Markets Preparing for Hyperinflation

At the end of the day inflation is already here and/or soon heading higher, depending on who you ask. And the best traditional hedge for inflation has been gold. At the end of the day inflation is already here and/or soon heading higher, depending on who you ask. And the best traditional hedge for inflation has been gold. [Outsider Club logo] Markets Preparing for Hyperinflation [Luke Burgess Photo] By [Luke Burgess]( Written May 05, 2021 The fear of runaway inflation in the U.S. has taken hold of the market. Last week Chairman Jerome Powell announced the Federal Reserve would keep its benchmark short-term rate near zero while allowing inflation to run hotter than normal. Powell said, “With inflation running persistently below 2%, we will aim to achieve inflation moderately above 2% for some time, so that inflation averages 2% over time, and longer term inflation expectations remain well-anchored at 2%.” But there are many who doubt the Fed's ability not to let inflation get out of control. Jim Paulsen, Chief Investment Strategist of The Leuthold Group, told CNBC’s Trading Nation last week, “I would put decent odds that it could get out of control and require the Fed and other policy officials [and] the bond market to kneejerk in order to shut down the overheat.” Several others have echoed Paulsen's comments since, including billionaire Jeff “The Bond King” Gundlach and BlackRock’s bonds chief Rick Rieder. On inflation, Powell said at the FOMC announcement, “During this time of reopening, we are likely to see some upward pressure on prices... but those pressures are likely to be temporary as they are associated with the reopening process.” Powell continued affirming those pressures are “not likely to lead to persistently higher year-over-year inflation into the future — inflation at levels that are not consistent with our goal of 2% inflation — over time. Indeed it is the Fed's job to make sure that that does not happen.” If inflation were to move significantly over 2%, Powell says, “we would use our tools to bring inflation and exceptions down to mandate consistent levels.” What tools is Powell talking about? Interest rates. The Gold Story of a Generation Two self-made billionaires took notice and joined forces to invest in this operation. They’ve each poured millions into this small company’s stock. For the details, [click here.]( As explained by economic writer Jean Folger, “Under a system of fractional reserve banking, interest rates and inflation tend to be inversely correlated. This relationship forms one of the central tenets of contemporary monetary policy: Central banks manipulate short-term interest rates to affect the rate of inflation in the economy.” Yesterday, Treasury Secretary Janet Yellen said interest rates will need to rise in order to prevent the economy from overheating. Yellen commented, “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy.” Yellen later walked back that statement clarifying she was not making any recommendation or providing advice to the Federal Reserve, which she no longer works for. Nevertheless, the “tools” Fed Chairman Powell is referring to when he says the Fed can bring down inflationary pressure is mostly raising interest rates. So the Fed isn't lying when it says it has tools that can fight inflation. But what the Fed isn't being direct about is the efficacy of those tools. Nor do they estimate whether political pressures would even allow them to use those tools. None of the government branches have total control over the Federal Reserve's interest rates policies. However presidential and congressional influence over the Federal Reserve is [well-documented](. To his credit, however, what Powell also seems to admit is that runaway inflation is not completely impossible. Powell said the Federal Reserve is well aware of their own history, and knows of its own failures in controlling inflation during the 1960s and 1970s. Of course the Fed's stance on comparing U.S. monetary conditions of the 1960s and 70s to today is basically “it's different this time.” And they're not wrong. What's different, however, is that never in the history of the United States has new money been printed so fast and at such a degree. In the nine weeks between March 9, 2020 and May 11, 2020, the Fed added $2.3 trillion dollars to the money supply as measured by M2. That's the equivalent of creating $425,000 in new USD every second... ... every second for nine weeks straight! And that was just nine weeks of last year. In total the Federal Reserve added more than $4 trillion to the supply of USD. This increased the total supply of USD by more than 25%. [Silicon Valley’s Death Sentence]( Silicon Valley is facing ruin… Its decline has nothing to do with COVID-19 or political unrest. This is about same trap the Rust Belt fell into decades ago. But one off-radar company is expected to come out as the huge winner of this development. It discovered the answer to a problem that might be the final nail in Silicon Valley’s coffin. Institutional investors like Vanguard and BlackRock are [pouring billions into this company.]( We’re about to witness one of the biggest breakthroughs in the history of technology… You could set yourself up for 950%... 6,893%... or even an incredible 12,795% gain. [Exact details here.]( I think it's important to recognize the Federal Reserve's role. The Federal Reserve does not exist to provide raw facts to the market. The Federal Reserve's mission is “to foster the stability, integrity, and efficiency of the nation's monetary, financial, and payment systems so as to promote optimal macroeconomic performance.” If achieving that mission means spinning facts, clever rhetoric, or downplaying things like substantial inflationary pressures, that's what they'll do. The job is to promote America's financial system to better the economy — not to service retail investors like you and me. We're on our own. At Berkshire Hathaway's annual shareholder meeting last week, Warren Buffet said the conglomerate is already seeing significant inflation. Buffett told shareholders, “We are seeing very substantial inflation. It’s very interesting. We are raising prices. People are raising prices to us and it’s being accepted.” “We’ve got nine homebuilders in addition to our manufacture housing and operation, which is the largest in the country,” Buffett continued, “So we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day they’re going up.” It's important to note, however, that Buffett is talking about the increasing costs of building materials, which is not a part of the Consumer Price Index the Fed uses to measure inflation. CPI is a measure of consumer expenditures — things like food, housing, clothing, transportation, healthcare, recreation, education, communication, and other goods and services. It doesn't measure the price of steel, lumber, or other commodities needed to make those goods — although many would argue it should. However Buffett's comments are still very important. Rising material costs for building and manufacturing will, no doubt sooner or later, translate into higher prices for CPI goods and services. At the end of the day inflation is already here and/or soon heading higher, depending on who you ask. And the best traditional hedge for inflation has been [gold](. Over the past several months, I have been positioning readers of my Junior Mining Trader newsletter in gold stocks aiming to take advantage of the inflation that's happening right now (or soon to come). And already we're seeing big gains. Two small gold stocks we bought just two weeks ago have jumped 60% and 20%, respectively. And we've just crossed a 100% gain in another gold explorer I've called “the most exciting gold stock on the market.” And I think we're only getting started. To learn more about how you can get in on the action today, [click here](. Until next time, [Luke Burgess Signature] Luke Burgess --------------------------------------------------------------- Don’t Buy Ford… Buy This Instead Ford (NYSE: F) is investing $185 million into a new battery lab that will eventually build their own cells for electric vehicles. You see, carmakers are hopping on the bandwagon in making their own EV batteries. This not only will save them loads of money, but it will also break their dependency on third parties for supply. This EV market lies right in the middle of a $3 trillion energy industry... The way things are looking right now, Ford could be in a position to build their own EV batteries by 2025. As exciting as this all is, I’m still not buying Ford stock. I think the stock is way overpriced. Rather, I found another way to make a fortune from the market’s push to perfect the EV battery. This technology is slightly larger than a pinhead but can help power football stadiums, aircraft carriers, and even your entire city for up to 150 years without being replaced! PWC says this energy breakthrough will kickstart the "4th industrial revolution." Heavyweights like Vanguard, Fidelity, and Morgan Stanley have already funneled over $1 billion into bringing this technology to market. And the tiny company behind it all is still operating under the radar… but not for long. They have already inked deals to supply this tech to some of the largest corporations in the world. Their popularity and share price could skyrocket at any moment. [Click here to learn more before it's too late.]( Browse Our Archives [Tesla Buyer’s Remorse Is Real and an Existential Threat]( [Yum!'s Post-Pandemic Future Is Looking Bright]( [Biden's American Families Plan Is a Cheap Swing at the Rich]( [A (Short) Investor’s Guide to the Shortage of Everything]( [Will Cryptos Kill the Banking Industry?]( --------------------------------------------------------------- This email was sent to {EMAIL}. It is not our intention to send email to anyone who doesn't want it. If you're not sure why you've received this e-letter, or no longer wish to receive it, you may [unsubscribe here](, and view our privacy policy and information on how to manage your subscription. To ensure that you receive future issues of Outsider Club, please add newsletter@outsiderclub.com to your address book or whitelist within your spam settings. For customer service questions or issues, please contact us for assistance. 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