Various Fed officials, including Vice Chair Richard Clarida, have taken to the airwaves to talk down inflation concerns and show confidence in the Fed’s ability to engineer a “soft landing” when the time comes to curtail pandemic-era policy. This has given markets a tone of uneasy quiet. Economist Mohamed El-Arian guesses at a 50/50 likelihood of success, which is a less rosy picture, and probably one closer to reality than the Fed’s confidence game. For our part, we continue to expect (1) on-the-ground inflation for consumers and businesses that markedly exceeds official CPI statistics, and (2) inflation that will not be merely transient, but will persist for some time, perhaps a year or two. We do not expect hyperinflation; for reasons we have explained in previous letters, catastrophic debasement of the dollar is not in the cards unless the structure of the global financial system is completely changed. That we do not believe is imminent.
Cryptocurrencies and Why Some Governments Oppose Them
There is clearly a coordinated campaign underway to discredit cryptocurrencies, and probably to pave the way for the rollout of central bank digital currencies. To longtime crypto observers and analysts, many of the anti-crypto pronouncements are manifest canards. However, as we have noted before, genuinely decentralized cryptos do represent a threat to the monetary sovereignty of governments, and they will not give up that sovereignty without a fight. Cryptos will be volatile and provide opportunity for traders. In the long run, their fate will be decided in the offices of lawmakers and regulators. Decentralized finance (DeFi) will certainly disrupt many legacy financial institutions, but it is far from certain that even cryptos built for this purpose, such as ether (the native token of the Ethereum blockchain), will serve as the backbone for global defi systems.
Investment Areas of Interest
The prospect of more persistent inflation keeps our attention focused on precious metals and precious metals companies in gold ,silver, platinum and palladium , on some commodity-producing nations such as Canada, on some companies in industrial metals, copper, food stuffs and base metals, and on cryptocurrencies — where recently some have been investing to protect against inflation. It is also interesting to note that bitcoin’s recent price correction is causing some additional inflation hedgers are moving to gold, the traditional go-to where investors and the public have protected themselves from inflation for centuries.
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