Stagflation and what it means for Gold and Silver

Jeffrey Christian: Good afternoon! It’s Jeffrey Christian of CPM Group coming to you for Monex. CPM does these videos with Monex. This month I’m doing it solo. I wanted to talk about stagflation and what it means for gold and silver. Not all gold and silver investors, but many of them have a stable of economic problems that they worry about. Some of these problems are real and some of them do not materialize. There are people who have been waiting for a collapse of the dollar for decades. It really hasn’t happened yet. There are people who are worried about hyperinflation. It really hasn’t happened yet. We had a period of inflation in 2021 into the middle of 2022, but inflation rates are declining now.

At present, one of the factors that is getting talk in the gold and silver communities is stagflation—Are we moving into a period of stagflation, such as was an issue in the 1970’s? There are some similarities between the economic mix of high inflation and low economic growth back then in the 1970’s and the present situation, but the differences between then and now seem far greater to us than the similarities. Also, if you examine the 1970’s economic record, you see that stagflation was more of a boogieman than a reality. The United States suffered from high and wildly variable inflation from the late 1960’s into 1982, but real economic activity was not stagnant, it was wildly variable as was inflation. We had four recessions between 1968 and 1982—14 years. We’ve had four recessions in the past 40 years, since 1982. If you go back to the 1970’s, you had four recessions, but you also had periods of 4% real economic growth, 6% real economic growth for several years, and 7% real economic growth. So, you had high inflation, which would then coincide with recessions, but then in between those periods of time, you saw lower inflation and you saw stronger economic growth. We understand that the first half of 2022 saw high inflation and low growth, but that was a 6-month period, it was hardly a long-term condition. Economic growth was stronger in the second half of 2022 in the United States, Japan, Europe, and Inflation was consistently lower on a month-to-month basis. Now, we expect a period of slower economic growth in the future, possibly starting in the second half of this year and leading to a recession at some point, perhaps in 2024-2025.

Economic growth is facing a number of constraints. The major constraints are actually not monetary policy. Fiscal policy, enormous deficit spending that needs to be brought under control and growing federal sovereign debt around the world, and real economic trends in supply and demands of goods and services are getting into constraints. We expect those constraints to lead to lower growth and ultimately a recession. Inflation, meanwhile, the rate of increases in prices, is expected to continue to decline.

So, in other words, CPM Group sees stagflation more as a boogieman at present, than a real threat at least at this time. There are real threats in the U.S. and Global Economies, as I just mentioned, and the political environment, both domestically in the United States, China, Russia, Europe, the United Kingdom present major problems to dealing with those economic conditions. International politics just add to the list of issues that we should be concerned about, but CPM Group doesn’t necessarily think that stagflation is one of those problems that is high on our list of concerns at this time. There are real threats to real economic activity, and to wealth, and investors would do well to protect their wealth with precious metals in advance of these problems, which are already upon us growing worse. I hope that helps you frame the economic and political environment that we’re facing as precious metals investors at this time.