Brace yourself for a bigger grocery bill...
You probably remember the actress Alyssa Milano from her sitcom days. She is very liberal and very active on Twitter. A couple of weeks ago she tweeted this:
We need a NATIONAL shut down NOW. Print cash. Give people UBI until we get this pandemic under control.
This is a terrible idea. Printing a bunch of money and handing it out to people so they can sit at home and not work—which is what universal basic income (UBI) is—would cause lots and lots of inflation. Prices would go through the roof!
Now, we don’t have UBI (yet), but the response to the pandemic is pushing the US further and further in that direction. The Federal Reserve, our country’s central bank, is “printing” cash like mad. And the federal government is spending trillions of dollars it doesn’t have and sinking further in debt.
The federal deficit exploded to $3 trillion in the first nine months of the fiscal year. And I don’t see this slowing down anytime soon. No one does.
This is all pushing us in one direction: higher inflation. And we’re already starting to see it.
Groceries and meat are getting more expensive. Toilet paper is getting more expensive. Cat litter is getting more expensive. Ballpark estimate—I’d say I’m spending 50% more on cat litter than I was five years ago.
Meanwhile, the markets are starting to “price in” inflation. Copper, gold, and silver are all traditional inflation hedges. Investors buy them when they expect inflation to rise, and that’s exactly what’s happening.
Just look at the price of gold over the past year:
You’ve probably heard some talking head on MSNBC mention the CPI—the consumer price index. The CPI is the standard government measure of inflation. It jumped up a bit more than expected last month.
That might not sound like a big deal, but it is. We’re in the middle of a pandemic, and people are buying less stuff. So, prices should be going down, but they’re not.
The next chart shows food inflation. Take look and you’ll see what I mean:
I’ve been talking about inflation a lot in my other publications. This is a big, long-term trend that we are all going to have to contend with for years to come. Now is the time to start planning on ways to protect yourself.
One way you can do that is with The Awesome Portfolio, which we’ve talked about before. It has a lot of inflation protection built into it—specifically, gold, real estate, and stocks. If you want to learn more about the portfolio, click here.
Gold is the most straightforward way to protect yourself from inflation. You have a couple of options here. One, you could buy physical gold and tuck it away in a home safe. Or two, you could invest in gold through a gold exchange-traded fund (ETF), like the one I recommend in The Awesome Portfolio.
Gold has already shot up quite a bit lately, as you saw in the chart above. It is currently trading near all-time highs. However, I think gold will continue to climb higher. A lot higher.
We’ve already found most of the gold there is to find (unless we start mining asteroids and bringing gold back to Earth on spaceships). So, the gold supply isn’t going increase in any significant way. But demand sure is.
Silver is another great way to protect yourself. It’s been on fire lately, as you can see in the next chart.
Like gold, you can invest in silver through coins or through a silver ETF. If you don’t own any gold or silver, now is a good time to make your move.
The call for UBI is not limited to liberal Hollywood types. The idea is gaining an increasing level of mainstream traction.
Even without UBI, though, we already have all the ingredients for higher inflation—unlimited money printing... unlimited spending. If you have any doubt, check your grocery bill.
Jared Dillian