Inflation is now the order of the day at the top of world politics, after President Biden himself calmed nervousness on Monday.
“Biden is trying to allay fears that rising inflation will jeopardize the US recovery,” [https://www.ft.com/content/a9e7450a-5ed3-4718-b71a-8a7f5d3148aa] headlined the same day the resulting headline in the Financial Times – the FT, it must be said, not appearing fully convinced that the president will succeed.
And pink paper isn’t the only one.
Because if inflation is only now at the top of the agendas of politicians around the world, it has long been at the forefront of the markets.
Yes, the price of lumber has now fallen back after an unprecedented race. But it was just an outlier, a swallow before the storm.
Other asset prices have remained high, and although markets come and go in response to the delta variant, these gyrations are occurring at a very high overall level. And the simple reason is that Silver’s long-standing reign as king finally seems to be coming to an end.
It has lasted a long time, certainly, let’s say to be generous, from the boom in bills of exchange offered by Italian merchants in the Renaissance to the present day. And the reign could have continued, had it not been for a serious psychological weakness that has long been evident in all of the world’s greatest politicians, except for a few: a reliance on quantitative easing.
This addiction was already threatening at the turn of the millennium, but distractions like the dotcom boom and the rise of China have temporarily averted the danger. But with the onset of the global financial crisis, addiction has set in and like all addictions it seems to be causing a lot of destruction.
In the old days, the world only had one place to run when inflation was high: gold. Now, with the advent of bitcoin and gold-based derivatives, there are many ways to guard against the scourge of inflation. This is largely why the trend in gold prices has not been as sharp as it would have been in other eras, and why, even as the world continues to depreciate cash and currencies of all denominations, gold’s upward movement is likely. be slower than the bulls would like.
Will he test $ 2,000 US this year?
The Fed will do its best to prevent this from happening.
But the only way to really tame the beast of inflation is to raise interest rates, and central banks have hated doing so since at least 2008. After all, there are political implications too. High interest rates mean a slowdown in economic activity, and it’s something President Biden will want to avoid at all costs. For the economy to stutter now, after all the talk of the recovery, would be unthinkable and could easily return the White House to Republicans in the next election.
So, despite all his harsh talk about inflation, Biden would likely privately argue that it’s the lesser of two evils. And if that’s the math, then gold may well test US $ 2,000 again before too long.