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Magflation: An Unexpected Gold And Silver Driver

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Money Metals Exchange


  • Few people are aware that even as the Feds tout the validity of the CPI in tracking inflation - both current and expected - they openly admit food prices are the most accurate predictor of inflation!
  • For years now, (officially-stated) inflation has been annualizing at one or two percent per year.
  • If the printing press and spending spigot remain unchecked, then inflation is more likely. Excessive demand, loss of confidence and increased money velocity leads reliably to the inflationary door.
  • But gold and silver catch a wave, and wealth preservation for the lucky relative few, historically topping out at 2.5-3% of the population's assets, is largely assured, enabling a small minority to seriously blunt the inflationary impacts on their material wealth.

By David Smith

During the 1970s, the U.S. experienced a decade of below-trend economic growth combined with rising interest rates - and eventually - massively higher gold and silver prices.

Some sectors boomed while others lagged, and then as now, the majority of the population struggled with rising home and commodity prices, bookmarked by lofty interest rates.

This stilted and challenging environment, which came to be called stagflation, eventually drove the more perceptive people into gold and silver.

The result?

Gold, having been freed from its long-term tether of $35, first rose to $200, then dropped to $100 before rocketing to an all-time nominal high of $850.

As per usual on a percentage basis, silver rose even more, topping out at $50 the ounce.

For years now, (officially-stated) inflation has been annualizing at one or two percent per year. Most people, including the current generation of market participants, have little or no memory of the relatively high inflation, interest rates and metals prices of the late '70s.

They may be about to get a shock...

Plata o Plomo?

Mexican bandits, when attempting to relieve victims of their money, might ask them "Plata o Plomo?" - Silver or lead (bullets)?

Given that demand and the rising cost of components have now priced ammunition several times higher in all calibers than last year, perhaps those who stack both silver and ammo should change this phrase to "Plata y Plomo"... Silver and Lead.

The picture nearby from a local gun range shows something well beyond the Fed's sub-2% inflation target.

But then they also said it would be acceptable to let inflation "run hot." Last year a box of .22 rounds could be had for less than $25. Is the Fed getting what they asked for?

Inflation? Deflation? Both?

This debate has gone

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Comments (15)

By no means a cryptogeek and personally own no crypto assets, but haven't such crypto assets been inexorably chipping away at the attractiveness of (and consequently usefulness of) precious metals as inflation hedges? I can see silver in particular increasing in value throughout this year due to a combination of supply shock and resumed industrial demand, but don't agree that its potential as a long-term hedge against inflation (even assuming a worst-case hyperinflation scenario) is anywhere near this promising.
@bbjs1972 , Bitcoin is riskier in my assessment.
buying /owning ammo is just as good, if not better inflation hedge then PM's.
KuriousJoel profile picture
Valid warning... The only way to beat hyperinflation, is to invest in it!
@KuriousJoel , How do you invest in it?
KuriousJoel profile picture
@kimbillro Um, anything that is looked at as a "product" of it. And what exactly is hyperinflation? But the massive, inevitable, destruction of fiat currency and its purchasing power upon the bearer of that instrument. So, all things energy (oil & gas e&p's, midstream, refining, nuclear, coal, ESG*) precious metals, real estate (that produces income via rents or natural resources), agriculture, and of course, all things mining (uranium, precious metals, base metals, rare earths). And rule #1 CASH IS NOT KING during hyperinflation! Guns, bullets, alcohol, gardens, vineyards, orchards, clothing, etc., anything that is a real asset is better than cash. As the Fed and the EU quietly steal from every responsible saver by running the presses we have the power to preserve wealth in commodities with intrinsic value. Also, GDP is not a dollar equivalent measure (it does not move in tandem with dollars created) GDP is an energy equivalent measure and it currently moves in tandem with BOE consumed.
@KuriousJoel , That sounds very sensible to me.
Holding on and adding to GDX and SIL on this latest pull back.
"Few people are aware that even as the Feds tout the validity of the CPI in tracking inflation - both current and expected - they openly admit food prices are the most accurate predictor of inflation!"

That tells you all you must know about the Fed, especially that CPI doesn't include food (and energy, healthcare, land, education, etc).
I didn't know lead was moving up in price.

I think he means ammunition.
@cat2005 , Good to hear from you again. I believe it was last year I told you about my CAT5 project at my house @cat2005 .

I am still working at it just in case you were interested in an update.

LOL - yes, but why aren't you done with it? How much more CAT5 do you need?
Good article
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