(The Burning Platform)—This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: The surprising motives behind inflation, unpacking central bank gold buying figures for 2023, and Turkey is becoming the world’s top consumer of gold out of necessity.
If inflation is bad, why do we have an inflation goal?
Egon von Greyerz recently analyzed the state of economic affairs. From gold to climate, a lot of the points he raises are striking, yet not likely to be covered by any mainstream outlet. His discussion of inflation, or rather its source, caught my eye.
We know the Federal Reserve has an inflation target of 2% annually. In recent years, they’ve missed that target consistently (from 390% over to today’s mere 60% over target). Inflation has been so high for so long that even getting back to 2% feels like victory.
von Greyerz addresses the elephant in the room: Why is the inflation rate not 0%? We should also address the most frightening of boogeymen, too… Why is deflation so terrifying?
First, you must understand that a 2% inflation target is a recipe for deliberate, sustained wealth destruction. So you’d think there would be a very compelling reason behind it! Yet when asked this very question recently in a Senate hearing, Fed Chair Jerome Powell said:
The 2% is globally agreed between all major central banks as a target.
When asked how that is beneficial to the people, Powell went on to reveal the true depths of the Federal Reserve’s policy:
I will tell you how it does, I guess it is obviously not obvious how that is… To have people believe that it will go back to 2% anchors inflation there.
Let me translate the Chairman’s responses into English:
- 2% inflation is our target because it’s everyone else’s target
- There’s no actual benefit to 2% inflation beyond expectations
If this doesn’t make you question the competence of those involved in managing your money, then nothing will.
Since understanding the alleged benefits of 2% inflation is “obviously not obvious,” here’s a brief Q&A:
What causes inflation?
An increase in the supply of currency – which, by itself, decreases the currency’s purchasing power. Rising prices are a symptom of inflation rather than inflation itself.
Is inflation going down?
No, but recently inflation is going up less quickly. Remember, inflation is cumulative. After a year of 9% inflation, your currency has lost 9% of its purchasing power permanently. Even if inflation drops to 0%, that lost 9% is gone forever.
How does raising interest rates help inflation?
Higher interest rates make borrowing more expensive and encourage saving rather than spending. Less credit and more saving decreases overall economic activity by reducing the amount of currency chasing goods and services. Higher interest rates don’t, by themselves, reduce the overall supply of currency, but they do discourage spending.
Why is deflation bad?
Deflation is literally a reduction in the circulating currency supply – which increases the purchasing power of the currency. That may not sound bad to you (unless you have a lot of debt). Deflation encourages saving money, which lowers overall economic activity. Worse, though, deflation forces debtors to use more valuable currency to repay their creditors. The more you owe, the worse deflation is for you – and if you owe, say, $32 trillion, it’s a recipe for disaster… Just as inflation encourages borrowing and spending, deflation encourages the opposite.
To continue: von Greyerz believes the world is turning away from IOU-based currencies. The reason for this is straightforward: the debt is simply becoming unsustainable, and it gets worse the higher up we go from the average citizen to governments themselves. One might say that the world’s credit score is becoming insufficient to support the current, debt-based global economy.
This is a key reason BRICS nations are interested in creating a commodity-backed currency. A commodity has intrinsic value – it’s desirable because of the thing itself, rather than because of a promise from a government. In this way, von Greyerz also inadvertently explains why BRICS economies want to rule the world all of a sudden. In a shift away from unbacked paper money and towards tangible assets, these global commodities exporters are real economic powerhouses.
The transition away from unbacked, debt-based liability currency to commodities-backed money won’t be easy. Expect a decade of high inflation, high interest rates, geopolitical turbulence and economic volatility. To navigate this “new normal,” von Greyerz recommends physical gold and silver (as well as a few industrial commodities) as the only assets likely to endure the chaotic decade ahead.
Central bank gold buying still up (if we exclude profit-taking)
Central bank gold demand down 39% vs. last year? Such a claim merits scrutiny.
On the heels of a record year (central banks bought 1,136 tons of gold in 2022), why the sudden about-face?
As IMF data reveals, three countries are responsible for the sell-off: Turkey, Kazakhstan and Uzbekistan.
Turkey was the largest gold buyer last year with over 125 tons, but has reportedly sold 59 tons in the first five months of this year. Turkey’s case has already been covered in full. The nation is selling gold bullion to prop up its currency. The results, so far, have been mixed.
Kazakhstan and Uzbekistan’s cases are less clear, with the former having sold 35 tons and the later 27 tons of gold. Notably, unlike Turkey, they were also net sellers last year. Both nations have large gold reserves (#15 and #17 largest) in relation to their economies. I suspect the motive is simply profit-taking.
Who are the buyers, then? Singapore bought 69 tons and China 68 tons during the period. We’ve covered in reasonable depth how China’s gold-buying reports appear to be a message to the world. It has been suspected for the longest time that China’s real holdings far exceed the reported figure, and that the country isn’t particularly concerned with reporting its gold purchases to the public.
This narrative is especially strengthened when one takes into account that most of the 1,136 tons were from countries unrevealed, with China being one of the few willing to disclose its central bank policy. Singapore has retained a similar air of secrecy – any attempt to get an explanation from its central bank was met with vague or secretive responses.
Not the case with Poland, this year’s third-largest gold buyer (and world’s #22 largest gold reserve). Sharing borders with Ukraine and Belarus, I’m personally not at all surprised to see Poland adding more gold to its reserves.
In times of geopolitical uncertainty, gold as always serves as the ultimate form of payment or collateral. Let’s hope the Ukraine conflict doesn’t spread to Poland – but if it does, the nation will, at least, have taken steps to diversify its savings with a heavy allocation to gold as insurance against crisis.
The collapse of the lira and Turkey’s massive consumer gold demand
It feels like any story of Turkish gold selling should be accompanied by the full economic picture. For example, the 165 tons of gold sold by the country within three months were actually sold to Turkish citizens. This was necessary to meet local demand as the country banned gold imports amid trade disagreements with the European Union.
Surprising, isn’t it? The biggest central bank gold seller this year has sold its gold reserves to its own citizens!
But there’s quite a bit more to the story of Turkey’s economic weirdness. Erdogan seems determined to play Russian roulette with Turkey’s economy. Instead of raising interest rates to fight rising prices, he has instead lowered them. Turkey currently misses the technical definition of hyperinflation by a whisker, after enduring 50% or higher monthly price increases for all of 2022. The most recent report puts inflation at a blistering 48% monthly.
Economic insanity aside, the earthquake in Turkey reminded us of something that doesn’t get mentioned often enough in the gold market: Gold and real estate are both tangible assets, but they aren’t the same. The latter comes with so much risk, including counterparty and environmental, that it can’t be classified with gold. Both are tangible assets with intrinsic value – beyond that, they’re completely different.
Unsurprisingly, Turkish citizens loaded up on gold bars and gold coins. (Unlike gold jewelry, these are classified as “gold for investment.”) In fact, the world’s 19th largest economy accounted for 1/3 of global demand for investment gold in the second quarter of the year.
The Turkish people are suffering economically – but fortunately, they’re spending their money as quickly as they can to secure a lasting store of value with gold.
Bypass Big Tech Censors
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.