Introduction to Stagflation and the Importance of Owning Assets
The world is experiencing a significant shift in the economic order, with the Federal Reserve struggling to balance interest rates amidst persistent inflation and deficit issues. The global capital market commentator, the Koobeissi letter, warns that having assets is no longer a preference, but a necessity. As the US stares down the barrel of interest rate cuts with core PCE inflation over 2.9%, it’s clear that the traditional rules of economics are being rewritten.
The Current State of the US Economy and Stagflation
For the first time in three decades, the US is facing interest rate cuts while core PCE inflation remains above 2.9%. This is a sign of how desperate policymakers are to avoid deeper pain in the real economy, even if it means risking the embers of continuing inflation. In the past, central bankers would wait for inflation to fall convincingly before making moves, but now everything is on the table.
The message is clear: holding cash can lead to a silent inflation thief gnawing at your future purchasing power. With the US labor market taking a hit, discharge symptoms from blue-chip companies and Silicon Valley favorites are piling up, and new openings are slowing down.
The Impact of Deficit Spending on the US Economy
The US deficit is ballooning, with over $2 trillion in expenses per year. This refers to future tax increases, more borrowing, and the potential for currency devaluation. As value investor Mike Alfred emphasizes, “Almost nobody gets rich on a single salary.” The richest people in the world are entrepreneurs and investors, and owning assets is crucial in today’s economic climate.
Massive deficit spending once led to promise investments and productivity, but now it’s merely a cost of doing business. Investors who own assets, from productive companies and raw materials to uncorrelated digital value storage, have the best chance of success as fiat currency purchasing power continues to erode.
The Role of Job Reports and Government Data in the Economy
Imagine trying to navigate a ship without a compass or GPS through a storm. This is the situation policymakers, analysts, and small investors find themselves in when job reports are suspended after government shutdowns. Critical signals are offline, markets are choppy, and uncertainty is growing. The lack of reliable data increases market risk, making it challenging for planners.
In such an environment, owning hard, productive, or tight assets like Bitcoin can be a lifeline. As the Koobeissi letter advises, “Own assets or risk being left behind.” In this new world, assets are not just a hedge; they are a necessity.
Conclusion: The Importance of Owning Assets in a Stagflationary Environment
As President Trump talks about stimulus checks, the economic rule book is being rewritten in real-time. We live in an era where government support, inflation, and historical technological revolutions meet at a crossroads. The time to stack Bitcoin and other assets is now more than ever. As the Fed considers two more rate cuts in 2025, the cocktail of stagflation, growth, and shopping discs is poisonous for savers. Real rates will continue to fall under inflation, and the incentive to hold “safe” government paper will diminish.
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