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Michael Pento: The Fed Can’t Control Inflation without Bursting All Asset Bubbles

Tom welcomes back Michael Pento, President and Founder of Pento Portfolio Strategies, to the program.

Michael compares the huge increase in debt leading up to the 2008 financial crisis and the current debt bubble. Pento highlighted the $68.9 trillion in total non-financial debt that is currently outstanding, which is double the amount of debt prior to the crisis. He notes that this was caused by the Federal Reserve taking interest rates to 1% and then to 0%, which created an artificial edifice known as the US economy. Pento described how the Fed’s balance sheet went from $800 billion in 2007 to $9 trillion in 2022, which caused misallocations of capital and asset bubbles. He warns that the only way to bring down inflation was to pop the bubbles, but that this would cause further economic destruction. He explains that this cycle of inflation-deflation would eventually lead to an inflation oppression, in which high rates of inflation would be combined with low economic growth. He coined this term “infla-pression” back in 2012.

Michael discusses the four horsemen of the economic apocalypse, which are cash, US sovereign debt, the dollar and shorts. He believes that the Federal Reserve’s BTFB has prevented a liquidity crisis and created a number of zombie banks. He has been investing in gold and miners, and his current allocation is 14%. He is waiting to see further erosion in economic growth before he increases his gold allocation to 20%. He advises that 5% of investments should be in physical gold, and the rest could be in liquid or paper gold. He believes that now is the time for people to buy the dip in precious metals.

Time Stamp References:
0:00 – Introduction
0:38 – 2008 Debt Crisis & Today
3:30 – A Perfect System
5:45 – Yellen & Q.E. Lite
6:52 – Inflationary Cycles
8:57 – Asset Bubbles & Inflation
14:36 – Infla-pression
16:00 – The Four Horseman
19:47 – Rates & Allocations
22:05 – Wrap Up

Talking Points From This Episode

  • The US non-financial debt is double the amount prior to the 2008 financial crisis.
  • Michael coined the term “infla-pression” which is a combination of high inflation and low economic growth.
  • Michael advises that now is likely the time to buy the dip in precious metals.

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Michael Pento is the President and Founder of Pento Portfolio Strategies, with over 27 years of investment experience. He was the portfolio creator and consultant to Delta/Claymore’s commodity portfolios that raised over $3 billion, distributed through Claymore/Guggenheim’s sales network. He is the author of the book “The Coming Bond Market Collapse” and has a weekly podcast called “The Mid-week Reality Check.”

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