Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
As Russia’s war in Ukraine continues to rage, so does inflation in the United States and around the world.
The current geopolitical crisis could morph into a full-fledged economic crisis if food and energy shortages spread. World leaders don’t seem to have a handle on how to prevent such a crisis from unfolding, but they do see an opportunity to push grandiose agendas.
President Joe Biden is eager to find a scapegoat for the inflation problem that has been spiraling for the past year – and Russia is the target. Meanwhile, Biden spoke to European officials this week and called for a “New World Order.”
Joe Biden: You know, we are at an inflection point, I believe in the world economy, not just the world economy, in the world… it occurs every three or four generations. And now's the time when things are shifting. We’re gonna, there’s going to be a New World Order out there and we've got to lead it. With regard to food shortage, yes, we did, we, wer, we did start talking about food shortages. And it's going to be real. The price of these sanctions is not just imposed upon Russia. It's imposed upon an awful lot of countries as well, including European countries and our country as well.
A dramatic loss in grain exports out of Ukraine and Russia isn’t the only concern. Russia is also a critical supplier of the basic elements that go into fertilizer production. As a result of economic sanctions, global fertilizer prices are skyrocketing.
Farmers are feeling the pinch. It remains to be seen whether this year’s harvest season will produce enough crops to keep a hungry planet fed.
Preppers aren’t taking any chances. They are stocking up on non-perishable, long-lasting foods. These include whole grains, canned foods, and emergency reserves such as military-grade MREs, or meals ready to eat.
Even if grocery store shelves don’t go bare, prices for everything from produce to beef to toilet paper are likely to continue rising. So, buying essentials in bulk is one way to hedge your household against future price hikes.
Another way to hedge against inflation is by accumulating reserves of physical precious metals. Gold retains purchasing power over time better than any fiat cash holdings ever have or ever will. And during bull markets, gold and silver price gains can vastly outpace general price level rises – generating positive real returns.
The gold market is back on the move this week. Prices up 1.6% since last Friday’s close to come in at $1,960 per ounce. Silver shows a weekly gain of 1.8% to trade at $25.67 an ounce. Platinum prices are down 2.1% at $1,031. And finally, palladium checks in at $2,515 per ounce after falling 1.3% for the week.
Bullion buying continues to be robust as investors seek safe havens from geopolitical turmoil, stock market volatility, and inflation.
They certainly can’t count on the Federal Reserve or elected officials to tame rising prices. The political class only recently discovered that millions of ordinary Americans are falling behind financially due to rising costs of living.
Now, with an election coming up in November, politicians are rolling out various gimmicks that they are pitching to voters as inflation relief.
California Governor Gavin Newsom recently vowed to give motorists $400 debit cards to use for gasoline fill-ups along with three months of free public transit. At least a dozen other state governors also want to hand out gas rebate cash.
On Capitol Hill, Democrats are pushing the Gas Rebate Act. It would provide a monthly energy credit of $100 per person as long as the national average gas price tops $4 a gallon.
Some of these same lawmakers are also trying to pass a so-called windfall profits tax on oil companies. Never mind that until recently, the energy was the most distressed sector of the stock market. Oil majors were on the verge of bankruptcy even as the more politically favored “dot com” sector was reaping windfalls from pandemic lockdowns.
But regardless of the politics, these energy tax and rebate schemes make zero sense economically. When you tax something – in this case, energy production – you get less of it. When you subsidize something – in this case, energy consumption – you get more of it.
Less supply and more demand generally don’t lead to lower prices. Instead, they make the inflation problem even worse.
Let’s get real. Handing out cash created out of thin air by the Fed to consumers so they can spend it on scarce resources is probably the stupidest inflation-fighting strategy imaginable.
It really makes you wonder whether our elected officials really are that dumb… or whether they are just cynical enough to believe that most voters are that dumb.
Incumbent politicians want to get re-elected above all else. And the electorate isn’t happy about the way things are going in the economy.
The average family had to spend $3,500 more last year to buy the same quantity of goods and services as they did the previous year. And this year’s inflation premium could be even higher.
Wise investors are preparing for things to get worse before they get better. They aren’t counting on Congress to embrace sound economic policies. They aren’t waiting for Joe Biden’s New World Order to bring peace and prosperity.
Wise investors are taking proactive steps to become more financially resilient today. That includes making sure they have a healthy allocation to inflation-resistant hard assets.
Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.
