The Last of Stagflation – How Gold can help you defeat this 21st century monster

The times, of course, have become more complicated. The reason for the deterioration of the economy was high deflation. Or excessive inflation. By comparison, these two have always been predictable financial predators who, although not pushers, could have been relatively defeated.
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Then came the 70s and the rise of a terrible, new animal: Stagflation. It plunged into the worst recession between 1973 and 1980, with the worst inflation to torment us. After that, in most cases, the creature wandered away (officially) so as not to be seen again.

Until 2008. It seems that now there is a “Son of Stagflation” who has reached adulthood and especially torments us with his confusing attacks.

Dr. of the US economy. Imagine that Frankenstein is locked in a laboratory garrison. This is stagflation. He has swollen legs, atrophied arms, a head that looks a little scary on both sides, and, yes, a really rude character.
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Fortunately for us, golden bullets can still kill him.

The inflationary part of stagflation

Here is Wikipedia’s definition: “Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain uncontrolled for some time.”

What makes stagflation so strange is that, as noted, we are accustomed to seeing one thing or another, inflation or stagnation, an overheated economy, or something as cold as ice. Clearly, what we are witnessing today includes disturbing parts of both, as well as another unexpected factor. Analyst Robert J. Samuelson writes that stagflation “meant the simultaneous occurrence of high inflation, high unemployment and slow economic growth; but its defining feature was the long-term persistence of this toxic compound.”
Some analysts argue that our stagflation status. Newsweek “Our situation is not close to stagflation,” he wrote. This is due to the fact that “the consumer price index is growing at a rate of 3% per year compared to 13% in 1979.” Of course … The CPI figures in 1979 were very serious in their intention to indicate the actual rate of inflation.

Today’s statistics cannot make such a claim by being bureaucratically deceived until they become a ridiculous caricature of reality. 3% annual rate? Hey, even 5.6% annual rate (latest official figure)? Who will believe this? Receipts you receive at the supermarket and at the gas station give you all the necessary statistics on the subject.

Is there anything a pizza can’t do?

Even our favorite pizza can catch a little light. According to Al Olson of MSNBC, “Pizza producers have seen the price of cheese rise from $ 1.30 to $ 1.76 a pound this year. rose. a bushel in less than a year. ”

Let’s see … a pound of this pizza cheese is a staggering 35% increase from $ 1.30-1.76. And – let’s be generous here – the rise of pizza flour from $ 7 to $ 25 means a 257% price increase to the mind. Average the two and you get a 146% increase.

Where does this leave us? On the one hand, government CPI statistics tell us that we are facing an annual inflation rate of 5.6%. On the other hand, the hand holding that slice of pizza tells us that for some industries we are suffering from rising inflation of 146% and even higher.

Who will you believe? Washington? Or pizza?

The stagnant part of stagflation: “Retail is following the roofs.”

So when inflation is actually boiling, no one gets anything. Here is an indicator San Francisco Chronicle“Sales in stores that have been open for at least a year, known as same-store sales, fell a record 2.4 percent in April, the worst since the Council of International Shopping Centers began calculating monthly figures in 1970.”

There are more …

o New home sales fell 36% in the first half of 2008.
o Edmunds reports new car sales are down 14.4% from August a year ago; Ford reported a 28% reduction in suffocation.
o Sales of commercial real estate in the United States fell by about 70 percent.
o Home Depot sales fell 5.4%.
o Old Navy decreased 20%, Kohl 10%, JC Penny 6.5%, Target 6.1% and Walmart 4.6%; 813 women’s fashion stores reported full annual profits, down 28% from the last calculated time.
o Book sales fell 7.1% in June.
o According to album sales BilboardDecreased by 11%.
o Magazine sales fell 6.3%.
o Mobile phone sales fell 13% in the second quarter.
o Meanwhile, the unemployment rate reached 4.7% in four years.

The old adage in retail development, “Retail goes behind the roof,” has never been clearer. If the real estate is miserable, what happened under those roofs is not so great. The Commerce Department said personal income fell 0.7 percent in July, the biggest drop in nearly three years and a much larger decline than expected.

So, in short, this is what happened. No one buys anything and prices are still rising. Stagflation’s son laughs his bad, small laugh.

Do you have gold bullets?

We all know about silver bullets and monsters, don’t we? The good news is that those gold and silver bullets will also work at the End of Stagflation.

Gold is, of course, known as an antidote to inflation. There is an old principle that in 1900 an ounce of gold could buy a beautiful men’s suit in London (at that time gold was about $ 20 an ounce), and today you can buy a beautiful men’s suit for the same ounce in London. of gold.

Although the question is: what suit can you get for $ 20 today, not gold, but real dollars? Bath clothes? Maybe at Kmart, if this Blue Light is special.

Has gold reacted to this latest round of crazy inflation? No, not yet. But give it a little more time. Many analysts believe that it is more than just being willing to think about a rubber band that stretches to its limits.

Then there is the uncertainty that the “stagnant” part of stagflation gives us. Fortunately, uncertainty is the perfect stage for gold. Why? Because we tend to trust gold, we trust it, we understand that it cannot be published by the Fed, it cannot be wasted by politicians or it cannot be diluted by bankers. We know that it has never been among the countless currencies that have fallen into the dustbin of history.

Stuart Schweitzer, a global market strategist at JP Morgan, noted that gold is “an asset that people want to own to protect themselves from risks that they can’t really analyze and take over. This risk has increased.”

It says it all. Stagflation son, be careful.