Summary: Lacy Hunt and Van Hoisington launch into their first-quarter "Review and Outlook," this week with a statement that some may find eye-opening: "The Federal Reserve (Fed) is not, and has not been, 'printing money'…" But given the facts of life about how money is really created (and destroyed), they are of course right: it's all about the acceleration – or deceleration – in the M2 money supply. Van and Lacy say, "A review of post-war economic history would lead to a logical assumption that the money supply (M2) would respond upward to [the Fed's] massive infusion of reserves into the banking system. Mystery Math- Monetary Base up 350%, M2 Up 35%? And yet, the Fed's 3.5x … [Read more...]
The Economics of Disasters Like Hurricane Sandy
Many people believe the fallacy that wars and disasters are good for the economy, perhaps because some people like defense contractors and home-builders benefit. But it is important to understand how wealth works. If you build a house from raw materials you are richer. For instance suppose you take $50,000 worth of raw materials and add $50,000 worth of labor and come out with a house worth $150,000. in that case you created $50,000 worth of wealth out of thin air. But if someone comes along and knocks your house down and you rebuild it: 1) Are you better off? 2) Worse off? 3) The Same? ~ Tim McMahon, editor In this article Kerk Phillips looks at "hurricane economics". Even Economically, … [Read more...]
Why Inflation is U.S. Hottest Export
Last week, we went to São Paulo, Brazil. There, too, we found taxi drivers who knew a lot more about monetary crises than the typical US economist. Said one: I remember. I was just a kid. But my father would call and tell us to run to the grocery store. He had just been paid. We'd dash for the grocery story, meet him there and buy everything we could. We spent every cent in just a few minutes. Our friend was recalling what it was like in the late 1980s in Brazil. The government had caused inflation... then hyperinflation. Prices rose so fast that as soon as people got some cash they ran to the grocery store to spend it. Later, there was no point. In 1990, hyperinflation in … [Read more...]
Why Money Printing Makes You Poorer
Here is an excellent article by Bill Bonner on the announcement that Japan made that they are going to crank up the printing press and eliminate the deflation that has been plaguing their economy over the last twenty years. In it he explains the effects of money printing both short term and longer term. He also debunks the idea of where demand actually comes from. He says, "People always want stuff. Demand is infinite. Government doesn't have to stimulate it. What really matters is buying power."~Tim McMahon, editor Why Money Printing Makes You Poorer Last week, Japan announced that it would undertake a bold and radical experiment. After 23 years of on-again, off-again deflation, the new … [Read more...]
What is the Phillips Curve?
The Nature of the Phillips Curve The Phillips Curve is an economic concept was developed by Alban William Phillips and shows an integral relationship between unemployment and inflation. Phillips began his quest by examining the economic data of unemployment rates and inflation in the United Kingdom. He tracked the data over business cycles, and found wages increased at a slow rate when unemployment was high, and faster when the unemployment rate dropped. Business cycles are basically economic activity over a lengthy period of time. Originally, business cycles were thought to be predictable, but they have since proven themselves to be irregular in the areas of duration, frequency and … [Read more...]
What Does 8% Inflation Really Mean?
By Dennis Miller Eight percent is not good news. In my latest article I shared some reader feedback from our inflation survey, and in case you missed it, the Money Forever Reader Poll Inflation Rate is 8%. But what does that number really mean for us – seniors and savers trying to protect our buying power? It's time to read the tea leaves and find out. Up to Your Ass in Alligators You may remember the old poster that read, "When you are up to your ass in alligators, it's tough to remember the goal was to drain the swamp." You may have felt overwhelmed during the last few years, as the investment options for your retirement portfolio changed. You might read about the benefits of gold … [Read more...]
Gold Mining Stocks are Down – What’s Up?
For many years now I've been saying that Gold is a Crisis Hedge rather than an inflation hedge. But it is also a commodity and a monetary instrument. Thus there are a variety of factors affecting its price at any given time. Currently as the world economy continues rolling on people are less worried about catastrophe around the corner and they are beginning to believe that the FED is all powerful and can paper over any and all monetary problems with the stroke of a pen. So why worry? This has taken some of the edge off the urgency to buy gold. Plus as the stock market reaches new highs the "opportunity cost" of holding gold increases. So does this mean that gold is headed for the dustbin and … [Read more...]
Could a Raise in Minimum Wage Trigger Inflation?
Here at Inflation Data we believe that all other things being equal the primary cause of inflation is an increase in the money supply, i.e. "too much money chasing too few goods." But raising the minimum wage may cause other distortions that will have an effect on the economy so that one simple stroke of a pen can still have a major impact. ~Tim McMahon, editor The Law of Unintended Consequences When the Government increases the minimum wage that employers need to pay to their employees, does it cause more problems later? The Government speaks of a raise as a good thing for the economy in order to boost sales (through more disposable income for the poor) and help low-income families pay … [Read more...]
Sequestration, Currency Wars, Inflation and Ben Bernanke
By Douglas French Laissez Faire Club Only in government speak can more = less We thought for sure the shrill cries of Sequestration hell, fire and brimstone were going to get Congress to hit the panic button and reach a deal. As such, they didn't. And while sequestration takes effect, we'll leave you with this one thought: even though $85 billion is getting "cut" from the federal budget... the government is still going to spend $15 billion more than they did last year. $85 Billion Cut = $15 Billion More Spending In the meantime, Doug French treats us to a look behind the curtain: Ben Bernanke an inflation hawk? Read on... Benny and the Monetary Jets "My inflation record is the … [Read more...]
Costs of Inflation in Business
The current UK inflation rate is 2.7 percent. So what does this mean? The term inflation refers to a general rise in the price of a goods and services. This means the price of a basket of goods this year are, on average, 2.7 percent more expensive than last year. See Also: What is the Real Definition of Inflation? Costs of Inflation Most countries adopt a inflation targeting policy; for example, the Bank of England targets the inflation rate at 2 percent. Generally, governments prefer inflation so they can repay their debts with money that is worth less. If they had their way they would inflate their debts away at a much higher rate than 2%. So why is high inflation deemed a bad … [Read more...]
