Originally published at: https://peakprosperity.com/get-ready-high-inflation-is-coming/
In this episode of Finance U, I had another in-depth discussion with Paul Kiker from Kiker Wealth Management, exploring:
- Japan’s bond market crisis (spoiler: the emergency isn’t over)
- The Big Beautiful Bill increases the deficit by such an alarming amount that it should be titled The Morbidly Obese Bill
- Inflation is coming
- The stunning advances of AI are worrying on several levels, but most concretely, will be its demands on the U.S. energy infrastructure.
- Inflation is all but assured to accellerate under these conditions; prepare accordingly
We started by discussing market manipulations, where I shared my observations on a recent market rescue operation, suggesting that central banks and major financial players are propping up markets to maintain an upward trajectory, which an increasing number of market participants now view with skepticism. After all, markets are supposed to be where price discovery happens, not where political narratives are bolstered and insiders get first dibs on fresh money.
Paul and I have both observed a growing distrust in the markets, a sentiment that transcends political divides, as people from all sides are beginning to question the integrity of our financial systems. Are the “markets” as fake as a WWF professional “wrestling” event?
We delved into the specifics of Japan’s bond market troubles, highlighting the potential for a significant financial crisis there due to rising bond yields and the Bank of Japan’s losses. This situation could have ripple effects globally, especially if Japan’s insurers face massive unrealized losses.
On the U.S. legislative front, the recent “big, beautiful bill,” instead of cutting spending, actually increases it, which will fuel more inflation. Even before the BBB, the OMB was already projecting a massive increase in U.S. federal debt over the next 10 years:
With the BBB in place, you can mentally add another $2.3 trillion onto that 2035 figure, bringing the total to $54+ trillion. Unless there’s a war or recession before 2035, then you can mentally add many more trillions to the amount. And all of that is without the dollar losing a lot of value internationally, requiring interest rates to get hiked, which will cause interest expense to skyrocket…
The BBB shows that Team Trump has thrown in the towel on fiscal restraint, which we believe sets the stage for economic instability.
We also talked about the advent of AI and quantum computing, which could disrupt not just financial markets but the entire digital security framework. BlackRock’s warning about quantum computing’s potential to break current cryptographic systems underscores the existential threat this technology poses, not just to Bitcoin but to all digital transactions.
Lastly, we explored the implications of these technological advancements on energy demands, with data centers consuming vast amounts of power, potentially leading to increased energy costs and further inflation. This is a critical issue as we’re not seeing a corresponding increase in energy production.
In conclusion, while the markets might seem to be rallying, the underlying issues of trust, fiscal policy, and technological disruption suggest we’re in for some interesting, if not challenging, times ahead. For those looking to navigate these waters, having a strategy that’s adaptable and informed by these broader trends is crucial. Remember, it’s not just about making money in a bull market; it’s about keeping it when the tides turn.
If you’re interested in discussing your financial strategy or just want to understand these dynamics better, feel free to reach out to Paul and his team at peakfinancialinvesting.com.