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Will inflation come back to haunt us? That is what many are asking this Halloween season—could another stimulus bill (and the money printing that goes along with that) add to the likelihood of seeing a noticeable increase in inflation? We start off today’s precious metals news with a two-part look at inflation’s chances of returning.
Enjoy your metals news today.
Let’s dig in…
Economy
The Return of Inflation, Part 1
Chances are, you aren’t one of the 1 in 50 Britons old enough to remember World War II. But if you have memories of the 1960s and 1970s, you can still remember the economic aftershocks of the war, when Britain’s government struggled to pay back the epic levels of debt. Taxes tripled for some Britons, and a 25% purchase tax was just one of the burdens everyday citizens shouldered to chip away at a national debt that stood at £1.1 trillion in today’s terms. Now, of course, the United Kingdom is fighting a war against a very different sort of enemy. And compared to the fight against Covid-19, Britain’s war debt looks like small fry. In the second quarter of 2020, the government borrowed a peacetime record of £128 billion – more than double 2019’s annual deficit. That borrowing spree has now pushed Britain’s debt to around £2 trillion and counting.
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Economy
The Return of Inflation, Part 2
If you’re the government staring up at its current debt mountain, you’re quite rightly worried. Raising taxes won’t be enough to tackle it. Neither will austerity. And neither option is popular with the electorate anyway. So how else can the government get a handle on its finances? Letting inflation off the leash may be the only way out that governments can see. Central banks have created a colossal amount of new money to tackle the economic impact of Covid-19. But this time they’ve gone further. While the 2008 crisis saw central banks pump money into the financial sector, this time people and businesses are on the receiving end too. Given the economic devastation wrought by the last lockdown, including a mass bankruptcy and high unemployment, there will be less supply and less choice. With more money chasing fewer goods, inflation is set to rise. Here at Southbank Investment Research, we’ve argued that…
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Commentary
Judgement Day: Stimulus Deal
Time and logistics have been steadily lowering the already daunting odds against a second major COVID-19 stimulus measure (on the scale of the March CARES Act) prior to Election Day, despite regular communications between House Speaker Nancy Pelosi and Trump administration negotiator Steven Mnuchin. On Sunday, October 18, in media appearances and a letter to House Democrats, Pelosi set a final, final deadline, as The Wall Street Journal reports:
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Commentary
Central Banks Must Use Gold to Dig Out of Their Hole
Many years of loose and unconventional monetary policy have severely damaged financial markets and the global economy. Currently, central banks find themselves cornered, as the financial system is drowning in debt and addicted to ever easier money. Gold, however, provides multiple solutions. The other day I sent out a thought-provoking tweet, which addressed how gold can solve three problems central banks are currently facing: 1. Lacking inflation 2. Bad debt on their balance sheets 3…
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Latest News
Capital Gains Tax on Gold Will Depend on Various Factors
The capital gains tax on sale of gold will depend on the form in which the yellow metal was purchased. Gold can be bought physically in form of jewelry or coins, gold ETFs, mutual funds, digital gold or SGBs. Gold prices lost momentum after hitting a recent high of Rs 56,200 per 10 gram and currently hovering at Rs 50,000 per 10 grams. However, physical gold traders are stocking up for the festive season ahead which they see will improve demand. Buying gold is an intrinsic part of Indian culture where it is considered auspicious to buy the yellow metal on special occasions such as festivals, weddings or for religious purposes.
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Latest News
IMF Forecasts Precious Metals Index to Rise
IMF's economic outlook for 2020 is less grim, but the more distant future is more worrisome. Therefore, the precious metals index is expected to rise. October's edition of the IMF's World Economic Outlook Report is out! The main message that the report conveys is that the IMF now predicts a less severe global contraction than in 2020 but a slower recovery in 2021 . The global economy is projected to plunge 4.4 percent this year and rise 5.2 percent in the subsequent year, contrary to the -5.2 and 5.4 percent changes forecasted in June. Unfortunately, the prospects for emerging countries, excluding China, have worsened, and the economic decline for 2020 is projected to be greater than previously estimated. As a result, the pandemic will reverse the progress made since the 1990s in reducing global poverty. READ MORE ([link removed])
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