More Inflation Showing Up

More hints of inflation are noticeable in our Key Market metrics with commodities up 2.55% and the T-Bond down 2.39%, meaning yields are up by a similar amount. Peter Boockvar reported that, “According to the Manheim Used Vehicle Index, prices went up 5.3% m/o/m in September and are up 27.1% y/o/y. The index is at a fresh record high. Supplies of motor vehicles are not keeping up with demand due to supply chain problems. Clearly, inflation is taking a bite out of the living standards of average Americans, and housing is a major issue. According to an Atlanta Fed report this week, median income households need to apply 32% of their income now to meet housing expenses. According to the Department of Housing and Urban Development, anything above 30% is referred to as ‘cost burdened.’ Adding to household costs was another tick up in the average 30-year mortgage rate, to 3.14%. That’s the highest since early July. Even though this is still so historically low, mortgage apps fell by 7%. Purchases were down by 1.7% w/o/w and 12.6% y/o/y, while refi’s were lower by 9.6% w/o/w and 16% y/o/y.”

Meanwhile, the U.S. trade deficit in August rose to a record $73.3b, above the estimate of $70.8b, which means more dollars flowing into the hands of people outside of the U.S. that already have their fill.  Imports were up by 1.4% m/o/m while exports grew by 0.5%.  

But here is the real kicker! The Atlanta Fed’s GDP Now Q3 forecast is now down to 1.3%. It was 6% two months ago! That means less money flowing into the Treasury even as Biden and the Marxist clan that surrounds him are trying to add as many more trillions as they can to the U.S. deficit. The “tax the rich meme” may buy votes but it will never work. What always happens is that the middle class ends up paying the bill! But that’s parasitic nature of socialism.  

The most frightening thing is that Americans have lost all sense of how our Federal debt is leading to enslavement and poverty. The U.S. is on track to drive its total debt load up to $30 trillion by the end of this fiscal year! As of August it was $28.43 trillion! Through the first ten months of this year, the additional debt was $2.54 trillion and that’s before the $3.5 trillion spending package the Biden Administration is seeking to get passed to “build back better.” Moreover, as the economy slows, deficits will surge even higher.

Keep in mind that this is happening while interest rates are still historically low! But now the long bull market in U.S. Treasuries is over, which means rates must rise dramatically or the Fed will have to print money at an exponential clip in a longer-term ill-fated attempt to keep the U.S. solvent. That of course will only lead to more inflation which will lead to higher rates of interest in what is a self-induced negative feedback loop. That is why the dollar is doomed and why you must own gold and the companies that mine and refine it from the ground and those that discover new deposits.

This is an alarming reality! It means that while gold is unpopular in the market, now more than ever it is a must-have asset to enable you to retain wealth. As the chart above shows, it is as inexpensive as in 1970 and in 2000 relative to the money supply.

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.