Never in history has there been so much money spent in so short a time, dwarfing the money spent after the last global financial crisis in 2008.
A look back at history shows that rising inflation can easily morph into hyperinflation. Lessons can be learned from the way hyperinflation developed in Germany, Austria, Hungary or Venezuela today. The common denominators?
* Reckless fiscal policy
* Deficit spending as each country ran enormous budget deficit financed by themselves.
* Double digit then triple digit increases in money supply.
* Government financed debt.
History shows that the consequences of higher inflation is higher interest rates, an outcome even more likely due to the deterioration of US government finances. Persistent growth in money and credit in the 1970s saw the price of goods and services go up to double digit levels – so did rates to stop inflation. Today, such growth has seen the prices of financial assets go up, and up. Today it is called a bull market. Another outcome of higher inflation though is much higher gold prices. While gold has lost seven percent this year and the broad markets post daily highs, inflation is rising. Gold is set to rise, it is a classic hedge against inflation. As such we continue to believe that gold will hit $2,200 as an interim target.