When Will Inflation Be Old News?
Don’t hold your breath or buy into the Fed’s mumbo-jumbo.
Yesterday, the Fed raised rates another 75 basis points.
The rationale is that raising rates will slow economic growth, and that will in turn slow inflation.
But if history is any guide, we ought to be skeptical.
We’ve seen this playbook before. And it resulted in a decade of disastrous inflation and tepid growth at best.
Interest rates soared to 18% (we’re at 3% right now) before all was said and done.
You see, inflation is a harder genie to put back in the bottle than many people realize. There are spirals that take place when inflation starts up.
For example, there is something called the wage-price spiral.
This is what we’re seeing right now.
Prices of goods and rents go up. Then people demand to be paid more in order to afford goods and housing.
That puts pressure on the prices of goods, as wages are a big component in determining the prices of products. Prices go up again and people demand more money again – hence the spiral.
In the early 1970s, we had a major shock to the system when the Arab-Israeli War led to the Arab oil embargo. Fuel prices in the U.S. and around the world tripled in a matter of months.
This led to inflation and economic stagnation.
Stagflation. The worst of all worlds.
And it was not over in a year or two. It took an entire decade to get through it.
But there were winners, and that is what you should focus on. For example, hard asset prices went through the roof.
Oil, real estate and gold were the ultimate winners in the 1970s, with gold exploding for a 20X gain before all was said and done.
Those who locked in higher yields made out like bandits as well – 30-year Treasurys were yielding north of 15%. Imagine doubling your money every five years!
Action Plan: Inflation is a scary word, and times could certainly get a lot tougher. That is why you have to position yourself now – things could get worse.
And the best way to do that is by joining us in The War Room daily. Every day the markets are open, we strategize and make real-time trades that produce market-beating results. Of the 296 trades we’ve closed this year, 228 of them have been winners. That’s a stellar 77% bear market win rate. And right now, we’re guaranteeing members will receive 322 winning trades in their first 12 months of membership.