After 40+ Years, It’s Back

That’s Not Good [The Daily Reckoning] May 09, 2024 [WEBSITE]( | [UNSUBSCRIBE]( After 40+ Years, It’s Back Annapolis, Maryland [Brian Maher] BRIAN MAHER Dear Reader, Here is a run of recent headlines: “Is the United States on the Verge of Stagflation?”... “It's Looking More and More Like Stagflation”... “Stagflation Fears Come Back With a Vengeance”... “The U.S. Economy May Be Barrelling Toward Stagflation, an Outcome Worse Than Recession”... “JPMorgan’s Jamie Dimon Can’t Shake the Worry America Is Headed for a Repeat of 1970s-Style Stagflation.” Examples multiply and multiply. Stagflation. The word is as ugly as it sounds — a ghastly portmanteau of stagnation and inflation. It conjures the grimmest days of the disco 1970s. Stagnant economic growth, skyshooting prices, gasoline lines and bell-bottomed trousers were the era’s high menaces. Dormant for decades, many considered stagflation permanently licked. Yet many have acquired its grisly scent… and detected its approaching footfall. 2024 is not 1979 of course. Unlike in the 1970s, official unemployment is low. Gasoline lines have no existence. Popular fashions — through God’s mercy — take far different form. Yet today we witness slackening economic growth and persistent inflation. They do not yet near the stagflationary rampages of the 1970s. The trend is nonetheless… worrisome. It appears the United States economy is down with a wasting disease. Consider: The real gross domestic product — that is, the inflation-adjusted gross domestic product — expanded 38% between 1969 and 1980. This span stretches across the deepest hells of the stagflationary epoch. Yet between the years 2012 and 2023 the United States gross domestic product expanded a combined 27.6%. That is, in real terms — in real terms — the stagflationary 1970s economy outran the 2012–2023 economy. Shall we place real economic growth alongside stock market growth? In real terms, the Dow Jones Industrial Average opened 1969 at roughly 6,500. It opened 1980 near 2,850. The S&P 500 plunged from 740 to 360 across the same space. For the stock market, the decade was well and truly lost. Meantime, the Dow Jones Industrial Average returned 208.4% between 2012 and 2023. The S&P 500 returned 179.7%. That is, economy and stock market endured a divorce of sorts. The 1969–1980 economy excelled the 2012–2023 economy by some 11 percentage points. Yet the 2012–2023 stock market excelled the 1969–1980 stock market by miles and miles and miles. Recall, both the Dow Jones Industrial Average and S&P 500 hemorrhaged over half their values 1969–1980. What accounts for it? In our estimation the answer is the Federal Reserve. It has assumed a parental and paternal responsibility for the stock market. It had not yet taken aboard this responsibility in the 1970s. Yet time equalizes as nothing else equalizes. We suspect stock market and economy will meet once again on fair ground. We hazard stock market will fall to the economic level… before economy rises to the stock market level. When? We do not know. We merely hope the gods are kind. Below, commodities expert Byron King shows you how to prepare yourself for the stagflation that may be emerging. Read on. Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: The stock market might be rigged, but you can’t fight it. You might as well take advantage of it. [And this strategy is one of the best in the entire industry.]( It boasts an average return of 57% in nearly two weeks — and that includes losers. In a two-year span, it had the power to grow a $40,000 model portfolio to $266,000. That’s a 565% compound return! It’s one of the most successful strategies we’ve seen. And this upcoming Monday, May 13, a new idea could be released that potentially doubles your money in as little as 24 hours. [Click here for all the details.]( [Are You Missing Out?]( Our records indicate you are not receiving the most profitable recommendations from our leading analyst. Don't miss the next opportunity to double your investment in just 24 hours… [Click Here To Act Now]( The Daily Reckoning Presents: Don’t look now, but stagflation’s staging a comeback… ****************************** The Return of the Dreaded “S” Word By Byron King [Byron King] BYRON KING If you’re under the age of about 60, you’ve never experienced stagflation. Back in the ’70s, everyone experienced what happened and people spoke openly about it. The term itself — “stagflation” — was a shorthand term to describe what was clearly and painfully a broad, national economic unwind. Throughout the decade, the rate of inflation crept up and people saw it in daily life. Food became more expensive, as did gasoline, and certainly housing. Meanwhile, entire swaths of the legacy U.S. economy began to contract, particularly in job-rich, good-paying industries like steel and other metals, machine building, heavy equipment, autos and much more. It was a shock to many Americans. For 25 years after World War II, and certainly through the 1950s and ‘60s, America experienced a generally solid economy. Energy was cheap, jobs were plentiful, wages grew. The country built interstate highways and much else, and, as the saying goes, “put a man on the moon.” But then came the 1970s when things changed massively within the U.S. economy, as if the economic train was leaving the rails. In so many ways it seemed that stagflation was relentless, and nearly unstoppable. Much of the problem was rooted in the 1960s, a decade of vast U.S. government overspending under President Lyndon Johnson for both the Vietnam War abroad and the so-called “War on Poverty” at home. Frankly, both wars were expensive, society-wrecking disasters. Politically, and from a fiscal standpoint, Johnson’s dumpster-fire presidency was all about the federal government spending immense sums of money on big things that caused much harm and yielded little to no return. And due to Johnson’s feckless, down-the-drain spending of the 1960s, the country’s money supply grew well beyond the productive capacity of the economy, and hence over time the rate of inflation crept up. Then when Richard Nixon became president in 1969, he (and Congress, absolutely) continued the spending trends. One key moment in the sordid saga of overspending was Sunday evening, Aug. 15, 1971, when President Nixon went on national television to announce his policy to control inflation. He imposed so-called “wage and price controls” across the economy, as well as closed the “gold window” of the Treasury. In essence, with the stroke of his presidential pen, Nixon froze the American economy in place. He replaced the free market with government controls, particularly in terms of what wage levels people could earn and what prices businesses could charge for goods and services. In other words, Nixon strangled price discovery, a concept that is intimately related to proper allocation of the nation’s resources. All this, and Nixon disconnected the U.S. dollar from its global relationship with gold, an arrangement that dated back to 1944 and the Bretton Woods Agreement. In terms of cause and effect, it’s fair to say that not all impacts occur immediately; just as not all carelessly tossed cigarette butts kindle a forest fire. So on Monday morning, Aug. 16, 1971, life went on in America and the world. People bellyached about frozen wages and prices, and international trade continued despite the disconnect of the dollar from gold. But the die had been cast. [Elon Musk’s NEXT Billion-Dollar IPO Revealed by the end of 2024?]( [click here for more...]( First, Paypal’s IPO made him a multi-millionaire… Then Tesla’s IPO made him a billionaire… Now, his NEXT big IPO could make him a TRILLIONAIRE. And for anyone who knows how to follow Musk as he potentially takes this new company public… The gains could be life-changing. [Click Here To Find Out How]( Over time, and now unmoored from its historic connection to something fixed and immutable like gold, the U.S. dollar became America’s Monopoly money, so to speak. Over time the dollar went from its 1971 level of $35 per ounce of gold, to the current level, recently over $2,400: a move of about 70x. At the same time, federal spending began its inexorable climb upward, as did many other societal trends that rely on easy money, in which the value of each dollar is tied to nothing really tangible. In 1971 the total federal budget was in the range of $250 billion in then-dollars, which included a substantial defense budget and even that abovementioned land-a-man-on-the-moon program. Now, in 2024, federal spending is moving rapidly toward $8 trillion, a factor of 32x over half a century. This huge, unending, 50-year, upward-sloping move in government outlays does not truly reflect the country’s primary economic growth. No, it’s more an echo effect from that massive, long-term expansion of money supply, accompanied by the constant shrinkage of the inherent value of the dollar. That is, the U.S. government has grown hugely over the decades, and year after year requires more and more dollars to perform the same kinds of tasks. Meanwhile, the national economy has transformed, courtesy of all those easy-to-create dollars of our collective money supply. Certain kinds of assets inflated in price, like real estate and housing, or high-end art, and certainly the stock market. As a nation, we’ve all come full circle, in a sense. From the stagflation of the 1970s, we are now again back in stagflation, this time the 2024 sequel. America’s young people have difficulty finding meaningful, productive work, let alone a personal identity in a world that has become a fetid swamp of insipid, mind-numbing, social media bubbles. All of this has been decades in the making, to be sure, with many sets of fingerprints scattered across the scenes of many economic crimes. But helpfully, in a perverse sort of way, the Biden administration seems to relish taking credit for what’s happening out there and has even coined the term “Bidenomics” for us. So what can we do to get through this mess? The usual advice pertains: - Stay out of debt, especially debt that carries high interest rates… - Hold at least some cash (find your comfort level) in your “hip pocket,” so to speak, to take advantage of opportunities - Hold real estate, but only in the right location-location-location - Hold shares in solid, well-run industrial companies that have strong reputations and protection for intellectual property - And preserve wealth with hard assets. As for those hard assets, begin with precious metals, particularly gold and silver, but also platinum and palladium. The bottom line is the stagflation economy has staged a comeback. Let’s hope it’s not as devastating as the 1970s version, but one way or the other you want to protect yourself and ensure your financial stability. Regards, Byron King for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Ed. note: The stock market might be rigged, but you can’t fight it. You might as well take advantage of it. [And this strategy is one of the best in the entire industry.]( It boasts an average return of 57% in nearly two weeks — and that includes losers. In a two-year span, it had the power to grow a $40,000 model portfolio to $266,000. That’s a 565% compound return! It’s one of the most successful strategies we’ve seen. And this upcoming Monday, May 13, a new idea could be released that potentially doubles your money in as little as 24 hours. [Click here for all the details.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Brian Maher] [Brian Maher]( is the Daily Reckoning's Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. His work has appeared in the Asia Times and other news outlets around the world. He holds a Master's degree in Defense & Strategic Studies. --------------------------------------------------------------- [Byron King] King]( is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. 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