Definition Of Stagflation …

As we are witnessing our economy falling apart, the manipulation of numbers and the bending in the meaning of words continues to keep most of the public in a state of confusion.

We are being told over and over how incomes are rising and inflation is falling while millions are being laid off and prices continue to rise- albeit a bit slower than they had been. Of course, all of the prior inflation is still there and inflation is STILL CLIMBING.

We are seeing a classic setup for STAGFLATION. This word is being used a bit more in the mainstream media because even though the “numbers” are made to reflect the narrative most people are seeing with their own eyes that things are not playing out as they are reported to be.

Many people, particularly those who are younger, have not heard the word stagflation because the last time it was a thing was in the 70s and 80s. The USA went off of the gold standard, and it took 18% interest rates to get inflation under control then. If that were to happen today, I cannot imagine the carnage to the economy, “markets,” and people’s psyches. Back then- as America was a bit over 200 YEARS OLD, we still had not gone $1 TRILLION into debt. That happened in the 80s. It took over 200 YEARS for the country to run up its first trillion and the last TRILLION was added in less than 6 MONTHS.

This debt is growing exponentially and there is no chance that any number of tariffs will fix this. Keep in mind that we only see what is ON THE BOOKS. That TRILLION in 6 months DOES NOT include the many wars we are starting and fighting, VA benefits, Social Security and Medicare payments. I cannot even imagine how much has been “printed” to keep rates from skyrocketing as foreigners are dumping our bonds and nearly $10 TRILLION are maturing in 2026. What is the real amount of “printing that is taking place?

STAGFLATION- An increasing money supply (conjuring cash up out of nowhere with NO intrinsic value or any corresponding VALUE from production) causing slower economic growth and rising prices because more cash is chasing fewer goods. In the beginning people love it because asset prices rise and it is like getting SOMETHING FOR NOTHING.

In a healthy economy someone produces a product and exchanges that product for cash. That producer then spends that money on another’s goods, creating a SOMETHING for SOMETHING transaction. This keeps the economy balanced and there is true price discovery for goods and services.

The economy becomes unhealthy when a third party (central banks in particular) enter and conjure up TRILLIONS in currency units with NO CORRESPONDING production of goods leading to higher prices and a slowing economy. They “print money” to buy assets (bonds to reduce rates and stocks to prop up the price) and charge me and you INTEREST on the freshly conjured cash that they used to manipulate prices.

This creates a SOMETHING FOR NOTHING scenario where with a few clicks of a mouse they can generate massive purchasing power but that is all it is. There are no tangible goods produced to back up the cash.

Those “in charge” love this because they get massively wealthy while the general economy and the majority of the population pay the price. We are living the definition of STAGFLATION- Decreasing economic activity, job losses and increasing costs for almost all necessities of life.

As the lower- and middle-class people start to struggle to keep their current lifestyles spending slows down on all but necessities. Now people are even using credit and buy now pay later plans even for many things including FOOD. This leads to more layoffs and an increasingly slowing economy.

Use your own eyes. We are living STAGFLATION RIGHT NOW. But the problem is that we are just in the early innings. My guess is that inflation is going to get MUCH worse before the end of this year. I also believe that A.I. will be blamed for MANY job losses- people like Jamie Dimon (CEO JP Morgan Chase) are already putting that out. While A.I. will likely kill many jobs the real damage is the imploding economy being artificially propped up by DEBT. Debt is then counted on the government’s books as GROWTH and all appears fine- until we go to the grocery store or see rising insurance premiums, taxes, utilities, healthcare, etc.

The reason for my belief that inflation is just starting is the enormous amount of “printing” I am anticipating will take place as nearly $10 TRILLION in maturing bonds need to be retired and our traditional foreign buyers are now net SELLERS. $2 TRILLION in admitted debt added to continue spending FAR more than taxes collected. With all the layoffs what will that do to tax receipts? Answer- they will not be going up. This will also add to the stress on our social safety nets- already at the point of snapping. I anticipate that this will require even more debt to continue the charade.

UNLIMITED CASH. LIMITED HARD ASSETS. Blackrock and JP Morgan both mentioned this week that hard assets are a must-have in this economy. Since they are the definition of those “in charge” it pays to listen.

I believe the financial economy is experiencing stresses that are leading us back to actually having supply and demand of PHYSICAL GOODS determine prices rather that bots, algorithms, and corporate manipulation which has dominated the “price” since at least 1971. When this happens, PRICE becomes aligned with VALUE.

A great question I have asked many times- but not recently- is:

WHAT IS THE VALUE OF a PROMISE that cannot be kept? We are likely to find out that answer in the near future. I will add what is the actual VALUE of assets that have had prices suppressed for over 50 years. That answer may be coming soon also.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not prove to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are rising overall.

Precious Metals, including gold, are subject to special risks including but not limited to price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.