Your Place in Cyber Space for Inflation Data
The U.S. Bureau of Labor Statistics released the Annual Inflation Rate data for the year through the end of June on July 12th 2018. Annual Inflation is Up Annual inflation rate was 2.87% in June up from 2.80% in May, 2.46% in April, 2.36% in March and 2.21% in February. CPI-U was 251.989 in June, 251.588 in May, 247.867 in January and 246.524 in December. Monthly Inflation for June was 0.16% while May was 0.42%, April was 0.40%, up from 0.23% in March 2018. June 2017 was only 0.09% … [Read More...]
There are many types of disruption, some can cause higher inflation but there are other types that can lower inflation and improve people’s lives.
Inflation occurs when the cost of a representative basket of goods and services is rising. It is a general trend that takes place in an economy, it is not restricted to individual items. When prices start rising, it is possible that households will run into money shortages. Of course, it all depends on whether earnings are keeping pace with inflationary pressures. This shortfall can cause personal consumer debt to mount. Compounding this problem is that often during an inflationary cycle unemployment begins rising as people get laid off. The connection between debt and inflation has been the subject of intensive economic research and activity for decades. The general consensus is that high levels of government debt cause inflationary pressures.
The Bureau of Labor Statistics released the Annual Inflation data for the 12 months through May on June 12th 2018. Inflation was up sharply as projected. Annual inflation for the 12 months ending in May was 2.80% up from April’s 2.46%. The increase was primarily because May 2017’s monthly inflation rate was only 0.09% so when May 2018 came in at 0.42% we saw a 0.33% jump.
Inflation Risk aka. “Purchasing Power Risk” is the risk due to a decrease in purchasing power of assets or cash flow due to inflation. A typical example would be a bond that generates a fixed rate of return. For instance, suppose this bond is worth $1000 and generates a 5% yield i.e. $50. Suppose when you purchase the bond that $50 will buy two tanks of gas for your car. Over time inflation will reduce the purchasing power of that $50 so it only buys one tank of gas. If you are counting on using the proceeds of the bond to buy gas there is an “inflation risk” that eventually you will not be covered. The worst case example of inflation risk is if a country experiences “hyperinflation” where the purchasing power of the currency decreases on a daily basis.
Being able to identify and manage financial risks is a very important responsibility for all individuals and business owners. One financial risk that many people underestimate is the risk associated with inflation. While inflation tends to devalue your money over time, there are steps that can be followed to help manage this risk.
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Back in 1918 gasoline was $0.25 a gallon and by 1932 prices had fallen to 18 cents a gallon! But as we all know over the last 100 years the purchasing power of the dollar has fallen drastically so in order to get the true picture we can’t just say that the lowest price of gas was 18 cents per gallon, we need to adjust the price for inflation.
Electricity Price Inflation Residential electricity prices in the U.S. have risen from an average of 7.83 cents per kilowatthour in 1990 to an average of 11.44 cents per kwh in 2010. This is a 46% increase in 20 years and sounds like a lot but as you can see from the chart below for many years[Read More…]
Source: inflationdata.com | NYSE Index Inflation Commentary To Print this Chart: When Printer dialog box appears be sure to switch to Landscape mode Note: Please feel free to link to this page but not to the image itself as the image may be renamed (or deleted) when it is updated but the page URL will[Read More…]
Your Ability to Choose Should Increase Competition In years past consumers didn’t have a lot of choice when it came to their natural gas supplier, they were tied to the local gas utility, so if they wanted to charge a 541% markup you were pretty much stuck. But just prior to the new millennium states began[Read More…]
Inflation Adjusted Real Estate Prices- Lets take a look at the idea that housing prices always go up. Of course, each neighborhood is different, so some neighborhoods might be going down while a few miles away housing prices are skyrocketing but by looking at the nationwide average we can get a better picture of the overall trend. The St. Louis Federal Reserve publishes the following chart that shows the S&P/Case Shiller National Home Price Index and by adjusting those prices for inflation we can get a better picture of how real estate prices really act. Is a home a good investment or not?
Inflation Indexed Bonds Performance- U.S. Treasury Inflation indexed bonds are supposed to protect you from the ravages of inflation while providing a safe and decent rate of return on your money. Obviously, since safety is generally inversely proportional to risk, if inflation indexed bonds are very safe you would expect the rate of return to be[Read More…]
