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Adam Fergusson: “Inflating your economy means playing with fire”
GoldMoney founder James Turk interviews When Money Dies author Adam Fergusson, who discusses the parallels and differences between the Weimar inflation and the situation in the US and Europe today. “I don’t see how any of these [Western] economies can grow their way out of the extraordinary debts that they have.” Continue reading
Michael Maloney: “We pay tax for the privilege to have currency”
In this video excerpt from the Casey Summit When Money Dies, Rich Dad advisor Mike Maloney explains how currency is created, “fractional reserve banking,” and why our banking system is a pyramid scam of epic proportions.
How Does Inflation Affect You?
When people go the the grocery store and see ever higher prices they know how inflation affects them. But when they are feeling more philosophical they might reason that if all wages and prices increased at the same rate it would all balance out in the end right?
Well theoretically yes but in reality it never works that way. Prices of various items all increase at different rates so some people are benefiting while others suffer. Those on fixed incomes suffer the most because the cost of things they are buying increases but their income stays the same.
This is where COLA or “Cost Of Living Allowance” comes in it is an adjustment that is made to compensate for the increase in prices due to inflation. Continue reading
The Way Out of Our Economic Mess
By Terry Coxon, Casey Research
“A rock and a hard place” is a long-running theme of Casey Research publications. It refers to the dilemma the US government has wandered into with its continued policy of rescue inflation. The “rock” is what will happen if the Fed pauses for long in printing still more money – the collapse of an economy burdened by an accumulation of mistakes that rescue inflation has been keeping at bay. The “hard place” is the disruptive price inflation that becomes more likely (and likely more severe) with every new dollar the Fed prints to keep the effects of those mistakes suppressed.
When the dollar was cut loose from the gold standard in 1971, the Federal Reserve was freed to create as much new money as it saw fit, whenever it saw fit. Enabled, it turned with enthusiasm to doing what central bankers imagine they are supposed to do – eliminate downturns in the economy. The Fed fancied itself as being on the answering end of a 911 system: whenever the financial markets signaled distress, whenever the economy came down with the flutters, the Federal Reserve would dispatch a van, an ambulance, a fire engine or even an assault vehicle, whatever seemed right but in every case full of cash.
To most people, rescue inflation was entirely agreeable. It made their world more comfortable and seemed to make it safer. Comfortable, yes. Safer, no. The pernicious but entirely welcome effect of rescue inflation was to cover up mistakes and keep them going. It allowed people – especially people handling other people’s money – to make progressively bigger mistakes. Lending on implausible mortgages and buying securities tied to those mortgages are the most recent examples, follies that required decades of training. Continue reading
Money Multiplier
What is the Money Multiplier?
In a fractional reserve system like we have here in the United States money is loaned out by banks and by law they are only required to have a fraction of the amount they loan out. For example they might be required to keep 10% in reserves. In other words, they may have $10 million dollars in deposits but because not everyone will come in to claim their dollars at once the bank may loan out $9 million dollars. But the multiplication doesn’t end there the $9 million will be deposited at another bank and that bank can loan out 90% of that or $8.1 million and that will be deposited in another bank who can loan out another 90% and so on.
In our article, How Wealth Can Simply Evaporate Bob Stokes gives the following example: “…a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, ‘a million dollars,’ and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one.” This is the perfect example of Continue reading
Velocity of Money
What is the velocity of money?
Simply defined the velocity of money is the turnover in the money supply. A shop owner can measure how fast his inventory is selling by calculating “inventory turnover.” To do that he simply calculates Total Sales ÷ Average Inventory for the period in question. See: Inventory TurnOver for more information.
But if you expand the idea of turnover to the entire country you get the “Velocity of Money”.
Strictly speaking all the velocity of money tells us is how long people hold onto their money. But from that we can infer their motives and perceptions of the economy in general…
Velocity of Money Calculation
To Calculate the Velocity of Money you simply divide Gross Domestic Product (GDP) which is the total of everything sold in the country by the Money Supply. Thus Velocity of Money= GDP ÷ Money Supply. Now there is some debate about the proper measurement of the money supply. The most most restrictive measure of money supply is M1 which basically includes short term money i.e. money that is available immediately. So that would be cash and checking accounts, NOW accounts and demand deposits i.e. money you can get your hands on immediately.
There is a good argument that this is the best measure of velocity of money because you want to look for an increase in the cash people are looking to hold. If people are Continue reading
Bud Conrad: Volatile Markets Show Original Credit Crisis Is Still With Us
Bud Conrad, Chief Economist
Bud Conrad, the chief economist for Casey Research, sat down with Jim Puplava on the Financial Sense Newshour to discuss the ongoing debt crisis, the fate of the Euro, Fed policy, and other key issues. “The situation is that the world’s economy is not well balanced. We in the US have taken over the bank debt by bailing out banks and taking over Fannie and Freddie, but we haven’t handled the government debt and deficits in a way that we can get through this storm.” Click play below to listen to his interview in its entirety.
Recession Watch- Where are We Now?
Recessions are generally caused by a shrinking money supply and/or an increase in demand for cash.
In the last two years the M1 money supply has grown by 40% and still the economy is weak, the unemployment rate is high… basically no recovery. Why? In this article Terry Coxon discusses the slow recovery and how it compares to previous recessions.
~Tim McMahon, editor
Economically Sleepwalking
Terry Coxon, Senior Economist
Until the Great Depression of the 1930s, the average length of a recession was 21 months. The misery that began in October 1929 lasted five times that long – 105 months…. the government pursued an array of policies to prevent prices from falling, which had the perverse effect of preventing the economy from recovering. The government’s would-be medicine was, in fact, poison.
Every recession between the Civil War and World War II ended on its own. In no case was a recession brought to an end by the actions of an alert government agency or with the advice of learned economists.
The rebound from the recent recession is the slowest economic comeback in living memory – so slow that some doubt whether it is happening at all. The recession bottomed (the economy stopped shrinking) in June 2009, so the recovery is now two years old. Here’s how things looked 24 months into recovery from the last four recessions. Continue reading
Five Things You Need to Know About the Economy
By David Galland, Managing Director, Casey Research
At any point during the recent negotiations in Washington over the debt, did you seriously think for even a second that the U.S. was about to default?
Of course, in time the U.S. government (along with many others) will default. However, they are highly unlikely to do so by decree or even through the sort of legislative inaction recently on display. Rather, it will come about through the time-honored tradition of screwing debtors via the slow-roasting method of monetary inflation.
Yet most people still bought into the latest drama put on by the Congressional Players – a troupe of actors whose skills at pretense and artifice might very well qualify them for gilded trophies at awards banquets. Instead, rather than glittering statuettes, these masters of the thespian arts settle for undeserved honorifics and the pole position at the public trough. Followed by lifelong pensions. Continue reading
Its Weight in Gold: The Real Prices of Things
Fiat currencies
By Charles Vollum, Casey Research
Fiat currencies the world over are being manipulated by central banks, which is distorting asset and commodity prices. Successful investing requires that investors have a good idea of what things cost and what they are really worth – and using the world’s oldest and most stable form of money, gold, to compare prices is one way to get that insight.
To that end, below is a sampling of current prices measured in grams or milligrams of gold. Price comparisons are against prices as of June 10.
Fiat Currency Watch:
| Change from: | |||
| Price in Gold | Week ago | Year ago | |
| USD | 20.3 mg | 0.7% | -20.4% |
| CAD | 20.8 mg | 0.7% | -15.7% |
| EUR | 29.7 mg | 1.9% | -3.9% |
| JPY | 0.254 mg | 1.7% | -9.4% |
The month of May was rough for all the currencies, with the EUR and JPY making new all-time lows on the 24th and 25th, respectively, while the USD made a new all-time low on June 6th. Since then, they have all been struggling to regain the lost ground. Last week, the much-beleaguered euro made the most headway, followed by the JPY. All of the currencies are down significantly from their year-ago levels, but the USD has fared much worse than the others, down 20%. Continue reading
