Slow cooking in a microwave world: Understanding inflation and economic trends [Video]

In the latest episode of the Money Metals Midweek Memo, host Mike Maharrey dives deep into the recurring economic themes that dominate the news cycle. Maharrey begins by acknowledging a feeling many listeners may share: a sense of repetition in the content.

However, he stresses the importance of understanding that while news headlines change daily, the underlying economic fundamentals remain consistent, often playing out in slow motion over time.

The repetitive nature of economic themes

Maharrey highlights that the same macroeconomic issues—such as inflation, debt, and easy money policies—continue to dominate the landscape.

Since the 2008 financial crisis, these issues have only intensified, particularly during the pandemic. He points out that while we see new headlines and data daily, the larger dynamics are slowly unfolding beneath the surface.

The host notes that, eventually, these dynamics will culminate in significant events, such as financial crises or stock market crashes. However, predicting when this will happen is impossible—it could be tomorrow, next month, or even next year.

The fast-paced world of news and its impact

Maharrey contrasts the slow-moving nature of economic trends with the fast-paced, headline-driven world of modern news.

Drawing from his background in journalism, he discusses the challenges of balancing speed and accuracy in news reporting. The pressure to be the first to report often leads to incomplete or incorrect information being disseminated.

He emphasizes that, in today's world, people want information quickly and expect it to be accurate, but these two demands are often mutually exclusive.

The impact of fast information on decision-making

The rapid pace of information in modern society has also shortened decision-making windows for both individuals and policymakers. Maharrey illustrates this with an example from history: when the Berlin Wall was being built, U.S. officials had days to contemplate their response before the news became public.

Today, such an event would be immediately broadcast worldwide, creating instant public pressure for a response. He suggests that this speed can lead to rash decisions, both in politics and markets.

Understanding economic frameworks

Maharrey urges listeners to develop a solid economic framework to interpret data and trends. He criticizes the mainstream reliance on Keynesian economics, which he believes leads to poor understanding and bad decisions.

By contrast, a good framework can help individuals make sense of seemingly contradictory data and avoid reacting impulsively to outlier events.

Jerome Powell’s Jackson Hole speech: More inflation ahead?

Maharrey then shifts focus to Federal Reserve Chairman Jerome Powell's recent speech at Jackson Hole. He interprets Powell's remarks as a clear signal that more inflation is on the horizon.

Although Powell did not explicitly say this, Maharrey argues that the Fed's plans to slow balance sheet reduction and cut interest rates will inevitably lead to an increase in the money supply, which is the root cause of inflation.

Inflation: A policy, not an accident

Maharrey stresses that inflation is a deliberate policy, not a random occurrence. He explains that expanding the money supply benefits the government by allowing it to borrow and spend more, but this comes at the expense of the public.

Despite the Fed's attempts to manage inflation, Maharrey points out that much of the inflationary pressure from the pandemic era remains, and the Fed’s recent actions indicate a return to inflationary policies.

The future of Gold

As a final point, Maharrey discusses the role of gold as a hedge against inflation. He notes that gold prices have been steadily rising, with the metal closing above $2,500 an ounce for two consecutive weeks. He also cites Brien Lundin, publisher of the Gold Newsletter, who believes that the next phase of the gold bull market has begun.

Maharrey suggests that now is a good time to invest in gold, as price drops present buying opportunities.

Conclusion: The importance of patience

Maharrey concludes by reminding listeners that economic changes occur slowly and that it is crucial to maintain a long-term perspective. In a world that demands instant results, he advocates for a "slow-cooking" approach to understanding and navigating the economy.