Brandon Smith, founder of Alt-Market, warns that after 17 years of unchecked money printing, the Federal Reserve is trapped in an inescapable cycle: Cutting rates risks hyperinflation, while maintaining high rates could trigger a deflationary collapse. Given the current debt levels and policy inertia, the most likely path forward is a resurgence of inflation.
Smith argues that modern monetary policy prioritizes avoiding deflation at all costs. Under Keynesian dominance, deflation is treated as taboo—yet it often serves as a necessary "medicine" to correct market distortions like malinvestment and debt addiction.
The 2008 financial crisis presented an opportunity for market self-correction, but the Fed chose to mask problems with massive money printing instead. The result? A financial system pathologically dependent on inflation.
Despite recent rate hikes, Smith contends the Fed has failed to address root causes. In the 1980s, rates soared above 20% to curb stagflation. Today’s hikes are merely "a band-aid on a bullet wound." Consumer demand remains hot, credit hasn’t meaningfully contracted, and prices stay elevated despite higher rates.
The U.S. government now spends $250 billion quarterly just on interest payments. Surging demand for gold and silver reflects market expectations of unsustainable debt and further dollar erosion.
While labor markets show slight weakness, true price deflation remains unlikely. The core drivers for sustained price declines are absent.
The real danger, Smith warns, arrives in 2026. As the Fed cuts rates to avert recession, suppressed inflation will rebound by mid-to-late 2026. The Fed then faces two grim choices: 1. Repeat the 1980s with extreme rate hikes (triggering economic collapse), or 2. Resume money printing (unleashing runaway inflation). The latter appears far more probable.
Some blame Trump-era tariffs for inflation, but Smith notes overseas-to-retail markups (averaging 250%+) allow corporations to absorb tariff costs easily. Their CPI impact is negligible.
Reduced immigration could theoretically curb demand and prices, but implementation would require years of large-scale enforcement—too slow to matter.
The financial system has never truly detoxed through deflation. With the Fed pivoting back to easing, inflation will resurge in late 2026. Short of suicidal rate hikes, inflation is inevitable. In this macro environment, physical gold and silver will remain core hedges—likely hitting record highs for years.
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