Big Inflation is Coming – and the Fed Isn’t Going to Stop It
Last week, I presented why I think the financial system is lurching towards a period of greater inflation.
- Commodities, which are extremely inflation-sensitive, are breaking out of a massive falling wedge formation. This suggests that commodity prices will soon be rising rapidly – which typically indicates inflation is rising.
- The ratio between the performance of Treasuries that are priced based on inflation (called TIPS) and the performance of regular Treasuries is also suggesting that an inflationary move is underway.
- Stocks are ramping higher based on their discounting that higher inflation is coming (stocks initially love inflation).
- The U.S. dollar is preparing to break down, which would confirm that we are moving into a higher inflation framework.
What’s truly astonishing is that the Fed has made it clear it is FINE with this happening.
In late October, Fed Chair Jerome Powell stated:
“I think we would need to see a really significant move up in inflation that’s persistent before we even consider raising rates to address inflation concerns.” [Emphasis my own.]
Here’s the Fed chair saying that inflation would need to rise significantly and stay there for some time for the Fed to “even consider” raising rates.
In of itself, this is a heck of a statement for the Fed Chair to make.
And when we consider the context in which Jerome Powell made this remark, it becomes truly astonishing.
Four Signs the Fed is Allowing for Big Inflation
First and foremost, the Fed’s own inflation measure, called the Underlying Inflation Gauge (UIG), is well above the Fed’s target of 2%.
Secondly, the Atlanta Fed’s “sticky inflation” – a weighted basket of items that change price relatively slowly – is ALSO clocking in at 2.4%, well above the Fed’s so-called “target” rate of 2% inflation.
Thirdly, the Consumer Price Index – which is considered the official rate of inflation – is at 1.7%, which isn’t exactly low. And when you exclude food and energy prices (as the Fed prefers) the rate is… you guessed it… 2.4%!
And finally, the Fed’s favorite measure of inflation, personal consumption expenditures, is currently up 3.9% year over year.
So we’ve got THREE of the Fed’s preferred inflation measures OVER its target rate of 2%… and its absolute FAVORITE inflation measure is nearly 4%!
And yet, the Fed Chair says the Fed isn’t interested in raising rates again until inflation becomes a significant and persistent problem!
Now do you see why I believe the Fed has decided to let inflation get out of control? Inflation is already above 2% and the Fed could care less!
The message here is clear: Big inflation is coming and the Fed won’t do anything to stop it.
And here’s the craziest part… I believe the Fed is doing this at President Trump’s request. Put another way, this was President Trump’s plan all along to guarantee he wins the 2020 Presidential election.
I’ll explain why tomorrow. For now, you need to know that BIG inflation is coming. And those investors who allocate their portfolios correctly for this could generate literal fortunes.
On that note, I recently clued subscribers of my Strategic Impact newsletter in to an incredible investment… that’s already up 4%.
And I fully expect to see it produce triple-digit gains as stocks roar to new highs…
Editor, Money & Crisis