War and Inflation: Investors Shield Themselves With Physical Gold and Silver

• Kitco: The War Plunges Western Commodities Trade in Chaos
• Degussa: Inflation Is a Major Challenge for Investors
• Money Metals: The New Rules of Global Finance

Kitco: The War Plunges Western Commodities Trade in Chaos

21 Mar 2022

“After the war in Ukraine, money will not be the same”, says Zoltan Pozsar, the former Federal Reserve and U.S. Treasury Department official and current Credit Suisse investment strategist.

The current monetary regime has begun to falter after the G7 countries froze Russia’s foreign exchange reserves following its invasion of Ukraine. According to Pozsar it’s not possible for the West to craft sanctions that punish Russia but don’t cause stability risks in the West.

The West has sanctioned the world’s largest commodity producer that sells virtually everything. The resulting chaos has made non-russian commodities more expensive, and Pozsar wonders what will happen to commodities future exchanges if some participants lack enough collateral or credit and fail?

People’s Bank of China has a pivotal role as it can sell Treasury bonds or pursue quantitative easing and buy Russian commodities. Regardless of what happens, the war in Ukraine will increase inflation and leave the Dollar much weaker.

Degussa: Inflation Is a Major Challenge for Investors

17 Mar 2022

The US Federal Reserve has finally raised its interest rate by 0.25%, and indicated that it would continue to raise the rates in the near future. Still, there are still some doubts on the hope that the Fed is ending its inflationary, ultra-loose monetary policy.

In February the Consumer Goods Price Inflation had skyrocketed up 8% compared to last year, so the Fed must send a signal not to lose its credibility to the general public. US short-term real interest is still at its record low: minus 7.7%. Bringing this rate to a more normal level (like 2 to 3%) might shatter the financial system: stock, bond and real estate prices would deflate with investors, firms, and private households suffering substantial losses. Cutting investment projects would cost jobs. This would cause a deep recession in the US, which would then drag the rest of the world with it.

So, are the Fed and other major central banks willing to defend their currencies by cutting production and jobs? Uncomfortably, the most likely answer is “no”. While they may raise short-term interest rates to convince investors that they are fighting against inflation, it’s very unlikely that they’ll push inflation down to 2% any time soon.

The ongoing conflict in Ukraine is working in favor of central banks and allows them to let inflation continue, but this means that the US dollar and euro will be devalued further and inflation will be a key challenge for investors for the time being.

An investor can shield their portfolio against inflation in several ways, one of which is holding physical gold and silver as they cannot be debased by monetary policy nor do they carry any default risk. In the current economical and political climate, there is a strong case for holding gold and silver.

Money Metals: The New Rules of Global Finance

21 Mar 2022

We are currently in the middle of the biggest financial paradigm shift of our lives, and no one knows what the future will look like or how exactly we get there, writes the Senior Analyst David H. Smith of The Morgan Report.

The current paradigm, the “operating system” of global finance based on global to local and buy/sell exchange finance has been under great stress due to mismanagement, indebtedness, the pandemic response, and rising socio-political unrest. Now the financial turmoil surrounding the war in Ukraine has swept away the assumptions we have for predictability, safety and financial growth.

The world is changing and now everyone needs to figure out what the new rules are, how they are best applied and what results might happen. Currently financial markets are in sea change, with nickel price rising 250% in two days and crude oil futures touching $130/bbl for example. It’s to be expected that the price of almost every usable good will rise by 15 or even 25%. The article recommends investors to shield themselves with gold and silver.

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