Inflation tends to appear unexpectedly every few decades.
A reason for the time between appearances could be that policymakers lack experience with inflation and take risks that fuel the next round of inflation.
That would explain why economists argue that the lessons of history no longer apply. Previous generations widely believed, to quote Milton Friedman:
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.
Recent experience argues against this, with the Federal Reserve creating money at an unprecedented rate while the change in the economy’s output is consistently disappointing.
Despite the Fed’s best efforts, inflation remains below 2%. Almost every major economy in the world reports inflation below 2% — 12, including Japan, report deflation with official inflation indexes below 0%.
But that’s not true everywhere in the world. Inflation is above 10% in 10 countries, according to Federal Reserve data. Darker colors indicate higher inflation.
2019 Inflation Crisis (Consumer Prices by Nation)
Source: Federal Reserve.
Inflation Crisis: Time to Buy Gold
In the Western Hemisphere, Chile is the only country on the map with inflation above 10%.
Venezuela’s inflation is impossible to measure as the country’s economy collapses.
Inflation in neighboring Latin American countries is above 5% and generally rising.
Africa also suffers from high inflation, as do several countries facing political turmoil including Iran and Afghanistan.
All told, 84 countries have inflation above the Fed’s targets. That’s about 56% of the world. Based on the data, inflation is a problem in many parts of the world, and it’s spreading.
Inflation also undermines stability and threatens to create international crises.
Both higher prices and the threat of global crises are reasons to own gold. Precious metals have declined for the past four months, but charts of gold and other metals are turning bullish.
As crises brew unnoticed all around the world, now could be the ideal time to buy gold.
Michael Carr is a Chartered Market Technician for Banyan Hill Publishing and the Editor of One Trade, Peak Velocity Trader and Precision Profits. He teaches technical analysis and quantitative technical analysis at the New York Institute of Finance. Mr. Carr is also the former editor of the CMT Association newsletter, Technically Speaking.
Follow him on Twitter @MichaelCarrGuru.