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Fifty Basis Points Does Not Fix This

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Your Masters of The Universe at the Federal Reserve would like you to believe that they have inflation under control and they can solve the problem through a few hikes of the fed funds rate. This is foolhardy and today let's look at just one problem that they cannot fix.

If you've traveled by car recently, you've likely noticed that highest gasoline and diesel prices on record. It looks something like this:

gas prices

And the situation is unlikely to improve anytime soon with crude oil prices approaching $120/barrel...

online chart

But high fuel prices are not simply a function of higher crude oil prices. Instead, years of declining refinery capacity combined with useless environmental regulation along with supply chain constraints have combined for a "perfect storm" as it relates to all distillates of crude oil....items such as gasoline, diesel, heating oil and jet fuel.

Keep in mind, that molecule of crude oil can only be cracked once. So refineries are forced to choose which distillate product to make. And in 2022, a decision to refine more gasoline leads to a shortage of diesel and jet fuel. Conversely, a decision to refine more diesel leads to shortages in gasoline and jet fuel. Do you get the picture?

So with all of this in mind, please take eight minutes to watch the video below. Shameek Konar is the CEO of Pilot/Flying J, which is one of the largest "truck stop" chains in the United States. This places Mr. Konar in a unique position to speak to the worsening problem and, in the video below, he's testifying before the Surface Transportation Board of the U.S. Interstate Commerce Commission.

There's a lot to unpack in that eight minutes but here's what you must know...

The United States is on the verge of a MAJOR shipping and logistics crisis. Not only are higher shipping and freight transportation costs driving higher inflation, as trucks get idled, supplies of all products will drop. This will lead to shortages and even higher prices for nearly everything.

So do you see how ineffective a few fed funds rate hikes will be in managing this situation? Years of bad policy and malinvestment in the energy sector has led us to this choke point and the situation is going to get far worse before it gets any better.

What does this mean to you, the precious metals investor?

Well, stagflation is already here and it's about to get worse as inflation continues to soar and the economy slows into contraction. From there, The Fed will soon be forced to reverse course and begin cutting rates and adding QE in a desperate attempt to keep the plates spinning. As this occurs, the investment world will again realize (as it did in 2010, 2016 and 2020) the your Monetary Masters are the 21st century equivalent of The Emperor With No Clothes.

As this is revealed yet again, gold and silver prices will soar (as they did in 2010, 2016 and 2020).

So for this week, understand first that we are about to experience the most serious energy supply crunch since 1973 and the economic and financial impacts are almost incalculable. From there, understand that no amount of "policy intervention" by the central bankers will be able to fix these problems.

Please continue to prepare and plan accordingly.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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