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Should Retirement Savers Prepare for “Structural” Inflation?

Isaac Nuriani    |
Oct 7, 2022
  • Structural inflation could mean permanent inflation
  • Rejection of globalization is one reason inflation could be chronically higher
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Sources of the acutely high inflation we’ve been forced to endure are generally considered to be near-term drivers associated with the global pandemic. Early on, the most popular explanation for soaring prices seemed rooted in the fact that consumers spent less because of lockdowns, and also had more of an opportunity to save money. Then, when conditions eased, pent-up consumer demand for goods and services overwhelmed available supply, driving prices up.

Ongoing supply-chain disruptions have been another popular pandemic-related explanation for inflation. As producer nations – most notably, China – maintain an adherence to strict COVID-19 public safety measures, global supply chains have proved unreliable.

Some economists blame the fiscal and monetary pandemic responses for inflation, as well. Fiscal years 2020 and 2021 saw the two highest annual budget deficits in U.S. history.[1] And the nation’s M2 money supply increased by more than 40% from early 2020 to mid-2022.[2]

Given the implied shorter-term nature of these particular influences, it makes sense to think the dramatically higher inflation we’re dealing with right now can last only so long.

But as it turns out, there are indications that other, more “structural” inflation influences are lurking. These influences raise the possibility that inflation above 2% could persist well beyond the point at which acutely high prices subside.

There are three structural inflation risks, in particular, that we’re going to examine in this piece: expansionary fiscal policy, a move away from globalization, and the transition to green energy. By themselves, each has the capacity to create problematic inflationary challenges for retirement savers. Together, these risks have the potential to alter the broadly disinflationary economic paradigm the U.S. has known for decades and – as a result – raise the stakes substantially for Americans trying to ensure financial viability in retirement.

The Case for Higher Structural Inflation

 “Permanent” expansionary fiscal policy

For some time now, there’s been an apparent upward trend in the number of Americans who are all too happy to trade self-reliance and rugged individualism for greater dependence on government. A 2019 Gallup poll saw a big uptick – compared to the same poll’s 2010 results – in both the number of people who think government should do more to solve problems and the number who think government should be actively involved in trying to improve the lives of citizens.[3]

And, mind you, that was before the pandemic.

When the pandemic did hit – complete with widespread lockdowns, soaring unemployment levels and plenty of other fallout – the government moved quickly to provide the support that Americans as a whole seemed to think was more than appropriate. By the time the dust had settled, years 2020 and 2021 saw 165 million Americans received three rounds of so-called Economic Impact Payments totaling nearly $1 trillion.[4]

It’s reasonable to speculate that rapid and generous COVID-19 assistance has set the tone for expectations of future stimulus. As signs of an economic downturn continue to grow, there already is talk of direct stimulus payments being used to help Americans weather the impact of the next recession.[5] And right now, a number of states are arranging for “inflation relief” payments to be disbursed to citizens as a way to help them negotiate the challenges posed by exceptionally high prices.[6]

In a paper prepared for the International Monetary Fund some years ago, noted Harvard economics Professor Kenneth Rogoff wrote declaratively that “since the invention of money, pressure to finance government debt and deficits, directly or indirectly, has been the single most important driver of inflation.”[7] Based on the citizenry’s growing expectation of government assistance, it seems likely that profligate spending and supportive monetary policy are well on the way to becoming more permanent features of the economy – along with the inflation that Rogoff and others say will follow it.

Move Away from Globalization

The second leg of the structural inflation “stool” we’re going to cover is an anticipated and lasting step back away from globalization. Globalization simply refers to greater connectivity among nations and regions of the world. In the context of economics, globalization is the international movement of goods, services, money and technology.

Globalization has not only been a part of the evolution of the global economic order but a primary driver of that evolution. There’s a variety of specific ways that globalization can serve as a disinflationary force in the economy, but generally speaking, the cost of manufacturing sinks as competition becomes more widespread and intense.

Now, however, the globalization winds appear to be shifting in the opposite direction.

Last week, I discussed the assessment of Rebecca Patterson – chief investment strategist at world’s-largest-hedge-fund Bridgewater Associates – that we could be looking at an extended period of stagflation. A broad move away from globalization is one of the reasons Patterson sees higher inflation remaining a part of the economic landscape even after prices retreat from the substantially high levels at which they currently sit.

“Globalization, over the last few decades this was a major disinflationary force,” Patterson says. “Today we’re in a world with tensions with China, the Russian invasion of Ukraine, the pandemic, all these things have led companies to say, ‘I need to make sure my supply chains are resilient, not just low-cost.’”[8]

“And that means bringing production home or to nearby countries,” she adds. “That’s inflationary and that is a change from what we had in the past.”[9]

Sure enough, there are signs suggesting that a move toward “onshoring” – which is the relocation of manufacturing and/or other business operations back within national borders – is very much underway in the U.S. A Bloomberg article from July cited data from analytics firm Dodge Construction Network that says the construction of new manufacturing facilities in the U.S. has jumped 116% in the past year.[10]

To clarify, it’s not reasonable to assume that all of those projects are attributable to onshoring, specifically; some surely are rooted in growth of operations. But the same article highlighting that data also notes another potentially revealing piece of information: According to Bloomberg, the number of explicit mentions of “onshoring,” “reshoring,” and “nearshoring” on company earnings calls is way up.[11]

As Rebecca Patterson might say, it appears that companies now are making it a priority to “bring production home.” And as they do, the disinflationary benefit of globalization is expected to evaporate.

Green-Energy Push

The third leg of the structural inflation “stool” I want to discuss here is the potential inflationary effect arising from the worldwide push toward green energy.

Green energy as a catalyst of structural inflation has been on the radar of economists for some time. There’s even a clever portmanteau that’s been generated on behalf of the concept: “greenflation.”

There are different specific sources of upward price pressures stemming from the move toward green energy. For example, as energy companies increasingly move toward a green-energy orientation, investment in fossil fuels is diminishing and creating a secular imbalance in supply and demand. It’s worth noting that even as oil prices were rising prior to the Russian invasion of Ukraine, capital expenditure (capex) had been dropping significantly.[12]

“And as we push and reduce the supply of dirtier energy,” Bridgewater’s Rebecca Patterson says, “it’s going to limit that supply, which is going to increase the price.”[13]

Another anticipated source of chronic inflation arising from the shift to green energy is the demand for those commodities essential to green-energy technologies. Among those resources is lithium, which is critical to car batteries, as well as copper, which possesses the very green-energy-friendly properties of conductivity, malleability and recyclability. Global asset manager Abrdn foresees “broader imbalances in commodity markets beyond oil and gas” as the transition to green energy continues. They cite data from the World Bank suggesting the mining of key green-energy minerals will need to increase by 500% between now and 2050 in order to meet anticipated green-energy demand.[14]

Earlier this year, Isabel Schnabel, a German economist and member of the European Central Bank’s executive board, suggested in no uncertain terms that “greenflation” is neither transitory nor poised to improve.

“The combination of insufficient production capacity of renewable energies in the short run, subdued investments in fossil fuels and rising carbon prices means that we risk facing a possibly protracted transition period during which the energy bill will be rising,” Schnabel said.[15]

So as structural inflation becomes embedded in – and reshapes – the economic landscape, retirement savers are going to wonder if there’s anything they can do to mitigate the impact.

I have a few thoughts about that.

Even Modest Inflation for Extended Periods Can Greatly Impact Savings

As I noted, the chance of higher inflation lasting for a greatly extended period represents a potential sea change to the prevailing economic order. Accordingly, it also suggests this possibility: that retirement savers might be especially well-served by augmenting their long-term savings regime with core assets that historically have demonstrated the potential to thrive during inflationary and other economically adverse environments. Among these assets are physical precious metals.

Notice that I referred to “core” assets. There can be a tendency to think of precious metals as assets to be deployed tactically, for a more limited time on behalf of economic turbulence expected to last for a shorter duration. However, the prospect of structural inflation settling in to the domestic and global economies could demand that those who’ve viewed metals in such a fashion up to this point may want to rethink that perspective.

Ultimately, retirement savers will have to decide for themselves if precious metals are suitable additions to their own base of assets. But this much seems clear: Acutely high inflation continues to be a problem today, while chronically elevated prices could be a problem long after. And given that a relatively modest inflation rate of 3% sustained over 20 years can cut the purchasing power of accumulated savings by nearly half, it only makes sense that savers will want to do something to lessen the impact of structural inflation.


[1] Kimberly Amadeo, The Balance, “US Budget Deficit by Year Compared to GDP, the National Debt, and Events” (April 5, 2022, accessed 10/6/22).
[2] John Greenwood and Steve H. Hanke, Wall Street Journal, “The Fed Ignored the Money Supply, and a Recession Is Coming” (July 7, 2022, accessed 10/6/22).
[3] Jeffrey M. Jones and Lydia Saad, Gallup, “U.S. Support for More Government Inches Up, but Not for Socialism” (November 18, 2019, accessed 10/6/22).
[4] Government Accountability Office, “Stimulus Checks: Direct Payments to Individuals during the COVID-19 Pandemic” (June 29, 2022, accessed 10/6/22).
[5] Annie Nova,, “How likely are stimulus checks to be used in the next recession? Economists weigh in” (June 22, 2022, accessed 10/6/22).
[6] Megan Henney,, “Stimulus check update: These states are sending ‘inflation relief’ payments” (July 25, 2022, accessed 10/6/22).
[7] Kenneth Rogoff,, “Globalization and Global Disinflation by Kenneth Rogoff, Economic Counselor and Director, Research Department, IMF” (August 29, 2003, accessed 10/6/22).
[8] Jennifer Ablan, Pensions & Investments, “Bridgewater’s Rebecca Patterson: Fed risks credibility in inflation fight” (August 25, 2022, accessed 10/6/22).
[9] Ibid.
[10] Brendan Murray,, “CEOs Start to Turn Supply-Chain Reshoring Talk Into Action” (July 6, 2022, accessed 10/6/22).
[11] Ibid.
[12], “Is the drive to green energy pushing up inflation?” (January 31, 2022, accessed 10/6/22).
[13] Ablan, “Bridgewater’s Rebecca Patterson.”
[14], “Is the drive to green energy pushing up inflation?”
[15] Javier Blas, Washington Post, “Greenflation Is Very Real and, Sorry, It’s Not Transitory” (January 10, 2022, accessed 10/6/22).
















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