As governments try to water down their currencies in a WWF style matchup of “my currency is worse than your currency,” it will be the middle class and poor that get body slammed. Commodities are continuing to rise with oil hitting highs and gold setting new records almost daily. The dollar is on the ropes and Uncle Sam has it in a head lock. It’s the “Franklins” and “Washingtons” in one corner with Uncle Sam pulling sucker punches in the other. The US government has made it clear that it is willing to print excessively, loan at near zero, and do whatever it takes to stop deflation. So how does a government stop deflation? By making your dollar worth less, it will take more of the less valuable dollars to buy the same product. So as prices are falling, the government will try to “catch the falling knife” in a pile of cash they’ve printed. Then they’ll try something that’s never been done in history: Put all that historically-unheard-of-printing cash back in the bottle before interest rates soar.
Economic theorists from the Keynesian camp will remind us that “there is no sign of inflation.” They’ll call the alarmists chicken-littles totally disconnected to reality. Let’s ponder for a moment. If you are in a coal mine with a carbon dioxide tester that reads “normal,” but your pet canary keeps falling over, what is the rational thing to do? Check the readings again perhaps. Check the batteries on your meter again. See if your meter is really calibrated correctly. See if your bird is just under the weather. There are lots of options one might consider if you are standing over a dead canary. Underneath all the fancy technical economic jargon is really one basic question: Is inflation the cause of rising prices or the results of rising prices? If it’s the result of rising prices than you can look around and say, “I don’t see many rising prices; therefore there is no inflation.” If inflation causes rising prices, you can look around and say, “We are printing dollars like crazy. Commodities like oil, gold and silver are going up. That means that it takes more of our less-valuable dollars to buy that same gold coin or barrel of oil. Therefore, the gold going up is the canary. The oil hitting over $100 a barrel is the warning bell. Silver hitting historic highs is our dead bird. This inflation (the printing of dollars) is GOING to cause rising prices.” The bird is gasping for air and higher prices are next. Check out these headlines from this past weekend.
There is a fascinating principle in the book of Hebrews chapter 11:
24 By faith Moses, when he had grown up, refused to be known as the son of Pharaoh’s daughter. 25He chose to be mistreated along with the people of God rather than to enjoy the pleasures of sin for a short time. 26He regarded disgrace for the sake of Christ as of greater value than the treasures of Egypt, because he was looking ahead to his reward.
Moses knew that there are passing pleasures of sin… But only for a “short time.” He took the longer view of things. He “saw” what wasn’t right before his eyes perceived it fully. He valued something of “greater value” than the short term rewards of living unwisely or wickedly.
Though Moses specific application is a spiritual one, the pattern is the same throughout the Scripture. The wise man sees the long term. He doesn’t fall for the short term smoke and mirrors. He detects the canary’s demise long before everyone else. He is willing to lose some short term gain to protect himself from long term destruction. He is willing to value keeping a strong currency that helps everyone (especially the poor) rather than inflating the currency and hurting the poor with the upcoming rising prices of commodities like food, rice, and grain.
Watch commodities, they’ll tell you what the news won’t.