It is said that those who do not learn from history are bound to repeat it. Unfortunately, it would seem that this adage is all too applicable to today’s Federal Reserve, who is raising interest rates in a belated response to skyrocketing inflation that a year ago we were told was transitory and nothing to worry about.
Had the Fed learned from the painful inflationary experience of the 1970s, it would not have allowed, as it did over the past two years, for the money supply to balloon out of control and interest rates to become as negative as they are today in inflation-adjusted terms.
Had the Fed learned from the painful 2008 experience with the bursting of the housing and credit bubble, it would not have allowed even greater bubbles to form in the global equity, housing and credit markets. But instead, it engaged in one of the biggest and most unprecedented money printing programs that the world has ever seen.
Fast forward to today, inflation is running at a 41-year high and still accelerating. If inflation continues to surge at the current pace, then we’re only months away from a return to double-digit inflation on the same scale last seen in the 1970s.
With just over a week to go until the next highly-anticipated FOMC policy meeting – the Fed now unenviably faces its biggest dilemma ever. Which is to kick the can further down the road and allow inflation to run its course or go big on interest rate hikes at the risk of a recession.
If history has taught us anything, then the one thing that we do know for certain is both scenarios, whether that’s persistent Inflation or a recession, ultimately present an extremely bullish backdrop for precious metal prices.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions: