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Stagflation Is Paradise For Gold And Silver

Scorpio

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#1
Stagflation Is Paradise For Gold And Silver

by John Rubino ◆ June 27, 2020 Leave a Comment

The creators of Medicare, Social Security, and other long-term spending programs had a handle on demographics – or at least on the political realities of the time – so they structured those programs to initially take in more money than they needed in order to build up “trust funds” to cover the eventual retirement of the massive Baby Boomer generation.
The alternative to trust-fund entitlements is “pay as you go,” which makes such programs nice and cheap in the beginning and vastly more expensive later on. This prospect used to be considered political poison, so trust funds became the conventional wisdom.
But those days are apparently over. The most recent Congressional Budget Office projections show the Highway Trust Fund running out in 2021 and the much bigger Medicare Trust Fund emptying in 2023. Social Security is projected to run out by 2030, but since those numbers were run before the pandemic slashed payments into the system, it’s safe to assume that Social Security’s trust fund evaporates circa 2027.
What happens when the various trust funds run out? The costs of these programs morph from “accounting issue” to “cash flow issue.” Taxes and/or deficits will rise dramatically as boomers move through their 70s and 80s, racking up massive medical bills along the way.
For a sense of just how big this change will be, here are a few fun facts:
  • In the early days of Social Security, 42 people were paying into the system for every 1 receiving benefits. Soon the ratio will be 2:1
  • The average early recipient received only a few years of payments before dying in their late 60s.
  • As life expectancies have risen, 20 years of benefits are now to be expected for most recipients, meaning that they’ll draw far more from Social Security and Medicare than they paid in.
  • There’s no demographic cavalry – in the form of younger workers — riding to the rescue. Birth rates are plunging in the developed world. Minus immigration, the US is now below replacement rate, meaning that the native born population is shrinking rather than growing. (This is great for the environment and housing affordability, but a serious problem for tax revenues.)

An optimist might note that all this new entitlement spending will at least be simulative. But even that might not be true this time. The following chart, snagged from a recent Katusa Research article, shows that the velocity of money – the rate at which an existing dollar changes hands via spending – has been plunging lately (from an already historically-low level). So the past few years’ massive deficits and Federal Reserve currency printing have done nothing for spending.

The coming world of monetary inflation and sluggish growth has a name: stagflation. And based on America’s last experience with it in the 1970s, it’s a hard time to feed a family but a spectacular time to own gold and silver. This is what silver did back then.

We’re already in the early stages of a precious metals bull market. Here’s another Katusa chart showing how gold is crushing stocks so far in 2020.

So if we can’t stop the massive deficits and rampant currency creation, we might as well embrace the resulting stagflation and keep stacking.


https://www.dollarcollapse.com/stagflation-precious-metals-paradise/
 

edsl48

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One of my neighbors has had a hip, knee and soon a shoulder replacements in addition to spinal surgery all on Medicare.He will proudly tell you that he paid for these services via his Medicare payroll deductions and woe be the one who even suggests the fact that just one of his joint replacements far exceeded the amounts put into the fund. The concept of Medicare was basically a ponzi scheme designed by LBJ that did not keep up with the realities of advanced costly medical procedures, extended life spans, and population demographic changes. The politicians have basically done nothing to rectify the basic mathematical concept that the the system will fail as currently designed but in many ways who can blame them? Just like my neighbor any senior citizen will pounce at election time on any politician that dares mention modifications to their Medicare entitlements. Realistically though Medicare has evolved from a Ponzi scheme to just another welfare program with bipartisan support. Welfare for the masses...another name for Medicare and Social Security.
 

Son of Gloin

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#5
One of my neighbors has had a hip, knee and soon a shoulder replacements in addition to spinal surgery all on Medicare.He will proudly tell you that he paid for these services via his Medicare payroll deductions and woe be the one who even suggests the fact that just one of his joint replacements far exceeded the amounts put into the fund. The concept of Medicare was basically a ponzi scheme designed by LBJ that did not keep up with the realities of advanced costly medical procedures, extended life spans, and population demographic changes. The politicians have basically done nothing to rectify the basic mathematical concept that the the system will fail as currently designed but in many ways who can blame them? Just like my neighbor any senior citizen will pounce at election time on any politician that dares mention modifications to their Medicare entitlements. Realistically though Medicare has evolved from a Ponzi scheme to just another welfare program with bipartisan support. Welfare for the masses...another name for Medicare and Social Security.
I would say to all that, edsl48, that it doesn’t matter. They idiots in Washington are all hell-bent on destroying whatever value is left in the dollar, so I say everyone should get as much out of them as possible. They’ve been confiscating our wealth by the tens of thousands of dollars, for as long as we’ve been working for it, so grab as much back as you possibly can and put it to good use, before it’s all totally destroyed.
 

solarion

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#6
Social security was an idiotic ponzi scam then and it has just gotten worse.
US 30 yr bonds are paying 20.7% in year to date?
Treasuries have done well with the collapsing economy. No they don't pay 20.7%, they pay almost zero yield...in fact it's negative when adjusted for inflation, yet the price of a bond is inverse to its yield so they've done well as interest rates have again cratered with the fake, phony, and false economy. The problem with bonds is...where now?

1593523391129.png


A 40 year manipulated bull market...and now where's it supposed to go? Cash must be eliminated if rates are going to proceed into negative territory on a non-inflation adjusted basis.

US goobermint 30yr paper yields YTD...remember price and yields are inversely related. Yields(rates) down = price up. Yields bounced off 1% and look to be heading back down again...so bonds up in price. It seems a good time to stack FRNs, PMs, and Pb to me as I fail to see how yields can go negative long term while cash is still alive and kicking. People would simply horde cash to protect themselves and there's simply not very much of that around.

1593523693934.png
 

Strawboss

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#7
Cash must be eliminated if rates are going to proceed into negative territory on a non-inflation adjusted basis.
COVID will be the catalyst that gets rid of the physical cash...the MSM will say that it spreads death...
 

solarion

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Perhaps. If/when cash gets scarc(er) we'll begin seeing additional restrictions on conversion of bankster credit to cash. ATM withdrawal limits lowered etc. No doubt TPB would love to ditch cash at this point, but I don't think the standard issue sheeple is there yet. Perhaps if they could just kill off some more boomers with their custom made viruses...
 

WillA2

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#9
I saw a recent add for a one ounce gold bar in Craig's List for $1700. It was an old post that wasn't taken down. Same ounce now goes for about $1800 in FRN's, excluding premium. I wish I had saw that add in January.
 

nickndfl

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#10
The only savings that will matter will be in physical gold and silver. I lived through it in the 1970s. Everybody was pissed off because of Vietnam and the hippies. The oil crisis pushed the country over the edge. Cash used to be king, no more.

Better stock up on dehydrated food, gold and silver and don't forget the common sense.
 

Roger Ramjet

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#11
Despite the extreme philosophical problem I have with debasement of our currency, I also would posit that there is also a silver lining in all of this - Cheap prices on PMs and (still) relatively good prices on food and supplies to acquire before the SHTF in a spectacular fashion. The longer the FRN retains "value", the more I can stack, rack, store, and prepare by spending every piece of paper that comes my way that doesn't have to be applied elsewhere. Works pretty well that way IMHO...

RR
 

Area51

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#12
I would say to all that, edsl48, that it doesn’t matter. They idiots in Washington are all hell-bent on destroying whatever value is left in the dollar, so I say everyone should get as much out of them as possible. They’ve been confiscating our wealth by the tens of thousands of dollars, for as long as we’ve been working for it, so grab as much back as you possibly can and put it to good use, before it’s all totally destroyed.

Nobody’s “hell bent on destroying” anything - - the economic system was such a piss poor set up that it’s a mathematical certainty to destroy itself.

It’s like seeing an airplane engulfed in flames and plummeting from the sky - - and insisting the pilot is “hell bent” on crashing it into the ground nose first.
 

Son of Gloin

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#13
Nobody’s “hell bent on destroying” anything - - the economic system was such a piss poor set up that it’s a mathematical certainty to destroy itself.

It’s like seeing an airplane engulfed in flames and plummeting from the sky - - and insisting the pilot is “hell bent” on crashing it into the ground nose first.
You know what I meant. You’re just arguing semantics.