continue to inflate their debts away because the only other option is to default. Typically, defaults only occur with countries who are unable to print their own currency. We should expect inflation to continue for some time and purchasing power to decline significantly.
Good forms of deflation comes from increases in productivity, technology, and improved energy systems. In a low-debt environment, things should get cheaper over time as we become more efficient. The bad type of deflation is when debt bubbles collapse, and we see a collapse of demand. Most economists see deflation as always bad, but in many systems deflation could be a good thing.
We’re entering a period where globalization is going to flat line or even begin declining. This will likely be a driver for inflation in the future.
Europe is going to have to focus on being a fiscal union, or they risk their monetary union failing to some extent. The United States works as a fiscal union, and the large expenses occur at the Federal level. States in the U.S. are relatively low debt. Most countries in Europe hold significant debt loads, which will be challenging.
We’ve seen energy prices rapidly moving up, particularly in Europe, rapidly well before the outbreak of war. Now we have additional risk factors in oil, wheat, uranium, platinum and nickel. The amount of currency creation and lack of capital expenditure on resource development are all drivers for the current issues.
Lastly, she discusses how the gold stock to high flow ratio can make a commodity easier to manipulate. This is because most investors are fine with only having a paper claim to the underlying metal.
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