Could We Be Facing Deflation?

Before I comment on the horrific events of this week and their impact on the markets, next week’s hotline will be short and will be sent on Friday rather than Saturday. That’s because I’m scheduled to participate in the Metals Investor Forum (MIF) on March 10 and 11 in Vancouver at the Georgia Hotel. It would be great to see you there but if you can’t make it, you can watch the event live on your computer. Register at https://cvent.me/eOznGL to attend in person or watch the event live on your computer. I will be speaking at 3:00 PM Pacific/ 6:00 PM Eastern time. Company presentations by Klondike Gold, Snowline Gold Corp., Goliath Resources, and Eloro Resources will follow my talk.

Despite the fact that commodity prices appear to be spiraling upward in a frenzy, I am planning to talk about a deflationary case as laid out by former Federal Reserve economist Lacy Hunt in a very interesting interview he recently did with Adam Taggart on the Wealthion YouTube Channel. I will go into some detail in my talk, but, cutting to the chase, there are three main reasons why Lacy suggests we are most likely facing deflation rather than inflation.

First is America’s massive debt/GDP. The current Federal debt to GDP is 114.9 times over the past five years and growing rapidly. It was 129.7% over the past year. When debt/GDP rises above ~60%, economic growth starts to decline at an accelerating rate the higher the ratio. At present, real economic growth is 21.5% below trend going back to the 1860s. I will discuss the reasons why massive debt ends up snuffing out economic growth but the short version is that by going into debt, you consume now at the expense of future consumption. Secondly, the issuance of new, untried policies like QE and universal fiat money have unintended consequences that do not allow those policies to be unwound. For example, the Fed now can never raise rates again without triggering a depression. The third concern that Lacy Hunt expressed very briefly is that we and virtually all the western nations have a rapidly declining birth rate, which means there are no workers to support an aging population living in retirement. I’m not going to tell you what my conclusions are because I want you to watch the Metals Investor Forum. I will share it with you later, but for now, suffice it to say that Lacy Hunt was interviewed before war in the Ukraine broke out. I’ll explain how that may have a huge impact on inflation.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.