Rewards1: Are We About to Experience Stagflation Redux?

Monday, March 31, 2025

Are We About to Experience Stagflation Redux?

Are We About to Experience Stagflation Redux

The 1970s were an economically awful decade.

I was born in London in 1971. So, I was sheltered from what it was like to be a working adult during that decade.

But my parents couldn't shelter me from the rolling blackouts that swept across the United Kingdom... The bare shelves in the supermarkets… Or the constant refrain of "we can't afford that."

What I remember of the 1970s is every adult complaining about the price of food and gas. My grandmother would tell me stories of how she used to be able to buy five chicken legs for 20 pence. Now, they were 20 pence each.

In the United States, things were no better.

Inflation averaged 7.1% per year throughout the decade of the 1970s. Like the UK, the States had high gas prices, high inflation, high unemployment, and lousy-to-no growth.

Economists coined a term for this period: Stagflation. It was the marriage of a stagnant economy and inflation.

In the 1970s, runaway inflation pushed real rates all the way down to -4.9%. Real rates are simply the nominal interest rate minus the inflation rate. It reflects the changes in purchasing power.

When real returns go negative, smart money flees bonds and paper money as they drop in value.

Instead, they seek protection. In the past, that was gold, which rises in value and offsets the losses from holding paper money.

During the 1970s, gold prices rose from $35 per ounce to over $543. And gold stocks did even better. The Barron's Gold Mining Index shot up almost 500% from 1970–74.

As I wrote last week, today I'm seeing a lot of parallels to the 1970s.

And just like people bought gold to protect their buying power in the 1970s, I believe they'll buy bitcoin to protect their buying power through the end of this decade.

The Silent Lurker Pushing Inflation Higher

I don't have a crystal ball. So, I can't say for sure whether we'll experience 1970s redux. What I do know is that inflation will continue to be a "rolling" problem for Americans.

What I mean by that is we will see periods when it looks like we've beat inflation only to then see it roll right back. We saw this in the 1970s when inflation dropped from 12% to 5% in 1976… But then came roaring back to 15% in 1980.

I expect the same type of action this decade.

Now, you may think I'm talking about tariffs here. In the short term, yes, tariffs could increase prices. And that's causing the market to panic.

But as I told you last week, tariffs are tame compared to previous economic crises the country has faced.

For the sake of argument, let's assume tariffs do cause the price of some items we normally buy to rise. That's not great.

But is it a financial crisis? No. Is it a banking crisis? No. Is it a depression-era economic extinction-level event? No. It is not.

It might cause a slowdown in consumer spending. It might even trigger a technical recession. But we're not talking about a 2008–09 redux when millions of people lost their homes, and millions more saw their standard of living hammered lower.

If tariffs did cause a recession, the Federal Reserve would aggressively lower interest rates, causing a flood of money to come back into financial assets, boosting their prices right back up.

Yes, we would have to deal with some scary volatility. But so long as you didn't sell into that volatility, you'd be fine.

Friends, when it comes to tariffs, we don't know how things will play out. But the view that tariffs will equate to the death of the U.S. economy – while making for great headlines – is less likely than the market is pricing in.

Of course, tariff threats will continue to rattle markets over the short term because markets hate uncertainty.

But over the long term, nobody knows.

The increased input costs caused by tariffs could be offset by a Trump administration fiscal policy that lowers taxes elsewhere. So tariffs could be "net" neutral or even "net" positive for the overall economy.

My bigger concern is the debasement of U.S. currency.

I know the Trump administration wants to reduce government spending. But spending is already out of control.

Currently, the U.S government is running a $1.8 trillion deficit. Let's assume presidential advisor Elon Musk's team can cut the deficit in half just by eliminating waste, fraud, and inefficiency from the government.

That's a huge improvement. But we'd still be running a $900 billion deficit.

At its current rate, U.S. debt is expected to balloon over the next decade from $33 trillion to over $54 trillion.

Where do you think the money to pay back that debt will come from? It will come from printing more money and diluting the value of the dollar.

Hear me when I tell you this: The dollar will continue to lose its buying power. That means every year, you'll be able to buy even less with your dollars.

A Digital Hedge for Digital Money Printing

The 1970s was an awful decade for millions of Americans because of stagflation. The best asset to own during stagflation was gold.

If all you wanted to do was protect your wealth, you could've simply allocated 10% of your net worth to gold. And it would've returned 15x on your money by the end of the decade. That would've more than insulated you from the savage effects of inflation.

If you wanted to go further down the risk curve, you could've boosted your returns by buying gold stocks.

I see a similar scenario playing out in the rest of this decade. Instead, bitcoin will replace gold as the digital hedge against inflation – and altcoins will replace gold stocks as a leveraged bet on the primary trend.

Except, I believe the best altcoins will outperform bitcoin by a large margin.

Right now, the highest-reward altcoin ideas are to be found in artificial intelligence (AI). But not public market AI stocks. I'm talking about AI coins.

Specifically, AI Agent coins.

If you've never heard of these coins, you are not alone. Not many people have. That's why I recently made my research on AI Agents public.

In it, I show the impact they will have and how you can use them to make a small fortune this year from a handful of $1,000 investments. You can watch the replay right here.

These are moonshot ideas that have the potential to turn a handful of $1,000 investments into a retirement nest egg in months rather than years.

Here's the bottom line: Gold and bitcoin function similarly and offer many of the same benefits. Bitcoin is even more scarce and much more useful than gold.

That's because it's more easily stored, transported, and exchanged than gold. That makes gold the horse… and bitcoin the automobile.

The world is becoming exponentially more digital. From the internet to artificial intelligence, nearly everything we do in modern society is done online or wirelessly.

The money you spend… The concert tickets you buy… Even your health insurance cards.

They're all digital now. And that's why bitcoin will be the store of value of the future.

Let the Game Come to You!

Big T