During Donald Trump’s first term as president, the national debt increased by over seven trillion dollars. It seems the federal government’s approach to spending continues to go big or go home. Just a few decades ago, the national debt was a hot button issue, but now it has been brushed to the sidelines. In the era of fiat money, a common misconception is that inflation occurs when there is an increase in a nation’s money supply. While there is some measure of truth to that, it is not the whole story.
There is a saying amongst statisticians, ‘correlation does not imply causation.’ The quantity theory of money is no exception. While the mainstream belief is that inflation soars when the money supply exceeds its equilibrium, this is a corollary of inflation rather than a root cause. When looking back to tumultuous financial events such as The Great Recession, the.COM Bubble, or the Coronavirus pandemic, significant inflation did not arise. Even after the Federal Reserve printed trillions of dollars to help buoy corporate balance sheets. So then what triggers inflation?
When looking at the graph above, note how inflation rose dramatically in 2011 – due to a loss of confidence within the government, rather than an increase in the money supply. Specifically, during 2011, for the first time in its history, the U.S credit rating was downgraded from AAA to AA+, showing the world the first chinks in Uncle Sam’s armor. Meanwhile, in 2008 even after Obama issued an $800 billion stimulus package, inflation was a non-issue. So long as the United States remains the de facto financial capital of the world, do not expect increases in government spending to be the cause of inflation.
This truth has remained constant throughout the history of human civilization. In Ancient Rome, the infamous emperor Nero began debasing the content of the aureus by 10% to help a nearly bankrupt Roman treasury. While his intentions were to provide infrastructure jobs to its Roman citizens, the debasing of the aureus caused people to no longer trust their government. Several years later, the senate and the people of Rome would turn against their emperor, leading to him committing suicide.
Our future forecast for inflation is bullish throughout the next decade. Throughout the 2020’s, we expect civil unrest to be prevalent and for confidence in the government to reach new lows.
IMPORTANT FINANCIAL DISCLOSURES
PLEASE SEE FULL DISCLOSURES
THE FORECAST DOES NOT PROVIDE OR OFFER ANY INDIVIDUALIZED, CUSTOMIZED OR PERSONAL INVESTMENT ADVICE TO ANY INDIVIDUALS OR ENTITIES. AT ALL TIMES, YOU BEAR FULL RESPONSIBILITY FOR YOUR FINANCIAL, INVESTMENT AND TRADING DECISIONS. YOU SHOULD SEEK THE ADVICE OF A QUALIFIED INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION.
Important Disclaimers Regarding Our Services and the Information we Provide:
The Forecast offers information, research, educational content, articles, alerts, bulletins, newsletter items and other conveyances of information that constitute the Services. The Forecast is a publication that is available to the general public via subscriptions. The Forecast provides market commentary, market analysis, and insights, as well as general investment education, and identifies particular trades that it believes will result in gains in value, but it does not provide investment advice, whether customized or otherwise. The Forecast does not owe a fiduciary duty to you, and is not aware of your financial situation, risk appetite or other investment preferences or parameters. The only information about you that The Forecast is aware of is your name, email address, date of birth and other basic information needed to purchase a subscription.
The Forecast is a publisher, and as such relies upon the publisher’s exclusion from the definition of investment adviser as provided under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. By using our Services, you acknowledge and agree to the foregoing and that any actions or forbearance from taking action based on the information we provide and the use of our Services is entirely at your own risk, for which The Forecast and its Affiliates shall have no liability. You understand and acknowledge that trading in securities, by its nature, involves risk of significant loss.
The Forecast is not registered as a broker-dealer, investment company or investment advisor with the United States Securities and Exchange Commission or with any state securities authority. We offer access to our Site on a subscription basis only, as described further below.
- You understand that no Content published on this Site constitutes a recommendation that any particular investment, security, sector, portfolio of securities, tax strategy, transaction or investment strategy is suitable for any specific person.
- You further understand that no one in the employ of The Forecast is advising you personally concerning the nature, potential, value or suitability of any particular investment, security, portfolio of securities, transaction, investment strategy, tax advice or strategy, retirement advice or strategy, or other matter. To the extent any of the Content published on the Site may be deemed to be investment advice, such published information is impersonal, general in nature, and not tailored to the investment needs of any specific person or entity.
- You understand that the views and opinions expressed on the Site are the opinions of our contracted analysts and of our users. The analysts may differ from time to time in their opinions about the same securities.
- You understand that the owners, officers, directors, contracted analysts and employees of The Forecast have or may have personal positions in the instruments (or similar instruments) mentioned on the Site. They agree contractually not to trade in securities in any way that is inconsistent or advantageous from a timing perspective with regard to their posts on The Forecast, nor to receive compensation from or insider information on companies whose equity or fixed income securities, or company prospects or information, that they discuss on the Site.
- You understand that the risk of loss in trading securities (including, without limitation, stocks, ETFs, options and index futures) can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. You bear responsibility for your own investment research and decisions and as noted above, should seek the advice of a qualified securities professional before making any investment.
- You understand that markets are fluid, dynamic, nonlinear systems. In order to trade such systems with a good prospect of success, one should endeavor to develop the knowledge and experience necessary to navigate its complexities. Therefore, we strongly suggest that any individual who seeks to trade in these markets takes the time to learn about finance, trading, market behavior, and related topics. We sometimes provide trade set-ups and alerts on the Site. These are provided for educational and hypothetical purposes only and are not trade recommendations. The prices quoted in the alerts are based on real-time market prices as of the time stated in the alert, and not actual fills by the analyst. Prices can change in real time, and actual trading could affect trading prices. We also sometimes track the performance of these set-ups and alerts. Performance table returns don’t include commission and other execution and trading costs, including taxes, that would be incurred if these were actual portfolios. Past performance is no guarantee of future results.