The Inflation Cat is Out of the Bag

published on August 1, 2020

What's up everybody welcome to heresy financial my name is Joe Brown in today we are discussing the fact that inflation is already starting to rear its ugly head across a number of key factors that are early on in the production chain that will lead to price

Inflation across the board in many areas over the next six months to a year leading to an increase in prices that is likely to make it extremely expensive for the average person to be able to afford life in general let's dive in if

You are new to the channel here you might not know but I have been talking about the coming inflation for a while here since the beginning of a channel about a year ago and talking about how the the devastating consequences of

Monetary expansion and the monetary and fiscal policy that our government and the Federal Reserve has been engaged in for the last couple of decades is going to really start to wreak havoc on our economy and our citizens very soon here

And so as a result of the coronavirus we are already starting to see some big inflation numbers start to pop up in some key areas that are going to lead to more and more price inflation going down the road now for some background

Information well I'm talking today about price inflation this is something that is commonly confused across the board and you whenever somebody says the word inflation you want to figure out very quickly are they talking about inflation

In the modern definition of the word which is price inflation or they talk about inflation in terms of the classical the traditional usage of the word inflation which used to mean monetary expansion if you go back and

Read any economic literature or any economic textbooks or writings about finance from you know the nineteen nineteen hundreds and 1800's the word inflation it was always used to talk about monetary expansion

It's the supply of money that expands and contracts it inflates the prices don't inflate they either go up or down that's inflation and that's why it's the word is inflation and deflation is because it was originally talking about

The supply of money the money either contracting or expanding whereas prices they go up or down but because prices are influenced so heavily by monetary expansion or contraction that's why the word inflation eventually

Became to be to be used to discuss the actual prices because price inflation or prices going up and down is pretty much a direct result of what happens to the money supply and so today we're talking about how price inflation is already

Starting to rear its ugly head in actual goods in actual products because again you've been around the channel for any amount of time you know that we've been talking about the massive amount of inflation that we've seen in asset

Prices already and if you've been watching the stock market at all you know we've seen this by any metrics stocks are at the pretty much the most expensive valuations they've ever been at before and so what we're seeing in

Terms of the price of stocks is a reflection of the value of the dollar going down more than anything I'd rather own a piece of a business that will stick around and eventually produce dividends or returns or can be

Denominated or priced in a different currency than hold a piece of paper which over time only loses purchasing power and so that's part of what we're seeing right now money wealth floods into assets when when cash or currencies

Start to go downhill but the second stage to inflation comes that comes after asset price inflation is consumer price inflation and the one most dangerous place that we're starting to see this show up right now is in food

Now I'm gonna throw a really boring looking table up here but you can see here this year 2020 at the bottom each month we are currently seeing some of the largest year-over-year inflation increases then we've seen in years

Really since 2008 there now this makes sense from a monetary inflation a monetary expansion standpoint because when you have a when you have a a pie of wealth a pie of goods and services and the only thing you do to that pie is

Throw more money into the pie the only thing you're doing is taking a pie that has let's say eight slices to the pie and you're cutting each slice in half so now there are sixteen slices of that pie but each slice is half the size of what

They were before and so it doesn't do anything to the size of the pie the size of the pie stays the same it just takes more slices now to make up the same amount of pie as it did before so when you have an economy that goes through

Some sort of crisis the amount of goods the amount of actual products in the system either stays the same or in a lot of cases it goes down like right now we're seeing a massive decrease in supplies because of supply chains being

Broken especially internal supply chain like not just from China from shipping and stuff products I'm talking about even locally like food farmers can't get food to the grocery stores because the supply chains a lot of them are meant

For restaurants restaurant restaurants are shutting down or not being open not placing the same amount of orders and so we're seeing a lot of breaking taking place in the supply chains especially in food and agriculture across the states

And so when you have a pie right now we haven't seen our pie really stay the same pie of goods and services it's actually shrunk and in response to that they've thrown more money into the system well if the pie stays the same

And you throw more money into the system that takes more slices to make up the same amount of pie but if you have the actual pie decrease in size and you're still throwing more into the system that's only gonna make the problem worse

So prices are gonna go up a lot now it takes time for this effect to happen and the reason why it takes time for this to happen is because they don't give all the money out in equal proportions to everybody imagine a stock split versus a

Secondary offering in a stock split if you have one share now you have two shares but each share is worth half your value didn't change at all it's an equal split for everybody everybody gets the same number of shares in in proportion

To what they already owned of the company and so there's no effect or little effect on what it does to the actual value of every person's share of that company every person's portion of their wealth held in that company versus

A secondary offering they're issuing new shares to the market but those shares are not being equally distributed to all the existing owners and the new money that is raised from those shares are going to

Be spent in a way that ultimately they do think will have a beneficial impact on the company but they might not and so you have a disproportionate amount of wealth being removed from from the existing shareholders through dilution

Of new shares entering the market and in that capital that's withdrawn from all those existing shares gets redeployed to you know build a factory or something like that and so what the Federal Reserve and our government does in with

Their actions that are caused monetary expansion an increase of the broad money supply that's a lot more like a secondary offering they're scalping purchasing power from every existing dollar and then redeploying that into an

Area that they think incorrectly will help the economy think of it like this you're playing a Monopoly game with your friends or your family and the banker decides everybody's money gets doubled so you had $1,000 now you have $2,000

Everybody across the board everybody playing the game gets double the amount of money that they had before well very quickly people would stop selling boardwalk or Park Place for $400 a bidding war would ensue on properties

Because everybody has more money to play with now and so a bidding war would escalate and you would see the prices of everything across the board start to go up people would be able to afford houses and hotels for their properties a lot

More easily and so those would be placed on the properties so rents would very quickly start to go up and so you'd have an almost instantaneous increase in prices in price inflation across the board if everybody's money supply was

Increased proportionately immediately so that's why the Federal Reserve doesn't like helicopter money because if everybody let's say you're worth $10,000 immediately the Federal Reserve gives you another ten thousand dollars to

Double your money or triple or in proportion to how much money they were printing if they did that for everybody immediately you'd see massive inflation and they can't have inflation start to show up in the numbers because they need

The ability to continue to print more money without it actually showing up in inflation numbers because then people will demand a higher interest rate on their debt which will crush their ability to do what they want with

Monetary policy because that's really reliant on them being able to continue to keep rates really low despite the inflation that's happening and so they don't want inflation to show up in the numbers so that's why they don't give

Helicopter money proportionately to everybody because it would immediately bit up prices of everything across the system so instead what they do going back to the Monopoly game is the banker decides to give one player double the

Money or one player triple the money aka the federal government they give the federal government a ton of money through this inflation through monetizing the federal government's debt and then the federal government can then

Go and spend that money as a federal government wishes and then it takes a lot longer for all that new money to make its way into the system bidding up the prices of everything along the way so the first recipients of that new

Money get the benefit of being able to use a ton of money at the old prices and then as that money gets spent throughout the economy gets transferred bought and sold throughout the economy as that various players get get their hands on

It eventually it will work its way down to wages right because wages are gonna be the last things that monetary inflation or deflation ever impacts and so eventually it'll make its way down to wages as wages are forced up either

Through competition from price inflation or from minimum wages but by that time the cost of living has already outpaced the the increase that wages see and so people who rely on wages are usually going to be hurt the most especially the

Ones who don't hold any assets so again it's the poor that are hurt the most from this and it's the the people who are at you know controlling large corporations who are on government contracts government employees they're

The ones that get their hands on the new money first and then they get to take advantage of low prices they spend that money they get the benefits of that at the Spence of everybody else down the chain

Now because of the coronavirus like I said earlier we're starting to see food inflation really take off take a look at this chart as well in addition to the boring table that I showed you earlier this chart shows you the kind of the

Breakout here in price inflation that we're starting to see in food and I'm gonna throw charts up here on the screen one by one here we're starting to see massive price increases in iron ore we're starting to see it in copper we're

Starting to see it in lumber we're starting to see it in nickel we're starting to see it in zinc and obviously if you've been around the channel for any amount of time you know that we've been seeing it be foreshadowed in the

Gold and silver prices for a while as well gold more than silver a lot actually but in in any case we're starting to see commodities are really starting to show the inflation that is coming into the system right now as the

Price of things increase are due to the fact that there's more money chasing the same amount of goods and when commodities prices increase you know that soon that means that the end product price will increase because if

It costs companies and suppliers and factories more to make if it costs them more to make the same goods they have to pass those price increases along to the customer otherwise they won't be profitable and if they're not profitable

They're just not gonna make anything right why would you make something at a loss we're not the federal government here and so the price hike that we're starting to see in commodities is foreshadowing a much larger price hike

That we're gonna see an end products across the system very soon here now in conclusion if you do want to shield your wealth from inflation the only thing you need to do is rely on the trusty wisdom that the only way to know whether a

Politician is lying or not is whether his mouth or her mouth is moving where am I going with this don't buy tips they're called Treasury inflation-protected securities which means they are definitely not inflation

Protected if you want to protect your money against inflation you need to put your wealth into things like gold that have a very long history thousands of years in fact of preserving their purchasing power

Across regimes across countries across cultures across history across time things like gold are going to preserve their purchasing power which is another way of saying they're protected against inflation so don't trust your money to

The one source that has constantly proven that is the most untrustworthy source thank you so much for watching if you enjoyed the video hit that like button for the YouTube algorithms and share with somebody you think liked it

As well really appreciate you guys have a great day

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