At 2.06% September's Annual Inflation rate came in at almost exactly half of the 4.15% Annual rate that existed only two months earlier in July. But does that mean that all of our inflation worries are over, the FED’s tightening has worked and all is right with the world? Not Hardly! I certainly wish we were reentering the days of low inflation, low interest rates and a recovering economy. But that is not the case this month. What we have is a simple rebound effect from… believe it or not… Hurricane Katrina. It is hard to believe but the one year anniversary of Hurricane Katrina has passed. With it’s passing we have the spike in prices that it caused passing too. The interesting … [Read more...]
Protect Yourself From Inflation
Inflation Warning!!! How do you protect yourself now? In a recent article, I discussed how Gold was not strictly an inflation hedge but more a crisis hedge against worry of all sorts. See How has Gold fared as an Inflation hedge? In another article, How the Iraq War will affect the U.S. economy, I discussed how a wartime economy almost guarantees future inflation. So naturally several readers wrote to ask, “What is the best way to protect against inflation?” … [Read more...]
Inflation and the Iraq War
Inflation Warning!!! Inflation is already "baked into the cake" You need to protect yourself now! Wars almost by definition are inflationary. This has been true since almost the beginning of time. Inflation is determined by the quantity of goods vs. the available money supply. See The Definition of Inflation The very nature of War results in the destruction of goods. But in normal times money is spent to produce goods which makes the world a richer place. During a war, however, things are produced but... they are not productive things but destructive. The money is spent to destroy things. Often this is combined with an increase in the money supply in order to pay for the … [Read more...]
Inflation similarities between the 2000s and the 1970s
"even though we have not seen the volatility of the 70's we are certainly traveling in the same direction." In the 70s, gold spiked to over $800, Inflation rates were over 14%, OPEC limited the supply of Oil, there were wars in the Middle East and the U.S. economy was a wreck. In the 2000s, Gold has doubled from $250 and ounce to over $500, inflation has doubled from 2% in 2002 to over 4% in 2005, Oil supply is maxed out, the decade began with a recession... is there any chance that we are returning to the 70s? Recently I was asked, whether I saw any similarities between the 1970's and the current decade. And that got me to thinking. If you remember the 70's culminated in a double digit … [Read more...]
Goodbye M3 – What is the Government hiding?
by Tim McMahon, Editor I'm surprised we haven't heard much in the news about this but as of March 23rd 2006 the government will no longer be publishing the M3 money supply data. Most people probably say "Who Cares?" Right? But you should care! And here's why: "The Federal Reserve tracks and publishes the money supply measured three different ways-- M1, M2, and M3. These three money supply measures track slightly different views of the money supply. The most restrictive, M1, only measures the most liquid forms of money; it is limited to currency actually in the hands of the public. This includes travelers checks, demand deposits (checking accounts), and other deposits against … [Read more...]
Inflation, Oil and the Environment
I recently received a great question from a 6th Grader on Inflation, Gas Prices and the environment all rolled into one. It isn't often that 6th graders think about these issues so I would like to share my response with you... To whom it may concern, My name is Sam and I am a 6th grade student at (deleted) Middle School. I love traveling. Whenever I go places I see lots and lots of poverty. I think to myself why? Than I look ahead of me and see the outrage sky high prices for food, gas and many other things. You may be wondering why I’m telling you this .I’m doing a project on one of the things that you know a ton about. My subject is inflation of consumer and gas prices. As I think … [Read more...]
Are Prices really in “Free Fall” ?
Falling Prices: A recent article in MoneyNews from NewsMax.com states “Consumer Prices in Free Fall- Consumer prices have not been this low since 1949”. The article went on to say “That's the conclusion of the US Labor Department, which reported Thursday that, thanks to lower gas prices, the Consumer Price Index fell by 0.6% in November.” First of all the index actually declined by .8%, it was .6% on a “Seasonally adjusted basis” and secondly nowhere in the report released by the Bureau of Labor Statistics (part of the US Labor Department) did they come to any conclusions about anything let alone “free falling” prices. What they did state is that the majority of the decline was … [Read more...]
Hurricane Katrina: The Economics of Disaster
The Economics of Disaster: Are Hurricanes Inflationary or Deflationary? Insurance companies have estimated the damage from hurricane Katrina at $25 Billion Dollars. But the economic effect is much greater than that. That is just the loss of property. Another consideration is the loss of revenue while things are being rebuilt. What about the loss of jobs from the companies who won’t be rebuilding because they didn’t have insurance? According to the “Financial Times” current estimates of “total economic losses” are closer to $100 Billion. Those numbers are so large that it is almost impossible for us to get our minds around it. If you stacked 100 billion one dollar bills on top of each … [Read more...]
Affordable Luxuries?
According to the January issue of "Wired" magazine luxury items are more affordable than ever. They picked several items and adjusted their prices for inflation and found that in inflation adjusted dollars many luxury items cost less than the did 10 or 25 years ago. How can that be? According to "Wired" the price to charter a plane for an hour was $3,016 in 1980 but was only $1,850 in 2004, a decrease of 39% over 24 years. A BMW series 3 was $40,945 in 1995 and is $30,840 now a decrease of 25% over 10 years. Other prices they compared were Dinner at the 21 club $114.66 in 1987 and $87.50 in 2004 for a 23% decrease over 17 years. LaPavoni espresso machine $1,242 in 1975 and $550 … [Read more...]
Confederate Inflation Rates (1861 – 1865)
The Chart below shows the Annualized Confederate Inflation Rates. The Annual Inflation Rates are calculated from information provided by the Richmond Civil War Centennial Committee on the purchasing power of Confederate Notes. The table below shows the actual Confederate Treasury Note Inflation data that was used to develop this chart. The method used was to create an index setting January 1, 1861 equal to 100 and adjusting the following months to come up with an Inflation index figure for the first of each succeeding month by interpolating from surrounding months if necessary to fill in the blanks. Note that some months have additional Inflation data for the 15th of the month while … [Read more...]
