Dave Erfle – Reviewing The Macroeconomic Backdrop In Light Of 4 Decade Record High 8.5% CPI Inflation Reading
Dave Erfle, Founder of The Junior Miner Junky, joins us to review the macroeconomic backdrop in the general markets and precious metals sector after seeing a 4 decade record high 8.5% CPI inflation reading this morning. We made the point that even with the Fed hiking rates and planning on getting more aggressive, they are starting from a point so far behind the curve, that even despite a few upcoming 50 basis point hikes, there will be negative real interest rates for the foreseeable future.
When asked if the Fed can truly get on top of inflation and normalize rates, Dave made the point that the Fed is not going to be able to do what the prior Fed chair Paul Volker did in the 1970s, because the Fed balance sheet and the US government has a far higher debt load and a far higher debt to GDP level than it did in the 1970s. In some respects this could be the end of the Keynesian economic experiment, and it is possible that gold is starting to sniff that out and head higher to the $1975 resistance level on the inflation reading today as there is a historical basis for gold to move higher in interest rate tightening cycles. He goes on to point out that not only do we have high inflation, and crushing debt levels, but that we have ongoing supply chain issues, a war in Ukraine, a stock market that looks like it is putting in a major topping pattern
We wrap up by noting that for the first time in a while gold and silver stocks are starting to diverge and outperform the general equities markets, and that while there has not been much interest or volumes in the junior PM mining stocks, once the generalist realize that gold is getting ready to make $2000 the floor and not the ceiling, then more speculative interest will come back into the sector as margins and economics expand on projects.