Inflation and debts

Higher than planned inflation looks like being with us for months to come. That's what the International Monetary Fund (IMF) says in its latest World Economic Outlook. Last year global inflation was 4.1% - this year it will be 4.7% says the IMF. Within that overall aggregate there is of course a multitude of different readings. If that figure turns out correct, it will be almost 3% above what most major central banks aim to achieve. The target most central banks aim at is to keep inflation running at 2%/year. That sounds mild - but if 2% inflation stuck around for a decade, you would need more than twice the amount of any fiat currency of today to buy the same product.

In any case should we believe the IMF? An esteemed Indian economist has written that the IMF's record of predicting a crisis "is lousy". Others disagree and point to its massive data collection and impressive team of economists.

In any case the global economy is not today in a crisis. It's more a kind of weariness.

That weariness may turn out to be more serious. The IMF report was finalized before President Trump declared the ceasefire with Iran was over. What that might mean for price rises is yet to be seen. Crude oil prices rose 7% on the President's comment, as the market anticipated further supply interruptions. Since the Iran War started in late February, retail gasoline prices have risen by around 30% in Asia; natural gas prices are up by 50% in Asia and 25% in Europe. The IMF warns that a "renewed conflict" would lead to a further increase in commodity prices, more price volatility and supply shortages.

Rising debts

If higher inflation wasn't enough to deal with, the world must face its growing massive debt pile. That hit a record high of $353 trillion by the end of March. That's more than three times the world's economic output. The US national debt is fast approaching $40 trillion. The US debt is growing fast - faster even than the economy.

This growth of government debt is destabilizing but it won't topple the US economy. The US can print as many Dollars as it likes; the debt can pile up much higher. The US it won't suffer from a sovereign debt crisis. But printing more paper money will cause a different crisis.

US government spending on social programs such as Social Security is growing rapidly as the US population ages. Washington is running a persistent budget deficit to pay for these programs. Last year the US government spent almost $1 trillion on interest payments on its debt. Expanding government budget deficits is also true for many other advanced economies.The bigger debts grow, the more they cost in interest payments.

The US Government Accountability Office (GAO) said this June that in "30 years" America's debt "will likely be 2.5 times the size of the economy". That "could ultimately lower the standard of living for all Americans." It's been nearly 200 years since the US was without a national debt. President Andrew Jackson, who called debt a "moral failing", cleared the US national debt in 1835, though it was badly handled and led to the Panic of 1837.

Self-defense

It's not at all surprising that many Americans are in a somber mood right now. The University of Michigan survey of consumers in June this year said that while recent lower gasoline prices helped improve sentiment, the cost of living "remains at the forefront of consumers' minds; for the third straight month, over half of consumers spontaneously mentioned that high prices are weighing down their personal finances."

Whatever the future holds, no matter how badly inflation affects your paper money's purchasing power, Glint provides an unrivaled self-defense. The purchasing power of fiat currencies has been falling since their creation, but there is an alternative, one that has been with us for thousands of years. Gold. It's not just decorative. Thanks to Glint it's also powerful. For with Glint it's also money, one that you can use for all your needs.

And if you use Glint, you can shrug off whatever the IMF says.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.