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The battle rages on: Inflation vs deflation

Jordan Eliseo

The Perth Mint

Eight years into the largest monetary experiment in history and the battle between inflation and deflation rages on. Despite trillions in QE, plus ZIRP/NIRP, central banks have to date been overpowered by the forces of household debt abstinence (as opposed to meaningful deleveraging) and declining monetary velocity, though the fall in industrial commodities and energy have played a role too. Pulling in different directions, these opposing forces have created a period of relative inflationary calm, though under the surface, a battle continues to rage. A bout of serious monetary turbulence is an almost certain outcome in the coming years. That the balance is tilting toward inflation gains credence by the day, with Incrementum AG’s proprietary inflation signal now expressing a “Rising Inflation” dynamic, whilst gold, gold stocks, and now even silver have outperformed in 2016 thus far. Buying TIPS may work, though considering the root cause of this switch in monetary dynamics, it’s akin to buying fire insurance from an arsonist. There are other assets that can protect investors from inflation. They’re just as liquid and have zero counterparty risk.

Gold bull since early 2000. Have spent +20yrs working in investment analytics, research & portfolio construction. Author of two books on investing in gold and the causes of the GFC. Lover of markets, competition & technology

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