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i think the other factor is that people still expect the fed to fight inflation especially if it ends up getting out of the comfort zone i mean maybe headlight inflation does come in at three three and a half four percent i think what everybody thinks is that well the fed is going to have to tighten in the face of you know that big a a uh you know overshoot right so i think the markets are also racing for the fact that you know maybe we're going to get more inflation than the fed is bargaining for and therefore the fed is actually going to tighten rates a lot sooner than they're now indicating because their current posture is based on inflation not getting too far above two percent even though they haven't specifically said like you know how high above it they're you know they're comfortable i think the markets are trying to get ahead of that by thinking you know it could be a lot more than they think and therefore the fed's gonna have to raise rates sooner than they're saying they may have to start you know tapering off their bond buying sooner and and so i think that's also scaring the gold market somewhat that the fed is not going to be as easy as the market thinks now i think the market is wrong on on on both counts right i mean i think that inflation is actually going to overshoot by a much bigger margin than pretty much anybody thinks i don't believe that it's temporary i believe it's the beginning of a protracted period of much greater increases in consumer prices i mean the fed tries to hang its hat on the fact that the last 10 years or so or 20 years we haven't had a lot of inflation and the fed says well that means that you know that's the new normal and we're never going to have it again right i think that was the aberration i think we're going to go back to normal and i think there were some you know some other factors that helped to mitigate the impact of inflation which is the expansion to the money supply on u.s consumer prices i mean one certainly was a cpi that was dramatically changed in 1998 and all of a sudden magically uh inflation disappeared after we rejiggered the cpi because we claimed that it was overstating inflation so we had to fix it and i think now it understates inflation so that's part of it but a lot of it had to do with china and their willingness to accept our dollars and exchange for their products and just buy our treasuries and supply our market with all sorts of consumer goods so there were these you know extenuating factors that i think made the lag between printing money and increasing prices longer than normal it didn't stop it i mean we're gonna see the impact we're just seeing it later than we might have in the past but so the other thing though that i think the markets have got wrong is not only is inflation going to be bigger than they think and not be transitory but the fed's willingness or even ability to do anything about it really doesn't exist i mean the fed could talk all at once about how it's going to fight inflation if it if it was wrong and inflation became a bigger problem i just don't buy it i don't think the fed is going to do that they can talk a tough game right they can bark but they will not bite because think about it from a practical point of view they've already said two and a half percent inflation that's not going to worry them right a little bit above maybe three and they've also said they want to wait at least a year they're not just going to look at a blip up in inflation they want to make sure that the inflation isn't transitory before they take action that's what powell's already said right they they want proof they're just not going to look at it they're just going to assume it's transitory unless they're proven wrong so let's say we they wait and as they wait the inflation just gets bigger and bigger and bigger because they didn't act preemptively and now a year goes by and maybe inflation is six percent seven percent and it's headed higher and now the fed is like okay we were wrong uh it wasn't transitory we got an inflation problem well now they got a bigger problem in trying to solve it because now they have interest rates still at zero what are you gonna do if inflation is five six percent move interest rates up to 25 basis points 50 base points that's not gonna do anything they got to move interest rates up to maybe eight percent nine percent i mean it's not even a possibility that they can go anywhere near that amount they're going to have to start unloading us treasuries and shrinking the balance sheet they would create a far worse financial crisis than anything we took place in 08 if they actually had to fight inflation because they waited too long and let it get out of hand so my thinking is they will not fight inflation they're going to surrender inflation is going to win without a fight and so when people understand this that inflation is going to be much greater than the fed things or anybody thinks and it's permanent and the fed is never going to do anything about it there is no way to put out the fire uh i mean gold will just go ballistic when people you know finally connect those dots you
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