In the latest episode of the Money Metals’ Midweek Memo, host Mike Maharrey delved deep into the intricate realm of inflation, offering invaluable insights and debunking prevalent misconceptions. With escalating concerns about inflation permeating the investment landscape, Maharrey's elucidation provided much-needed clarity on this pivotal economic force and its implications for investors.

 

Inflation, a phenomenon with far-reaching consequences, has emerged as a central theme driving market dynamics and shaping Federal Reserve policy decisions. However, as Maharrey astutely pointed out, misunderstandings about inflation abound, underscoring the necessity for a precise definition and a comprehensive understanding of its causes and ramifications. 

Maharrey shared a quote from economist Ludwig von Mises, stating: "Inflation is the true opium of the people."

Recent market trends have underscored growing apprehensions about inflation, prompting investors to seek refuge in traditional safe-haven assets like gold. Citing a CNBC report, Maharrey highlighted that a staggering 83% of the largest money managers have turned bullish on precious metals, reflecting the heightened demand for inflation-resistant assets.

Gold, in particular, has witnessed a notable surge in portfolio allocations over the past month, indicating its status as a favored commodity among fund allocators. James Steel, HSBC's chief precious metals analyst, emphasized the role of Safe Haven demand and institutional fund purchases in propelling gold and silver rallies.

Throughout the episode, Maharrey dispelled common misconceptions surrounding inflation, asserting that much of the mainstream discourse on the topic is either incorrect or misleading. 

Quoting economist Milton Friedman's famous dictum, Maharrey emphasized that "inflation is always and everywhere a monetary phenomenon," shedding light on the fundamental relationship between monetary expansion and rising prices.

Maharrey went even further by providing a longer quote on ‘inflation’ from economist Ludwig von Mises:

"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation."

Moreover, Maharrey elucidated the symbiotic relationship between inflation and government spending, noting that the federal government relies on inflation to sustain its fiscal policies. 

As Maharrey succinctly put it, "When you print a whole bunch of money and throw a whole bunch of money into the economy... you're going to have a general rise in prices across the board."

In conclusion, Maharrey underscored the importance of understanding the intricacies of inflation and its underlying mechanisms for investors navigating today's economic climate. By discerning the impact of monetary policies and government interventions on inflationary pressures, individuals can make informed investment decisions, including allocating assets to precious metals as a hedge against inflationary risks.

In essence, the Money Metals’ Midweek Memo episode served as a beacon of clarity in a landscape clouded by uncertainty, empowering investors with the knowledge needed to navigate the complexities of inflation and its implications.

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD stays on the back foot and trades near 1.0400 following the earlier recovery attempt. The holiday mood kicked in, keeping action limited across the FX board, while a cautious risk mood helped the US Dollar hold its ground and forced the pair to stretch lower. 

EUR/USD News
GBP/USD set to swoon on holiday-shortened week

GBP/USD set to swoon on holiday-shortened week

GBP/USD waffled near the 1.2550 level on Monday, kicking off the holiday trading week with a third of a percent decline as market sentiment coils. Market volumes are set to drain out of global exchanges as investors broadly hang up their hats for the Christmas holiday, and global markets will be shuttered on Wednesday.

GBP/USD News
Gold flat lines above $2,600 ahead of holiday trading week

Gold flat lines above $2,600 ahead of holiday trading week

Gold price trades flat around $2,610 during the early Asian session on Tuesday. Markets face a relatively quiet trading session ahead of the holiday trading week. The US Richmond Fed Manufacturing Index for December is due later on Tuesday. 

Gold News
Ethereum risks a decline to $3,000 as investors realize increased profits and losses

Ethereum risks a decline to $3,000 as investors realize increased profits and losses

Ethereum is up 4% on Monday despite increased selling pressure across long-term and short-term holders in the past two days. If whales fail to maintain their recent buy-the-dip attitude, ETH risks a decline below $3,000.

Read more
Bank of England stays on hold, but a dovish front is building

Bank of England stays on hold, but a dovish front is building

Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures