For Australian investors, the month of May is “budget” month and, again, Australia’s “conservative” administration, delivered enough debt and deficit to keep even the most hardened lefty blushing.
It’s a real sign of the times, get on board with debt spending or get left behind other “respected” central bank supported administrations around the globe.
The effects are starting to pop up everywhere.
Like we’ve warned many times on this website, populations may wake too late to potential consequences of these policies.
Some laws of economic nature still apply and inflation has been constantly stated as a preferred consequence by global central banks. Other choices are politically unpalatable. The problem is, Central Banks, and their fellow believers, still believe they can reign inflation in once it gets going.
Even more unrealistic, even humorous, is main stream financial media and central bank whisperers attempts to label the rising costs of everything as……., wait for it, …….. “transitionary”, or temporary.
It’s our view that nothing could be further from the truth.
Central Banks will do nothing to combat inflation because they can do nothing.
From time to time you may hear some noise about winding back spending and stimulus, tapering bond purchases or even rate rises.
Not going to happen. Too much debt for rates to rise, too much ESG/climate change policy to implement, too much infrastructure spending to politic. Then add in the risk of bubble pricking! They aren’t going to risk it.
As you can see in the charts below from the United Nations Food and Agriculture Organisation, food price index increased for an 11thconsecutive month in April, hitting levels not seen in recent times, with sugar prices leading the main index.
It’s not just commodity related inputs, cars, housing and soon to be labour in Australia, the US itself is already on its it way to a double digit inflation print this year, even after they’ve taken all the inputs out that make the number bigger, just check out http://www.shadowstats.com if you’re interested in the make-up.
Anyway, this below, is Temporary?
Transitionary
Not temporary!
Temporary?
The aforementioned commitment of global central banks to multiyear infrastructure spending and stimulus almost guarantees a continuation of the above commodity price performance of the last few months. Fortunately, we are sure followers of these pages are well set to benefit from this commodity cycle.
More copper might be better, if you can find it. As usual, this presents an incredible back drop for precious metals and particularly that other super conductor of energy, Silver!
In spite of the obvious inflationary pressures, precious metals have, so far, failed to launch until this month.
This chart above is very bullish, especially from a technical perspective. A double bottom followed by a multiple moving average take out.
We think one should thank the main stream media for keeping many investors thinking that this whole inflationary thing will be temporary and easily bought into line by central bank rate rises! (A negative for Gold)!!
It’s not, and investors still have time to get set. Especially, profitable gold producers look incredibly cheap.
As we’ve often stated in the past, precious metals are not the only way to protect ones purchasing power but have proved pretty reliable over a few millennia.
In the energy sector, funding for any fossil fuel project, new and existing, has virtually dried up in the new woke world. A world where the difference between metallurgical coal and coking coal is irrelevant!!
It’s only a matter of time before markets wake to the reality that wind and solar aren’t going to cut it, for the time being, and the world just needs energy, for everything!!!
Check out this for a set of Alligator Jaws, just waiting to close?
And within the alligator jaws of energy there is Uranium!
One of the greatest potential supply demand mismatches of the last decade! Potentially.
Finally, when a consumer “buy all the things now before prices rise” mentality kicks in you’ll know that this inflationary bout is more than a supply chain glitch.
Peace!
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