Many investors consider the recent drop in gold, silver and platinum prices to be the perfect opportunity to build (or add to) their precious metals position. With the price down, the basic law of supply and demand has kicked in and demand for silver bullion and silver coins has risen sharply. Short-term, supply has gotten tight, as some dealers scramble to keep up with demand. We also saw a major disconnect between Physical Gold vs. Paper Gold as a massive sell order hit the futures market to sell 400 tons of gold! But at the same time small buyers rushed to their local dealer to take advantage of the price drop and stock up on the physical metal. And of course since gold and silver … [Read more...]
Long Term U.S. Inflation
We have updated the charts on long Term Inflation, including Average Annual Inflation by decade, Cumulative Inflation by Decade and Cumulative Inflation since 1913. The Chart below shows the Annual Inflation Rates for each decade. Each bar represents the average Annual Inflation for that decade (not the total cumulative inflation for that 10 year period but how much it increased each year on average during that decade). Do you know: 1) Average Annual Inflation since 1913: 2) That deflation in the "Roaring 20's" was almost as bad as in the "Great Depression" of the 1930's? 3) How Crop Subsidies affected farm prices in the 1920's and 30's? 4) How the proliferation of … [Read more...]
Inflation Trends since 1914- The 15 year Cycle
Inflation like everything else it seems has cycles. It trends up for years and then for almost no reason begins falling again. After a while it rises again. Unfortunately, while it is doing its long term dance it is bouncing up and down creating so much "noise" that it is difficult to see the longer term trend. The chart below shows this trend by adding a 5 year moving average to the inflation rate. This smooths out the noise so we can see the underlying trend. And surprisingly it is actually quite regular. Inflation Cycles Approx. Every 15 Years From the chart we can see that beginning in 1917 we had 15 years of declining inflation until the bottom in 1932. From there inflation … [Read more...]
Regarding Gas Inflation
Doug S. Says I'm full of It- Regarding Gas Inflation I just got the following comment from Doug S. I saw the chart on how gas prices haven't really risen when considered with inflation. I am 61 years old, and when I was working in the mid- to late-60s as a high school student, I made $1.60 an hour as minimum wage. Gas was only .25-.35 per gallon (with 'gas wars', much of the time cheaper) so with one hour of work I could purchase 5-6 gallons of gas. Now, with a minimum wage of $7.50 or so, you can only purchase a bit more than 2 gallons of gas, depending on the day of the week. Minimum wage has gone up, what, 4.6-5 times or so, but gas prices have gone up 10 times or more. Where am I … [Read more...]
Health Insurance Inflation
Since the beginning of 2012, health insurance costs have skyrocketed significantly above the rate of overall inflation. As you can see from the chart below, health insurance inflation peaked at almost 15% per year in 2012 and at 12% in 2007 while overall inflation hovered around 2%. When people focus in on one single item, this is why many people don't believe the overall inflation rate. They say, "Oh, my health insurance went up 15% how can inflation be only 2%?". But what they fail to take into consideration is that in September of 2008 when the overall inflation rate was 5% health insurance was falling 2%. Yes, according to the U.S. Bureau of Labor Statistics, health insurance costs … [Read more...]
Stimulate the Economy? Please Don’t!
Personally, I would love to see the inflation rate stay between 1 and 2% or better yet between 0% and 1%. Why? In the long run low inflation rates benefit everyone, as people can accurately judge their future costs and make sound business (or family management) decisions. In addition to making planning easier it also promotes saving because people know that the money they put away will be worth the same amount (plus interest) as that which they saved in the first place. High savings results in stability in times of need, and it provides capital for industry which generates wealth as new things are produced. But why save if the value of the money you are putting away is eroding? In a … [Read more...]
What are Derivatives and How do they Work?
Derivatives Defined According to Dictionary.com the term "derivative" means 1. derived. or 2. not original; secondary. In the financial arena derivatives are derived from a basic commodity and can be a portion of that original commodity. They are essentially contracts between two or more people. You can think of derivatives as ways of "slicing and dicing" financial contracts. For instance, a normal bond could be broken into two parts. The first part would be the underlying asset itself and any appreciation thereon. The second part could be all the interest due on that bond. This way one investor would get more leverage on the appreciation of the bond while the other investor would … [Read more...]
What is Biflation?
Biflation is a relatively new term coined by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group in 2003. It is sometimes referred to as "mixed inflation" but it basically refers to a condition where both inflation and deflation occur at the same time. This seemingly contradictory situation is not a real a paradox but simply appears to be one as a result of faulty logic. The problem results from thinking that all prices rise in lock-step in times of inflation but this is clearly not the case. It is quite common for electronics to be declining in price (deflation) while oil and gas are increasing in price. Thus we have "mixed inflation" or "biflation" however … [Read more...]
Food Price Inflation Since 1913
On March 4, 1913, the last day of his presidency, President William Howard Taft signed a bill promoting the Department of Labor to a Cabinet-level Department. That same year they began tracking consumer prices. This is also the same year that the Federal Reserve was formed to manage the money supply. Perhaps Taft worried that putting a bunch of bankers in charge of the money supply was like putting the fox in charge of the hen house and so the country needed a cabinet level department to keep an eye on them? Whatever the reason, that the Consumer Price Index was formed, a gauge, or measuring stick now exists to compare prices across the ages. Although some people believe that the … [Read more...]
International Inflation and Deflation Trends over the Past 5 Years
International Inflation Rates Had Ups and Downs Over Past 5 Years. The global economy has suffered some serious setbacks since late 2007, with some economists and experts going so far as to call it the "Great Recession," after the 1920s-era Great Depression. And that certainly is an apt term for it, as the spread of the crisis has not been limited to a few countries. Nearly every country in the world has been affected in some way, which is a telling sign of the modern international economy. Inflation is one of the key indicators as to the health of the economy, but it needs to be looked at in context in order to have any value. Economists often use stretches of five years of … [Read more...]
