A Storm Is Coming: High Prices and Slowing Growth
Are Converging
Peter Reagan

Sometimes life doesn’t space things out for you.

It stacks them.

A broken appliance. A medical scare. A bill you weren’t expecting. None of those things are unusual on their own – but when they arrive together, that’s when it starts to feel overwhelming.

Lately, I’ve been thinking about how much the economy is starting to feel the same way.

Not one big crisis.

But many smaller pressures… arriving at the same time.

These aren’t separate problems

A recent Reuters report noted that U.S. manufacturing activity picked up last month – which sounds like good news!

But in the same report:

• Input costs rose to their highest level in four years
• Supplier delivery times slowed
• Backlogs began building

That’s not a “mixed” picture. It’s a financial system under pressure.

Higher costs make it harder for businesses to expand or raise wages. Slower deliveries mean production increases may not last. And both of those forces tend to push prices higher for everyone.

We’ve seen this kind of chain reaction before:

Costs rise. Supply tightens. Prices increase. Families feel the squeeze.

And once that process starts, it doesn’t stay contained.

The pressure hasn’t fully arrived yet

Energy is a good example.

Recent geopolitical tensions have already pushed fuel prices higher – something you’ve probably noticed at the pump. Bloomberg tells us that, today, dated Brent crude oil (the key real-world crude price) hit the highest level since 2008. Gas prices have already risen over $1/gallon over the last few weeks. Yes, they'll keep going up.

But historically, that’s just the first stage.

Higher energy costs work their way through the financial system:

• The cost to produce raw materials (agriculture and mining) rises
• Shipping becomes more expensive
• These raise input costs for manufacturers, so wholesale product prices rise 
• Retail prices adjust last (but, inevitably, they go up, too)

In other words, what you’re seeing now looks like the beginning – not the end – of that price pressure.

Generally speaking, higher prices slow economic growth. Today, though? Economic growth is already slowing...

Cooling economic growth

According to The Economist, economic growth has already plunged from 4.4% in the 4th quarter of 2026 to 0.7% in the first quarter of 2026.

Yes, it's still positive! But the magnitude of the difference shows us just how fast the slowdown occurred. An 84% decrease in economic growth in just three months is the economic equivalent of stomping the brake pedal and the emergency brake at the same time.

Slower growth doesn’t cancel out rising prices. It makes them worse.

The combination puts us in a situation where:

• Everything costs more
• But incomes and profits don’t keep up

Worse still, that gap doesn’t just disappear. Over the long term, if we're lucky, profits and incomes eventually rise to meet higher costs. 

In the meantime, though? That gap between costs and income has to get filled. Most often with debt. Sometimes with cutbacks, aggressive budgeting and downsized or canceled plans. Those downsized or canceled plans might be trivial (a summer "staycation" instead of a family trip to Disneyworld, for example). Or they might be life-changing – pushing back a planned retirement another five years, in the hopes your savings will catch up with higher costs.

So what do we do in this situation? Fortunately, history offers some vital lessons...

We’ve seen this pattern before

I’m not one for dramatic predictions. As Yogi Bera famously said, 

"It's tough to make predictions, especially about the future."

But I do pay attention to patterns. History doesn't repeat, it rhymes. This combination of economic forces – rising costs, slowing growth, and energy pressure – has a precedent.

The 1970s. Also known as "the lost decade" of American prosperity. 

Birch Gold Group contributing writer Brandon Smith of Alt-Market.com offers this bleak thumbnail sketch:

House prices nearly tripled from 1970 to 1980 (the median house price was $17,000 in 1970 compared to almost $50,000 in 1980). Annual inflation on most goods and services was in the double digits and the minimum wage was only $1.45 an hour. Unemployment was high [peaking at 10.8%]1 and interest rates were eventually hiked to nearly 20% by 1981.

Back then, it wasn’t one single policy mistake or one isolated shock. It was multiple forces reinforcing each other at the same time:

• An extreme oil price shock
• A Federal Reserve under pressure from the White House to lower interest rates despite inflation
• Persistent high levels of federal deficit spending to fund both warfare and welfare simultaneously

The result was something most people hadn’t ever seen before: A slow economy… paired with persistently high inflation.

Economists had to invent a new word to describe this dynamic... We now call it stagflation.

I’m not saying we’re there. But consider the parallels to today:

• An extreme oil price shock (gas up 33%; dated Brent crude at 18-year highs)
• A Federal Reserve under pressure from the White House to lower interest rates
• Persistent high levels of federal deficit spending (the President's 2027 budget raises federal spending 22%)

Eerily similar, right? That's what has me so concerned. Worse, though, it's remarkably difficult to end stagflation...

When the cure is worse than the disease

Situations like this are difficult to manage, because the usual tools work against each other.

Fighting inflation by raising interest rates slows the economy even further. But stimulating growth by lowering interest rates makes inflation worse...

There’s no clean solution – only trade-offs. 

Paul Volcker famously broke the back of stagflation, but the cure, at the time, seemed worse than the disease. Volcker's "strong medicine"touched off two recessions, almost back-to-back. Interest rates peaked near 20%. Construction and homebuilding companies pieces of lumber to Volcker's office in protest, saying they didn't need lumber because nobody could afford to buy a home.

Image via Museum of American Finance

The Federal Reserve itself tells us: 

Farmers protested at the Federal Reserve's headquarters, and car dealers, who were especially affected by high interest rates, sent coffins containing the car keys of unsold vehicles. Many people also wrote letters to Volcker telling him how they had saved for many years to purchase a home but were now unable to because of high rates.

Volcker ruined many lives and many businesses went bankrupt... But he saved the economy. Eventually. And in the meantime, families were forced to deal with the consequences, day by day.

What this means today

This is the part that often gets missed.

It’s not just about economic terminology.

It’s about what it feels like day to day:

• Groceries costing more than expected (or more than you can afford)
• Gas taking a bigger bite out of your budget 
• Running out of money before the end of the month, over and over again
• ...and the whole time, papering over the gap between costs and income with debt

All this is not because of one big shock. But because multiple pressures are hitting at once.

In times like these, prudent people tend to shift their focus. 

Less on growth.

More on stability.

Less on chasing returns.

More on preserving what they’ve already saved.

That’s one reason physical precious metals have remained relevant through so many economic cycles. Physical precious metals, almost uniquely among financial assets, aren't debt-based. They aren't an IOU or an option on hypothetical future profits. Physical gold and silver aren’t affected by the same pressures that drive inflation and currency fluctuations. They sit outside that debt-based financial system. 

That gives gold and silver powerful diversification benefits you can't find anywhere else. If you want to understand how that works – and how many Americans are taking advantage of those benefits today – you can request our free 2026 Precious Metals Info Kit.

 

 

Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.

 

www.birchgold.com