"Supply Bottlenecks" as an Excuse for Inflation

Gold last traded at $1,895 an ounce. Silver at $27.94 an ounce.

NEWS SUMMARY: Precious metal prices rose on safe haven buying Thursday as the U.S. official inflation index hit a 13-year high of 5% in May. U.S. stocks rose as investors shrugged off a key inflation report that showed a bigger-than-expected increase in price pressures.

Mises.org-One of the arguments most used by central banks regarding the increase in inflation is that it is because of bottlenecks and that the recovery in demand has created tensions in the supply chain. However, the evidence shows us that most commodities have risen in tandem in an environment of a wide level of spare capacity and even overcapacity....

Inflation is not a transport chain problem either. The excess capacity in the shipping and transport sector is more than documented and in 2020 new capacity was added in both freights and air transport....

Why does inflation rise if overcapacity is perpetuated and there is enough transport capacity?

We have forgotten the most important factor, the monetary one, or some central banks want to make us forget it. 'Inflation is always and everywhere a monetary phenomenon,' explained Milton Friedman many decades ago. More supply of money directed towards scarce assets, be it real estate or raw materials. The purchasing power of money goes down.

Why did they tell us that there was 'no inflation' before covid-19 if money supply increased also massively?

The big difference between 2020 and the past years is that previously, the Federal Reserve or the ECB increased money supply at or below the levels of demand for money (measured as demand for credit and use of currency)....

The risk of stagflation is not small, and the so-called value stocks are not a good bet in this environment. In stagflation, commodities with tight supply dynamics, gold and silver, high margin sectors and bonds of stable currencies support a portfolio."