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...]
Do Housing Prices Always Go Up?
In the last few years, housing prices have skyrocketed, and investors are once again jumping on the housing bandwagon as an excellent way to make money. The same sentiment existed in the early 2000s as housing prices were rising rapidly then as well. These periods both created the impression that “housing prices always go up”. But is that actually true? If we look at the “nominal” prices of houses, i.e., the cost in dollars BEFORE adjusting for inflation, it does appear that housing prices go up fairly consistently. In the following chart, we see housing prices since 1890. The blue line is the nominal housing price, and we can see a very gradual increase up through the early 1970s. Prices … [Read more...]
The Travel Industry, the Pandemic and U.S. Inflation
Inflation has been apparent in the United States, making many people worry about financial stability in the nation. With the COVID-19 pandemic, there have been rising prices, labor shortages, and people wary about spending. In this overview, we’ll explore how the U.S. inflation brought on by the pandemic has contributed to changing the financial and business landscape of the travel industry. At First Glance “The pandemic not only caused the shutdown of many companies and organizations but had also discouraged consumers from traveling to abide by social distancing mandates,” says Kendra Banks, a business writer at Uktopwriters. Rising airfares, price hikes on used vehicles, and people … [Read more...]
September Inflation Rebounds
The Annual Inflation Rate rebounded in September, according to the Bureau of Labor Statistics report. Inflation Summary: Annual inflation was 5.39% in September, 5.25% in August, 5.37% in July, and 5.39% in June. CPI Index rose from 273.567 in August to 274.310 in September. Monthly Inflation for September was 0.27%, August was 0.21%, and July was 0.48%. Next release November 10th Inflation for the 12 months ending in September was Up from August. Since the BLS rounds to 1 decimal place, they reported June and July as 5.4% and August as 5.3%. So September is once again at June levels. The last time inflation was this high was the 5.60% of July 2008. Before that, we … [Read more...]
Why is a Little Bit of Inflation Considered Good for the Economy?
The short answer is because the U.S. Federal Reserve Board, i.e., the “FED,” says it is. The longer answer is much more complicated. To determine whether 2% is really best for you, we will have to look at a variety of different factors. First of all, it might surprise you to know that it wasn’t always that way. It wasn’t until January 25th, 2012, that U.S. Federal Reserve Chairman Ben Bernanke set a 2% target inflation rate. Before that, the FED didn’t have a specific inflation target but instead regularly set a target range. This range was often between 1.7% and 2%. But even that range is relatively new, and some economists still believe that Zero percent inflation is optimal. Prior … [Read more...]
