Inflation Is Coming. The Evidence is Hiding in Plain Sight

 Understanding how, when, where and why monetary policy is going to explode is near impossible.  Why?  Because monetary THEORY is not the same as math FACTS.  In math you can definitively say that "5 plus 5 equals 10"  But you can't say, "Printing 100% more money in any economy WILL DEFINATELY do such and such."

In history, some nations got to the point of having 130% of GDP and they collapsed in a horrible crash.  But we can't say that 130% debt to GDP will ALWAYS collapse nations.  Look at Japan!  They have like 260% debt to GDP and have no kids and a dying population that doesn't allow immigration and yet they haven't collapsed in a heap.  

So maybe American CAN got to 30-40-50-100 trillion dollars of government debt and use all that borrowed money top make some incredible infrastructure, maybe pay everyone a national income, maybe give everyone free health insurance, maybe give everyone free college, maybe give everyone an electric car for their 18th birthday, maybe fund abortions around the world??

Or maybe the USA is on the verge of financial collapse and the evidence is everywhere but we refuse to see it?  Maybe it's all a mirage??

We have said for years now that once investors/marketplace DEMANDS higher interest rates or they WON'T BUY US Gov't bonds, then America won't collect enough taxes in all the land to even pay the interest.  That could be when the jig is up and the mirage is revealed because at that point they will have to print money to pay the interest payments to avoid default.

The mirage cannot continue in the face of rising interest rates.

The U.S. government has printed an unprecedented amount of money since 2009: more than $10 trillion with a probable $6 trillion more on the way. Yet inflation has remained subdued, even though the CPI increased to 5% over the last two months, which some say is shocking.

Soak this in. New money printing now exceeds the total cost of our most expensive wars. The money supply has increased 250%, but inflation has remained low. Economists explain that this phenomenon is due to extremely low velocity. In other words, money is sitting in bank vaults going nowhere.

That’s somewhat true, but most of that money went into the stock and bond markets, exacerbating the great wealth divide and creating a “money illusion,” the mirage that stocks and bonds have become tremendously more valuable – stocks have become 300% more “valuable” in the past decade.

We’ve had serious inflation, but don’t know it because the barometer we use to measure it ignores security price inflation. The Consumer Price Index (CPI) measures increases in the prices of goods and services, but that’s not where the money went until recently. We are beginning to see inflation in CPI because some of the $5.2 trillion in COVID relief went directly to consumers.

We’ll be seeing more.

Investors realize that this massive money printing is inflationary, so they are protecting themselves, as they should. Cryptocurrencies would not exist if investors were not afraid of currency debasements. Precious metals, especially gold, are a popular inflation hedge. Real estate is another historically good inflation hedge.

Stocks can be a hedge if inflation does not cause increases in interest rates. Increasing interest rates reduce stock prices, because future earnings are discounted at a higher rate; those earnings are worth less.

The Federal Reserve is implementing a zero interest rate policy (ZIRP), so investors are confident in inflation protection from stocks, for now. Some of the Fed’s money is being directed to manipulate the bond market, but investors are not fooled by money illusion there. They know bonds are not worth their current price, since that price is being manipulated and high.

Investors are moving their cash to inflation-protected securities like cryptocurrencies, precious metals, real estate and stocks. Stock prices will hold up if interest rates remain manipulated and low.

We’ve had serious inflation, but it’s been hiding in the prices of securities that investors expect to protect against inflation. Inflation is in plain view in securities, especially stocks.

Venezuela’s stock market teaches a lesson. In 2016, the Venezuelan stock market was the best performer in the world, earning 114% in local currency versus 13% on the Dow, even though its economy was in shambles and it was suffering hyperinflation. This event has direct application to the U.S. stock market: Lots of cheap paper money was frantically searching for someplace to go. Like Venezuela, U.S. investors will come to realize that they’ve been fooled.

Most stock investors believe they’re richer and that’s being reinforced by Wall Street gaslighting that does not mention the possibility of inflation and its impacts.

But investors will realize that their gains are a mirage driven by a greater-fool market that cannot be sustained, as more money is poured into the economy.

At some point the Fed will lose control, and interest rates will return to “normal.” Normal interest rates, in historical terms, is inflation plus 3%. Given the unprecedented money printing, inflation greater than 50% is a possibility even though most mistakenly believe that 5-10% is as high as inflation can go.

Why will interest rates go up? Because the cost to manipulate them is increasing and will become unaffordable at some point. The government is testing the extremes, waiting for something to break. Plus, other countries like China are paying higher interest on their government bonds.

The mirage cannot continue in the face of rising interest rates.

Following the roaring 2010s, this decade is loaded with a host of investment threats that can destroy lifestyles, especially for baby boomers. Most of our 78 million baby boomers will spend much of this decade in the “risk zone” spanning the five to 10 years before and after retirement. They may not recover from the next market correction.

Here;  Inflation is Looming and Hiding in Plain View - Articles - Advisor Perspectives

There is no doubt in my mind that America is on shaky ground.  It's shaky in morals, family values, godlessness and financially.  There are some who are sounding the alarm but with only 6% having a Biblical worldview it becomes tough to see how these foundations will ever be fixed this side of the rapture.