Inflation is now at 7.9% – a 40-year high, according to government figures. Clearly the categories of gas, food, and housing, it’s considerably higher.
The Federal Reserve is attempting to fight that inflation by raising interest rates. But those higher rates could prove expensive in the long run for the economy since past data shows rate-tightening cycles often culminate in recession.
But are the burdens of current inflation so great that higher prices alone could trigger a recession? Will the Fed hikes fix ratchet down inflation? And we see a quick fix or are we looking at a long-term adjustment before we see a return to normalcy?
Helping us answer these questions and more, is Devlyn Steele, with Augusta Gold Group.
Q&A:
1. Welcome, Devlyn. The Federal Reserve has begun a series of rate hikes to fight inflation. You recently made an educational financial video wherein you say that the higher rates can come with a cost beyond higher rates on home and car loans. Tell us about that additional cost.
Answer: I’m talking about recession. Politico recently noted that “nine times since 1961, the central bank has embarked on a series of interest rate increases to rein in inflation. Eight of those times, a recession followed[r1] . [1]
2. Some believe higher interest rates alone are enough to tip the economy into recession? What is your opinion on this:
Answer: Yes, it is impossible. Inflation is unfolding before our eyes and it’s far higher than our government leaders want us to believe. Either way, signs are beginning to emerge that our country is headed toward an economic downturn.
3. Bloomberg Television host Lisa Abramowicz said recently that “American consumers are starting to hit their breaking point” as they fight to keep pace with prices for goods and services that relentlessly have moved higher over the past year[r2] . [2] What categories is she pointing to?
Answer: She pointed to data cited in a recent Wall Street Journal article that revealed unit sales of general merchandise goods – clothes, toys and sporting goods, for example – fell in nine out of ten weeks from the end of December 2021 through early March[r3] .[3]
4. Let’s talk about needs vs. wants. We all need to eat and have a roof over our heads and both housing and food prices are significantly higher that overall inflation, does that mean our ‘wants,’ or discretionary spending will down and what would that look like?
Answer. Yes, indeed. The frills are gone for millions of people living paycheck to paycheck. But the cuts needed to make are not simply cutting back on luxury items, it also means cutting back on gas. People will be rethinking any and all travel due. The NPD Group – the market research company that compiled the data – also found that 43% of consumers they surveyed said they’d hold off on discretionary spending if prices keep climbing. “We are seeing less demand as consumers pay higher prices,” said Marshal Cohen, NPD’s chief retail industry adviser. “Price sensitivity is starting to show up. There is a threshold that consumers don’t want to go over.”[4]
5. I believe you have some statistics on what the average U.S. household will bear for the same basic goods and services this year, compared to last year.
Answer: Yes, Americans are no longer able to shrug off higher prices and instead will begin to reduce their spending. Bloomberg Economics says the average U.S. household will have to pay $5,200 more this year for the same basket of goods they bought last year[r4] .[5] And if Americans collectively begin to restrain their spending – as evidence now suggests may be happening – the eventual result could be lower national economic output.
When asked to explain changes in their finances in their own words, more consumers mentioned reduced living standards due to rising inflation than at any other time except during the two worst recessions in the past fifty years: from March 1979 to April 1981, and from May to October 2008[r5] .[7]
6. Will the inflation we all are experiencing right now prove to be the catalyst of anotherU.S. recession – even without the added stress of higher interest rates?
Answer: We can’t know for sure, but it is that kind of uncertainty prompting retirement savers to include tangible assets such as physical gold and silver among their holdings since US dollars are quickly eroding in the face of ongoing inflation that may or may not be stopped by Fed rate hikes, even if they initiate draconian in nature.
7. Where may we get more information on acquiring gold or silver or other tangible assets that may act as a hedge against inflation?
Answer: AugustaPreciousMetals.com. Once there, you will see a picture of Joe Montana, one of our spokespersons.
ABOUT DEVLYN STEELE…
Devlyn Steele began in 1983 as a financial analyst for Butler Aviation and went on to work for UPS and People’s Express Airlines. As his career has progressed, he’s been an analyst in various industries, from finance, manufacturing, and technology to venture capital and more. He has sat on the boards of several Silicon Valley and technology companies and still does.
He is a member of the Harvard School of Business analytics program and predicted the housing crash in 2008 and the rise in gold and silver that followed.
Devlyn is an avid investor in all markets: real estate, stocks, gold and silver, and cryptocurrencies, and is a gold bull.
Devlyn is the director of education for Augusta Precious Metals. His focus as an analyst is primarily on Federal Reserve policies that can affect the dollar and precious metals.
CONTACT: To schedule an interview with Devlyn Steele, email jerry.specialguests@gmail.com or call Celinda Hawkins at (432) 349-2736 or jerry.specialguests@gmail.com. or Robert Workman at robertworkman@comcast.net.
500/topics for interviews: https://SpecialGuests.com/guests-topics/
