Quantitative Easing was initially considered inflationary but after its first usage, it didn't appear to be. Is this always the case? Is Quantitative Easing really inflationary? Will the Quantitative Easing of 2020-2021 result in more inflation? That is what we are going to look at here. ~Tim McMahon, editor At the height of the 2008 mortgage crisis the FED came up with a revolutionary idea to handle the crisis and that was called "Quantitative Easing (QE)". But before we delve into that let's look at what brought us to that point. Before Quantitative Easing Prior to the 2008 crisis, the housing market was on a tear (much like it is today). The banks were lending at a furious pace and … [Read more...]
Millennials Have Never Seen Inflation This High
The Bureau of Labor Statistics reported that the Annual Inflation Rate rose again in November. Inflation Summary: Annual Inflation highest since May 1982. CPI Index rose from 276.589 to 277.948. Monthly Inflation for November was 0.49% Next release January 12, 2022 Inflation for the 12 months ending in November was Up again from October. October 6.22% -- November 6.81% The earliest millennials were born somewhere between 1980-1985 (depending on which definition of millennial you use), just as we were coming off one of the highest Inflation spikes the U.S. has seen since they began tracking the CPI in 1913. In March of 1980, Inflation topped at 14.76%. By May of 1982, … [Read more...]
Is Bitcoin a Better Inflation Hedge Than Gold?
Proponents of the digital cryptocurrency Bitcoin are touting it as the latest Inflation hedge... perhaps better than gold... but is it? Although gold may fluctuate significantly in the short run, this precious metal has fared relatively well as a hedge against inflation over the long term. One of gold's significant benefits is that it is a commodity that if held in physical form is neither paper, nor government-controlled, nor another person's liability. Gold's other major advantage is its limited supply (i.e., requiring quite a bit of effort and energy to mine). Recently, Bitcoin has arrived on the scene and become a "digital commodity" independent of the government, which has gained … [Read more...]
How Nixon’s Revolutionary Move Influenced U.S. Inflation For 50 Years
Nixon is not remembered well by history because of the single defining moment of Watergate and the high inflation rate during his Presidency. However, according to a 2017 C-SPAN Presidential Historians Survey, Nixon actually ranked 10th among all presidents for his foreign policy. And the Siena College Research Institute, Presidential Expert Poll of 2010 ranked him 11th on foreign policy accomplishments. Of the 21 different categories, this survey ranked Nixon an average of 27.6th out of 44 presidents... so only slightly worse than average. Nixon’s China Visit One of Nixon’s foreign policy actions was to open diplomatic relations with China. This one action would have long-lasting … [Read more...]
U.S. Inflation is Not the Only One Increasing
It is not just U.S. inflation that is surging. Other countries have followed the U.S. lead and pumped massive liquidity into their economies. For instance, Brazil had double-digit inflation, Mexico had 6.24% inflation, and South Africa had 5% inflation. Brazil: In October Brazil announced that it had broken the double-digit inflation mark at 10.25%. The last time this happened was in 2016. In November they announced that as of October annual inflation was up slightly more to 10.67% with monthly inflation of 1.16%. In addition, Brazil is suffering from 14.1% unemployment resulting in a Misery Index of 24.77%. Currently, the U.S. Misery Index is less than half that at 10.82%. UK Inflation … [Read more...]
Inflation: The New Normal?
After decades of low inflation and even fears of deflation, inflation concerns are once again dominating the headlines in the contemporary financial media. As the global economy grappled with the fallout of the coronavirus pandemic, major central banks embarked on an unprecedented monetary easing program. This was an attempt to shore up the flagging economic growth by increasing the money supply. This resulted in the shortest recession in economic history but also created problems of its own. With widespread shortages spooking consumers and investors alike, central banks are now having to contend with persistent supply chain disruptions, decaying consumer confidence, and the looming … [Read more...]
Annual Inflation Soars to Highest Level in 31 Years
The Annual Inflation Rate exploded in October, according to the Bureau of Labor Statistics report. Inflation Summary: Annual Inflation highest since October 1990. CPI Index rose from 274.310 to 276.589. Monthly Inflation for October was 0.83% Next release December 10th Inflation for the 12 months ending in October was Up Sharply from September. September 5.39% October 6.22% Current levels have exploded through the pink resistance line. Exceeding the 5.60% Oil Peak of July 2008, and coming very close to the October 1990 peak at 6.29%. If next month takes it up even slightly we will have to go all the way back to 1982 to see higher inflation. BLS … [Read more...]
How Businesses Cope With Inflation
With the Producer Price Index for manufacturing industries increasing by over 15% on a not seasonally adjusted annual basis for the last couple of months, businesses are facing rapidly increasing costs. To remain profitable, companies only have two options, either raise prices or cut costs. In the short run, larger corporations can postpone the inevitable by taking a 3rd option, i.e., “to squeeze margins to maintain volumes” (which is just a fancy way of saying “eat the increased costs”. Small businesses are generally in a weaker position to adjust themselves when inflation knocks at their doors. It is more difficult for Small and Mid-size Enterprises (SMEs) to cope with the situation … [Read more...]
How Foreign Currencies Act as an Inflation Hedge
One method investors can use to hedge against inflation is investing in a variety of foreign currencies. The key of course is which currencies you choose as an inflation hedge. You need to invest in those countries' currencies, which will provide you with better protection from exchange rate changes to be successful at hedging against inflation. Inflation in the United States has been relatively tame since the 1980s but it is currently at risk due to massive money creation by the FED via Quantitative Easing. However, inflation risk can be mitigated with the help of investment diversification. One method investors who are looking to protect their money against inflation would use is to … [Read more...]
How Insidious Inflation Affects the Affordability of Tuition and Fees
While the pandemic began to alter the way we live in 2020, its ripple effect on the economy has continued the devastation. Initially, people were not spending as much as they would have if they didn’t have to remain at home. Once the government relaxed the restrictions in November 2020, people began traveling and satisfying their pent-up demand. This surge in spending overwhelmed the limited supply, which caused short-term inflation (when demand exceeds supply, prices go up). Several other factors have affected inflation since then, and households have been reeling due to the hikes in the prices of everyday items. However, hardly anyone talks about the effect of inflation on American … [Read more...]