from Rebel Capitalist
Home Blog
Do Inflationary Expectations Cause General Increases in Prices?
by Frank Shostak
Mises.org
Many believe the key cause to a general increase in prices are so-called “inflationary expectations.” For instance, if there is a large increase in the prices of oil, individuals will start forming expectations for higher inflation ahead. Consequently, individuals will speed up their purchases of goods and services at present, thereby raising the demand for goods and services, all other things being equal. This is supposed to set in motion general price increases. According to the former Fed Chairman Ben Bernanke, “Undoubtedly, the state of inflation expectations greatly influences actual inflation and thus the central bank’s ability to achieve price stability.”
It is believed that, if inflationary expectations could be made less responsive to various shocks, then, over time, this would mitigate the effects of these shocks on the momentum of the prices of goods and services. Most commentators believe central bank policies can be employed to bring individuals’ inflationary expectations to a state of equilibrium.
Status of U.S. Dollar as Global Reserve Currency: Central Banks Diversify into Other Currencies and Gold
by Wolf Richter
Wolf Street
The surge of the “nontraditional reserve currencies.”
The status of the US dollar as the dominant global reserve currency has helped the US fund its twin deficits, and thereby has enabled them: the huge fiscal deficit every year and the massive trade deficit every year. The reserve currency status comes from other central banks (not the Fed) having purchased trillions of USD-denominated assets such as Treasury securities, other government securities, corporate bonds, and even stocks. The dollar status as the dominant reserve currency has been crucial for the US, and as that dominance declines ever so slowly, risks pile up ever so slowly.
Better Than the Bank, but Just Barely
by James Hickman
Schiff Sovereign
We recently received a question from a reader asking— given all the volatility in the market, what do we think of US government bonds right now as an asset class?
First, it’s absolutely true that there has been a sudden surge in uncertainty.
In some respects, it’s astonishing how much of this has emerged just over the last 6–8 weeks. Consumer sentiment, business sentiment, and investor confidence have all cratered since mid-February.
This is a very difficult environment in which to do business.
Companies have no idea what the world is going to look like, literally two days from now. That’s crazy.
Why the Global Recession Will Be Deeper and Longer Than Pundits Anticipate
by Charles Hugh Smith
Of Two Minds
The global recession will be deeper and longer than those relying on models based on the past two decades of hyper-globalization and hyper-financialization anticipate.
While everyone focuses on conflicts between nations, few look at the problems shared by nations. Richard Bonugli and I discuss both sets of problems in our latest podcast.
The conflict sphere is dominated by the trade wars that are bubbling up here in the first inning of the global rebalancing of national interests and global trade/financial frameworks. Supporting these frameworks benefits participating nations until they don’t, at which point they’re jettisoned.
The conviction that these frameworks, linch-pinned by the U.S. since the end of World War II in 1945, no longer serve America’s core national security interests, is reaching a rough consensus, and as a result some describe the U.S. as a “rogue superpower.” In other words, now that the U.S. is no longer the dumping ground for global surpluses of production, it’s seen as “going rogue.”
Coming Soon: Silver’s Mania Phase
by Adam Sharp
Daily Reckoning
Every so often, silver goes through a mania phase.
I experienced my first and only silver mania from 2009-2011. There’s nothing quite like it in the investment world. Simultaneously thrilling, nauseating, and lucrative.
Silver is tiny compared to gold and other commodities, so bull markets tend to be almost violent in nature. Once generalist investors get involved, things can quickly get out of hand, in the best kind of way.
Here’s a chart showing the relative performance of silver vs gold from 2009 through 2011:
Inflation Heats Up for Third Consecutive Month, Casting Shadow On Fed’s Earlier Cuts
by John Carney
Breitbart.com
Inflation continued its steady rise in February, the latest indication that the Federal Reserve’s efforts to restore price stability have faltered.
The personal consumption expenditures (PCE) price index rose 0.3 percent for the month in February, matching the January pace. If prices rose at that pace over the next twelve months, inflation would rise to four percent. Compared with a year ago, the PCE price index is up 2.5 percent.
The Fed uses the PCE price index for its official target of two percent inflation. It also uses the index in the economic projections of Fed officials that are released at every other meeting of the Fed’s monetary policy committee.
The core PCE price index, which strips out volatile food and energy prices, rose 0.4 percent from the previous month.
Inflation Galore Now: Fed Started Rate Cuts at the Low Point Six Months Ago, Just as Inflation Began to Resurge
by Wolf Richter
Wolf Street
Core PCE price index jumps MoM by most in 13 months on Non-Housing Services. Recreational Services blow out. Durable Goods continue 6-month trip out of deflation.
The inflation measure released today – the PCE price index favored by the Fed as yardstick for its inflation target – dished up another surprise.
While gasoline prices fell in February from January, and food prices were stable month-to-month after substantial increases in prior months, prices in core services jumped, driven by non-housing services, especially by the ongoing six-month-long red-hot spike in recreational services – the services that consumers want to buy.
Goldman Sachs Sees Trump Tariffs Spiking Inflation, Stunting Growth and Raising Recession Risks
Goldman Sachs expects aggressive duties from the White House to raise inflation and unemployment and drag economic growth to a near-standstill.
by Jeff Cox
CNBC.com
With decision day looming this week for President Donald Trump’s latest round of tariffs, Goldman Sachs expects aggressive duties from the White House to raise inflation and unemployment and drag economic growth to a near-standstill.
The investment bank now expects that tariff rates will jump 15 percentage points, its previous “risk-case” scenario that now appears more likely when Trump announces reciprocal tariffs on Wednesday. However, Goldman did note that product and country exclusions eventually will pull that increase down to 9 percentage points.
When the new trade moves are enacted, the Goldman economic team led by head of global investment research Jan Hatzius sees a broad, negative impact on the economy.
In a note published on Sunday, the firm said “we continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed.”
Paper Promises, Golden Truths
by Adam Sharp
Daily Reckoning
“Paper money eventually returns to its intrinsic value – zero.” – Voltaire, 18th century
In films and TV shows set in the future, money is usually a digital government currency.
Credits, cubits, and chits are a few names I recall. This is a globalist CBDC-based vision of the future. Bleak.
But in one of my favorite sci-fi movies, Looper, precious metals reign supreme as money. In that film, the inevitable breakdown in fiat currency has already occurred and hard money has made a comeback.
This latter scenario is far more likely. Time and time again, central banks and governments have proven they cannot be trusted with the power to create unlimited money. It doesn’t matter whether it’s paper or digital money, central bankers will print too much of it given the chance.
Gold Going Higher, Dollar Losing 75% Value | Rick Rule
by Craig Hemke
Sprott Money
In this Monthly Wrap-Up, host Craig Hemke is joined by legendary investor Rick Rule to break down the latest developments in the precious metals market. We discuss gold’s strong March gains, why the gold price is going much higher, the declining purchasing power of the U.S. dollar, mining stocks, and the future of commodities like copper. Rick shares deep insights backed by 50 years of experience, including his views on upcoming economic risks and how investors can protect their wealth with precious metals. Watch today!