Before the Ukraine/Russian conflict exploded on the scene, the price of goods and services were already advancing at levels not seen in decades. Price inflation was largely driven by loose money policies due to national government reactions to COVID, and the subsequent demand created as the economy restarted.
However, in the last two months, commodity prices across the board have exploded upward. Input costs such as gas, diesel, and fertilizers have done the same. This is a game-changer because it sets the base cost level for production at a much higher level.
The article on the right was sent to us by a friend who was doing research in his local library. At first glance, we thought it was from a recent newspaper. However, it was actually written in 1969. The forces that were in place at that time are similar to what we are facing today. The result then was nearly a decade of “stagflation.”
As much as we don’t want to say it, it is possible that stagflation could be a near best-case scenario today. That is because the global economic and monetary systems are much more interdependent than they were in the 1970s. Yet the global inflationary pressures of the late 60s and early 70s led to President Nixon “closing the window” on international gold redemption for the US dollar. Today, our monetary system is fiat and debt-saturated. It’s difficult to know what policymakers will do today as inflation entrenches itself in the global economy. We believe this is all the more reason to have tangible assets, like gold and silver, as portfolio insurance.
