Is inflation getting out of hand?
Inflation is here, but no one wants to admit it
Summer and sunshine have arrived and the opening after the long lockdowns is also finally here. Under such circumstances it is understandable that problems like inflation are pushed to the sidelines for many people and they rather concentrate on the European Championship. But this could prove to be a serious mistake. Massively higher liquidity now meets higher velocity of circulation. The result of this simple equation is inflation. While everyone is listening with big ears to the FED, which is still talking about short inflation, it looks different to us. There is a lot to be said for higher, longer-term inflation. First of all, there is the already mentioned rising velocity of circulation. In addition, the FED and others are quite happy with higher inflation. Another factor to be mentioned is the huge mountains of debt, which can be reduced somewhat in this way. In the longer term, demographics and the new Cold War between the US and China also argue for inflation.
It’s the governments’ turn
Like the machine guns of US troops overseas, Joe Biden’s government is firing away with stimulus projects. One programme follows the next with ever increasing rate of fire. The Joe Biden administration is spending money like there is no tomorrow. The classic means of the central banks no longer work, so now the state has to take control. But the effect of these packages is usually not very long-term and history shows that such economic management is not very good in the long run. It also fuels inflation. It remains to be seen how long this will go well.
Mines and silver as the great hope
Commodities and gold have by far the biggest inflation beta. The mining sector also had an almost brilliant year in 2020, with dividend increases, share buyback programmes and free cash flow, all things that could not have been imagined not long ago. The sector is extremely healthy and is benefiting from strong demand and rising prices. Although many are sure to make mistakes in the course of this bull market, the sector is on solid footing and ready to soar to new heights.
Click here for the Video:
Let's meet!
Do you have questions about our product or do you want to arrange a personal meeting?
