Great Depression By 2018 With 1970s-Style Inflation?

Those don’t represent the words of optimistic economists by any sense.

But indeed, the usually upbeat Beaulieu brothers of ITR Economics uttered them at a webinar earlier this week.

Delivered in the style of Car Talk, these two banter not only about the fate of the American economy (they boast a 94.7% economic forecast accuracy rate over the past 60 years – of which we have followed the last five), but the direction of copper prices, steel prices, inflation, monetary policy, interest rates and even who of the two has the greater “smarts” (Ed. Note: Brian deemed Alan smarter on the basis that Alan had to call into the webinar from Paris.)

2013 – Growth!
Three mega-trends will form the basis of the longer-term economic picture that we will come to in a moment according to the brothers. The first mega-trend, demographics, points to one billion new people on the planet with the US gaining here as compared to other industrialized nations as well as most of Asia. The significance, according to Brian Beaulieu, involves the number of working people supporting a growing older population. In this sense, growing populations “help” the economy.

The second mega-trend and one more disturbing, involves inflation. “The next 20 years will not look anything like the last 20-30 years,” according to Brian, “It will look more like the 1960’s and the 1970’s,” countries with natural resources will fare better than those without.

Finally, the third mega-trend – drum-roll please involves – surprise – higher taxes! This will impact cash structures, employee compensation structures etc.

The short to mid-term forecast
The economists call for decent growth during the first half of 2013 and slower growth in the second half with a 2014 mild downturn. (Ed. Note: the brothers disagreed as to the level of severity of the 2014 downturn.) Both agreed the years from 2015 – 2017 will bring growth to the US economy. Some of the leading indicators mentioned (that look favorable) include: liquidity and specifically the cash hoarding will drive the expansion between 2015-2017, stimulative monetary policy, though that serves as a double-edged sword when we move into 2018, rising employment and decent bank lending among many other economic indicators.

Metal price indicators
From a metals market perspective, the Beaulieu brothers see upwardly moving copper prices, steel scrap prices, finished steel product prices and possibly gold though they indicated that most of the rise in gold had likely already passed. MetalMiner would concur as the monthly index (MMI data) suggests most prices have declined since the start of the year.

It should come as no surprise that many metals prices ought to rise on the back of a healthier economy in 2013, particularly during the first half. The economists also point to a growing China and Brazil which would “set the stage for a price rise,” or as we here at MetalMiner often say, game on for the super-cycle.

by Lisa Reisman