A lot of people seem to think this is a sign of pending economic growth. But in his podcast, Peter Schiff said it’s really a sign of inflation. Most of the investment world continues to focus on the stock market and they’re not really paying attention to what going on in the commodities markets. We’re seeing five-year highs on many commodities.
It’s not just agricultural commodities charting big price increases. Industrial metals are also up. What’s driving commodity prices higher is the record growth in money supply. The Fed is cranking out money like it’s going out of style.
«In fact, the money supply grew at record levels in 2020. Historically, the growth in the money supply has never been higher with the 1970s being the only period that comes close. The Federal Reserve is printing money to monetize the record US budget deficits. And it’s also expanding the money supply in order to keep interest rates from rising.
While yields on US Treasury bonds remain relatively low, interest rates have spiked significantly from their lows last spring and the trend is clearly up. This stands to reason given the huge numbers of bonds the US Treasury is issuing to fund the borrowing and spending. Since we have such a historically large amount of debt, we can’t handle historically normal interest rates». Peter pointed out that we could easily see the yield on the 30-year Treasury quickly move from 2% to 4%.
The risk is that we print a bunch of money because we owe so much debt. We can’t raise taxes on the population to cover the debt. So, we have to print money, which is exactly what we’re doing, which is why commodity prices are rising. Peter said he thinks it’s because investors believe the Fed will ultimately fight inflation and rising interest rates will be bad for precious metals.
«It’s going to be a death spiral of inflation where the more inflation we get the more inflation the Fed is forced to create».
Source: Peter Schiff | SchiffGold
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