This is an extract from an article in today's AFR. It explains what I am expecting to happen to inflation to go up significantly over the medium to longer term (ie next 10 years) which would be good for gold and commodities (but have no idea how good). It will be a volatile ride.

I have held the opinion since last year that the only way to solve the massive debt problem the world has is allow inflation to go a lot higher than the past 10-20 years and repress bond yields which is what this article is stating and what happened after WWII. Inflation does not need to reach the levels of the 1970s to do that. The key quote in the article is
"But if inflation is the new scourge, it’s also the only viable escape mechanism."
I have underlined the key parts. This is the author: Jonathan Shapiro is a senior AFR writer. He writes about banking and finance, specialising in hedge funds, corporate debt, private equity and investment banking.

The slow demise of Tea Party politics

It’s hard to believe that it was a little less than a decade ago that the Tea Party movement reached its nadir. These hardliners preached fiscal rectitude as the only way to save America from inevitable ruin, as the government debt position ratcheted up.

Around the time the Tea Party was gaining traction, European leaders were also espousing the importance of austerity.

They were informed in part by the work of celebrated economists Carmen Reinhart and Kenneth Rogoff, who identified a point of no return where a level of indebtedness suffocated a nation’s long-term prospects. As belts were tightened, the European continent was plunged into recession.

Well, times have certainly changed. In Europe austerity was ditched. A University of Massachussetts Amherst student discovered Reinhart and Rogoff’s spreadsheet didn’t correctly add up, and when countries such as Australia and New Zealand were included, the debt-to-GDP point of no return was higher than they thought.

Lately, in response to the COVID-19 outbreak, governments were left with little choice but to change their philosophies on debt and deficits.

And so we are entering a new era of fiscal profligacy. The Tea Party has failed to resurrect itself or recruit sitting politicians to its cause even as the Biden administration unveils monstrous spending packages.

As US strategist John Fagan told clients of UBS, there is simply “no constituency for fiscal rectitude”. Attempts to “rekindle the fire about concern for the debt” have shifted to the threat of rising inflation.

“Inflation is now the big talking point to push back on big spending items,” Fagan said on a webinar hosted by UBS on Wednesday.

But if inflation is the new scourge, it’s also the only viable escape mechanism.

In fact, high levels of inflation are what eroded Australia’s high postwar debt levels, allowing it to grow and prosper. It’s the data point Rogoff and Reinhart’s faulty spreadsheet missed when it spat out the point of no return of 90 per cent debt-to-GDP (Australia’s gross debt exceeds 100 per cent).Larry Jeddeloh, another expert speaking on the same UBS panel, recounted a similar experience in the postwar US.

The short-term Treasury bill rate, which is more easily influenced by policymakers, was kept ultra low while the 10-year bond rate increased by 2 per cent in the seven years after the war. It was a classic case of financial repression.

“It took us five to seven years to work that [debt] off using inflation,” said Jeddeloh.“My guess is we’re in the same period [as the postwar years]. We have started the same kind of process, where this president, and probably the next one, are looking at the same problem.”

A decade or more of financial repression might solve the debt problem. But it’s not going to be good if you own government bonds.

Jeddeloh actually thinks the US 10-year bond rate could fall materially from here. He believes it has to come down in order for debt servicing costs on the growing pile of debt to remain flat.

But if policymakers do succeed at delivering inflation, and he believes the signs are there that we are experiencing more than a transitory rise in prices, that can’t be good news for investors in government bonds.

Naturally, investors are hunting for appropriate inflation hedges to protect them from this scenario. Some out there believe cryptocurrencies may be the answer. Others are pinning their hope on good old gold.

Jeddeloh says gold isn’t really a good inflation hedge, except over decades-long time horizons. Where it works best, he says, is in times of system failure – real or perceived.

“We’re getting to the point now where there’s going to look like there’s been a system failure somewhere.

“Not that there will be one, it just has to look like one.

”In 2020, when gold surged, there was a real risk of system failure. But in 2011, as politicians dug their heels in over the debt ceiling, it was a perceived failure that catapulted the price of the precious metal.