By James Anthony
American Thinker
January 29, 2026
In a so-called great inflation, politicians borrow and spend faster than usual by having crony bankers inflate the quantity of dollars faster than usual.
The added dollars start inflating asset prices, then start inflating producer-product prices, then start inflating consumer-product prices, and then start increasing wages. The purchasing power of wages recovers as fully as it can only after the political regime changes, reducing the uncertainty and the spending and inflation, and businessmen then resume their usual value-adding.
In the runup into the 1970s great inflation, crony bankers first inflated the quantity of dollars faster than usual from January 1961 through November 1978. In the runup into today's great inflation, crony bankers inflated the quantity of dollars from August 2008 through April 2022 more than twice that fast.
Crony bankers continue to inflate the quantity of dollars, because government people continue to borrow and spend, because we continue to lack a major party that supports small government.
Repudiation
Progressives systematically refuse to use the Constitution's sanctions against others in governments to limit them. Without sanctions, the Constitution's rules have no force. Progressives are openly rebelling against we the people.
Amendment 14, section 4 requires that "neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of rebellion against the United States."
Amendment 5, though, requires that no person be unduly deprived of property. This fundamental rule takes precedence for citizens who are retirees and who own government bonds. Retirees can no longer earn wages and so can no longer replace savings.
These underlying principles apply to all governments.
Allocation
Benjamin Graham suggested that investors should allocate between 25% and 75% of their funds to common stocks and the balance to bonds.
The minimum of 25% in stocks would provide some insurance against the possibility of " large-scale inflation." Stocks are shares in ownership of businesses' assets and future earnings. When there's inflation, the asset prices increase, and the future earnings increase. The greater the allocation to stocks, the greater the insurance against inflation in general.
Except that with stocks, there's also a greater risk that in a crisis, substantial value will be lost rapidly, and afterwards, only partial value will get built up again, or value will get built up again only very slowly.
Lately:
- The "magnificent 10" tech stocks are trading at 4.1 times the historical-average S&P 500 price/earnings ratio.
- Debt is weighing people down more than ever. In 1980, the USA gross public debt was 44% of GDP; now it's 139% of GDP. The USA total debt is 324% of GDP.
- In the first half of 2025, the USA's so-called real GDP grew only 0.1% per year apart from spending on information processing hardware and software. Current spends on A.I. aren't supported by current value-adding, currently planned power generation increases, or currently realistic future returns. Subtract all the A.I.‑correlated spending, and subtract inflation realistically, and the economy is already in a recession.
- Trump, like Nixon in the 1970s great inflation, has just been a new skin over the same old Republican Progressive favoring of business cronies. Trump, like Nixon, has escalated both spending and a major war, and has taken major actions that have been remarkably economically illiterate. The considerable current regime uncertainty due to politicians' actions will continue at least through 2028, 2032, or 2036.
A crash and faster money-printing are both likely.
An investor shouldn't allocate 75% or 50% to common stocks; an investor should allocate 25%.
But bonds' real returns are likely to be further pushed down by Fed-lowered interest rates plus Fed-increased inflation. Bonds can't serve their historic role of safeguarding savings in exchange for reduced returns.
The role of safeguarding savings and delivering acceptable returns is increasingly being fulfilled by gold. Gold surpasses all contenders as an acceptably understood, legally supported, stable store of value.
Gold Price
If governments would honor their bonds owned by citizen retirees and would repudiate the rest, and investors would allocate 25% of their funds to stocks and 75% to bonds or gold, the value of stocks might decrease by 66%, and the price of gold might increase to $16,000/oz.
Or, if governments would take no actions and investors would leave their bond investments unchanged but would otherwise allocate 25% of their funds to stocks and 75% to gold, the value of stocks might decrease by 70%, and the price of gold might increase to $18,000/oz.
These estimates are evidence-based bounds. If enough investors would take into account the current great inflation and the current big-government politics that are sustaining the current crisis and would allocate their funds following best practices, then asset valuations could approach these estimates.
In the 1970s great inflation, gold was unavailable to USA individual investors until 1975, and fairly soon, a political regime change was clearly underway, starting in 1980. Allocation to gold reached 22% of investable assets.
In the current great inflation, allocation to gold is now less novel and more obvious. Allocation to gold is just starting and has only reached 6% of investable assets.
$16,000/oz gold, at today's purchasing power, could reflect a fact-based, rational, completed shift in investors' individual choices.
Powerful Change for the Better
Investors would have shifted away from enabling politicians to take future income by force from the people who live within governments' geographic monopolies, systematically shaking the people down by forcing them to use government monopoly moneys. Investors would have shifted to instead helping people sell to and buy from one another in freedom.
English landowners used their power by contracting for the Magna Carta, increasing freedom. American colonists used their power by seceding, increasing freedom. Investors can use their power now to move substantial allocations of their money into government-independent gold, increasing freedom.
It's hard to see what single action that's feasible right now would be more favorable for future peace and prosperity.
This article was originally published on American Thinker and was reprinted with the author's permission.