Thibaut Lepouttre is a highly educated and well respected economist from Belgium. But unlike many of his counterparts who often tow the line of mainstream politicians and financial pundits, he’s not one to sugarcoat the seriousness of the current global economic, financial and monetary environment. According to Lepouttre, while the Federal Reserve has worked feverishly to prevent a widespread destabilization of the system, their machinations will soon be revealed as an abject failure.
Whereas many of his colleagues suggest the possibility of inflation is an unlikely scenario, Lepouttre says that we will see it begin to manifest in the near-term in the form of higher prices for essential resources. In his latest interview he explains why we’re within the prime target dates for inflation to take hold, the snowball effect that will lead to uncontrollable hyperinflation, and how to strategically position assets ahead of this unprecedented monetary event.
There is no doubt that the Federal Reserve has almost run out of options to get the economy going.
Let’s go back to the basics of the economy. It takes a while when money gets printed before it really gets circulated in the system. In normal economic times, it takes like 24 to 36 months before a newly printed $100 bill is really brought into circulation, and you can see the trickle down effects of that.
The problem in the current economic situation is the fact that the velocity of money is much slower than it used to be. Due to the lower velocity of the money, it takes much longer before you feel the trickle down effects. So instead of the 24 to 36 months, it’ll take, I’ll say 60-72 months before we see any of the trickle down effects into the real economy.
We’re closing in on the 6-7 year period right after the first round of quantitative easing started in the U.S. so I do expect to see some sort of inflation increase in the near future, and the problem is once the velocity of money goes up again, then you might, indeed, have some sort of snowball rolling off the slope of a hill, and it will be completely uncontrollable.
Lepouttre notes that both Russia and China see the writing on the wall, and that’s why they’ve resorted to off-loading billions in U.S.-dollar based assets over the last year. To mitigate the inevitable collapse of the U.S. dollar they have been heavily acquiring one particular asset:
Even though the Federal Reserve and the mainstream media are trying to downplay the real value of gold, it still has its monetary value.
It’s had so in the past two, three four thousand years, and it will continue to have it, because even Russia, even China, which have their own economic problems right now… they’re still buying gold.
Russia has been hit incredibly hard by the low oil price… and instead of trying to protect their own balance sheet of the Russian central bank by keeping their dollars, they are getting into the economy in U.S. dollars and buying gold with it.
So it really says a lot when a large economy like Russia, which isn’t a small economy at all, values having physical gold more than U.S. dollars for the balance sheet of the central bank.
The message could not be any clearer. To survive what’s coming investors need to be looking at diversifying their portfolios with resource-based hard assets that will retain their value when Western monetary systems buckle.
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