Inflation Is Not Temporary (Part 2) | The Gold Standard #2120

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Dave Deno and Ken Russo, VP of the Midas Gold Group, continue their discussion about the dire state of the economy. Despite what officials proclaim publicly, inflation is not transitory. High prices for goods will be with us for a while. The annual inflation rate in the US reached a three-decade high of 6.2 percent in October. Price spikes will likely remain high in 2022. The Federal Reserve is under tremendous pressure to do what it can to limit the inflation rate to around 4 percent next year.

As revealed in the conversation, the worry is not just about the current inflation. Food prices worldwide have risen to their highest levels in a decade. Prices for everything have multiplied over the past year. The 12-month producer price index for steel products was up one hundred- and forty-one-point six percent. Inflation is just one troubling ingredient.

There are many red-flag indicators that problems with our economy will not resolve equitably. Between lack of leadership and bi-partisan bickering, the worst part is that we have a system that isn't working.

The debt ceiling is the amount of money the government allows itself to borrow to pay its bills. These bills include things like entitlements such as Social Security. US bills also include paying the salaries of military personnel and federal employees. Any delays for payments from the government have a trickle-down effect on how it impacts ordinary citizens' lives. People who depend on the money don't get paid on time. Delays in raising the debt ceiling can also increase the cost of buying things on credit. The stock market would spin into tumult if the government decided to default on its loans.

Living on credit has become such a way of life for the US and its citizens we hardly think of it. Debt is something we have learned to tolerate as a nation. Living beyond means seems to be a part of the American psyche. That's one of the reasons why our government keeps hitting the debt ceiling. The US has approached its debt limit 17 times since 2001.

There have been many crises in recent years because Congress failed to authorize an increase in debt. The government continues to spend more money than it takes in. Unlike the national debt, the deficit is a consequence of spending more money in a fiscal year than what comes in through taxes and other revenue. The national debt is a loan to cover deficits. Currently, the government owes more than $28 trillion in debt. It's a huge debt that keeps growing year after year.

Talking about the decay of purchasing power, host Dave Deno describes a vivid and haunting image from Germany's Weimar Republic. Germany went off the gold standard at the beginning of World War One. The number of marks quadrupled during the war. The citizens of the Weimar Republic didn't feel the impact of inflation because prices for goods did not match the currency supply. The World War had set the stage for uncertain and turbulent times, so people didn't spend the money. They saved it. Despite the government pouring tons of currency into the German economy, no one was paying it. Once confidence returned after the war, the people felt the plundering impact of the previous influx of currency.

Gold was about 100 marks per ounce during World War One. A couple of years after the war ended in 1918, the precious metal moved between 1,000 and 2,000 marks per ounce. Those who kept their cash merely had 10 percent of their original buying power. A couple of years later, prices had risen another 700 percent. By the time the purchasing power of the German stock market fell 97 percent, the price of gold, which initially was 100 marks, climbed to 87 trillion marks per ounce. The value of the precious metal grew exponentially.

Ken reveals his all-time favorite gold bullion product saying, "it's the most American coin out there." The American Gold Eagle is the most popular bullion coin globally and is especially popular amongst US citizens because it's pure Americana. Signed into law by President Regan in 1985 to revitalize the nation's precious metal bullion production, the American Gold and Silver Eagle program was an immediate success. Ken calls the American Gold Eagle one ounce a foundational piece and one that every American would be proud to hold in their hands. The obverse features are one of the most beautiful designs ever created for a coin, Augustus Saint-Gaudens's Lady Liberty from the $20 Gold Eagle (described in more detail below). The reverse features images of the American Bald Eagle.
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