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Inflation is a Policy Decision

Gary Christenson
|
Wednesday, August 29th

Miles Franklin sponsored this article.

Inflation results from policies implemented by governments, commercial banks and central banks.

A FEW CONSEQUENCES:

  1. More currency placed into circulation devalues all currency units. We can thank fractional reserve banking, deficit spending and QE.
  2. Stock markets rise as each currency unit buys less.
  3. Commodities rise in price.
  4. Incomes, taxes, debt and government expenditures rise.
  5. Politicians spend more currency units as they reward friends and buy votes.
  6. The wealthy become richer and the poor and middle class suffer as prices rise while wages stagnate. More stagflation is coming in 2018 – 2020.
  7. Inflation discourages savings and encourages spending and debt creation.

 

Examine official national debt and M3 currency in circulation at ten year intervals on a log scale for a big-picture perspective.

Both debt and M3 have risen exponentially for decades. Inflation is a policy decision that benefits bankers and politicians, so it is not surprising the political and financial elite promote policies that encourage currency devaluations and inflate consumer prices.

The Stock Market and Silver:

Both rise as currency units purchase less, and both fluctuate while rising in their long-term uptrends.

Calculate average monthly prices for the DOW and silver over a ten-year period. Plot those prices on the center date of the period. This shows long-term trends and eliminates most market fluctuations.

Example: Take the average price for the DOW each month from January 1, 1969 through December 31, 1978 and plot it as a single data point on January 1, 1974 (five years into the ten-year interval).

The DOW and silver prices have risen exponentially for over 50 years with occasional spikes higher and lower.

The upward exponential trend is clear. Until financial systems change, stocks and commodities will rise as bankers devalue currencies. These exponential increases in debt, M3, the DOW and silver prices can’t continue forever, but how long it will take before the system resets is unknowable.

SO THE QUESTION IS: WHICH SHOULD WE BUY IN 2018?

Investing short-term: Good luck competing against the High-Frequency-Traders, their massive capital base and their manipulative algorithms. Some are successful, but it’s risky.

Investing long-term: Both the DOW and silver will go up, but which is a bargain today?

Graph the ratio of silver prices (times 1000) to the DOW for 30 years. This period includes the aftermath of the 1980 silver bubble, the 2011 silver spike and several stock market bubbles and crashes.

CONCLUSIONS:

  • Relative to the DOW, silver prices are too low.
  • Long-term the DOW and commodity prices will rise.
  • Bankers and politicians profit from currency devaluations so inflation will continue.
  • Silver prices bottomed in December 2015 but remain low compared to the DOW, M3, and national debt.
  • M3 and debt increase exponentially. People will realize that debts can be paid only via default or devaluation.
  • Silver will (someday) rise when investors protect their savings and retirements with inflation hedges.
  • In hockey, “Skate to where the puck is going, not where it has been.” (Gretzky). When investing, buy what is inexpensive (going higher) and sell what is too expensive.
  • In 2018 buy silver (and gold) and sell the DOW and the high-flying tech stocks of the NASDAQ.


REPEAT:

  • Over the past fifty years the inflation policy has devalued currency units and increased prices for stocks and commodities.
  • Silver is under-valued compared to the DOW in 2018. Buy silver.
  • Miles Franklin sells silver and gold. Call them at 1-800-822-8080.

 

Gary Christenson

 

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