In the following article Bill Bonner makes some excellent points about the problem with the current monetary policy. The first is that it is totally ludicrous to try to buy real goods with fake money. It has to cause distortions in the overall economy. "People make different decisions when they can borrow for practically nothing... " Secondly, once it gets started, without some form of real recovery it will be impossible to stop. Kind of like a drug addict. The withdrawal will be painful and won't happen until something forces the FED's hand. And thirdly also just like drug addicts and unsuccessful people the world over the FED is taking a short term view. It is a proven fact that the most … [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...]
Gargantuan and Growing: The US Debt Figure You’ve Probably Never Heard Of
The widely reported $16.1 trillion federal US debt is a drop in the bucket Financial transparency is a must for U.S. publicly traded companies. But if the federal government had to abide by those same regulations, more Americans would know that the often-reported $16.1 trillion federal US debt doesn't come close to the truth about the nation's liabilities. In a Nov. 26 Wall Street Journal opinion piece, a former chairman of the Securities and Exchange Commission and a former chairman of the House Ways & Means Committee write: The actual liabilities of the federal government -- including Social Security, Medicare, and federal employees' future retirement benefits -- already exceed … [Read more...]
What are “Foreign Exchange Reserves”?
Will the U.S. Dollar Be Replaced as the World's Reserve Currency? Foreign Exchange Reserves are foreign money held by International banks for use in international trade and in an effort to diversify their holdings and hedge against the inflation of their own currency. The most common items bought and sold with their foreign exchange reserves are oil and gold. Up until 1944 the asset of choice was gold and it was used as the medium of exchange between countries to settle their debts. But in July 1944, delegates from the 44 Allied nations gathered in Bretton Woods, New Hampshire., and made the U.S. dollar the reserve currency of the world. At that time, the dollar was pegged at $35 per ounce … [Read more...]
Worried About Inflation – Consider Inflation Indexed Bonds
Inflation-Indexed Bonds (aka i-Bond)- Although inflation is currently low it is still a key concern for investors, because with interest rates at record lows and the FED promising to keep them there for the foreseeable future even a small uptick in inflation can prevent an investor from achieving a real return on investment, as returns on investment fail to beat inflation rates. If a return on investment fails to beat inflation, then in real terms you have not earned any money. You may have a larger figure for your total net worth, but in terms of purchasing power this will earn you less as the costs of living increased at a higher rate. On target Inflation is currently tracking at … [Read more...]
In 1929, Deflation Started in Europe Before Overtaking the U.S.
Marcus Aurelius was the last of the "Five Good" Roman emperors and is also considered one of the most important members of the Stoic philosophers. He ruled Rome from 161 to 180 AD. He brilliantly said, "Look back over the past, with its changing empires that rose and fell, and you can foresee the future, too." Today we may be seeing the beginning of the end of the American Empire. As Americans we don't like to think of ourselves as having an empire but according to Daniel Larison, The U.S. treats several key regions of the world as privileged space where it is supposed to have military and political supremacy, and regional challengers to that supremacy are treated as potential … [Read more...]
One Chart Explains Why Government Debt Is Dragging on the Economy
By Dan Steinhart, Casey Research The US has too much debt. This is no longer a controversial statement. Some may believe other problems are more urgent, or that we need to grow our way out rather than slash spending. But even the most spendthrift pundits acknowledge that the debt-to-GDP ratio of the US must decrease if we are to have a stable, prosperous economy. The private sector has reacted to this over-indebted reality as you would expect: by deleveraging. Since 2008, households and businesses have extinguished of 67% of their debt when measured against GDP. Some paid debt down purposefully, and others defaulted. For our purposes, it doesn't matter how the debt went away. Only that … [Read more...]
US Savings Bonds Are Still A Safe Investment
With interest rates still at record lows, many people are looking for alternatives to savings accounts. US Savings Bonds are a safe and smart investment choice. No other investment carries the full weight of the U.S. government. The U.S. Treasury Department guarantees investors will receive their full principle plus interest. Consider why purchasing savings bonds is an investment that can be made with confidence. US Savings Bonds: Conservative, but Smart Although savings bonds do not yield as much return as higher-risk investments, investors can rest easy knowing they will not loose their money. The financial downturn of the last few years has resulted in many Americans loosing large … [Read more...]
Gold and the Federal Reserve
Gold-US Dollar Link by Chris Vermeulen The $1800 per ounce level continues to be a major technical resistance area for gold. After hovering near $1800 recently, gold moved sharply away from that level last week to close at $1735 an ounce. Despite that, more fund managers and analysts continue to point to a bright long-term future for gold prices. John Hathaway of the Tocqueville Gold Fund says gold will reach new highs within a year. He based his forecast, like many others, on the fact that negative real interest rates look likely to persist as Ben Bernanke and the Federal Reserve continue to print money. Believe it or not, some mainstream analysts are also touting gold’s … [Read more...]
Bernanke’s Bigger Bubble: QE-3 and the Coming Economic Crash
Why monetarist theory is flawed Federal Reserve Chairman Ben Bernanke really means it this time. He will rescue the economy. Ben S. Bernanke for the first time pledged that the Federal Reserve will buy bonds until the economy gets closer to his goals ... . The central bank yesterday announced its third round of large-scale asset purchases since 2008, with the difference that it didn't set any limit on the ultimate amount it would buy or the duration of the program. ... Bernanke is "going to fight and fight until he sees a real improvement in the economy," said a co-head of global economics research at [a major bank]." He believes quantitative easing can help the economy, so he'll just … [Read more...]
