Quantitative Easing Effects- You have probably heard that the massive inflation of the money supply through Quantitative Easing is going to result in hyperinflation or at least massive inflation. But so far that hasn't happened. As a matter of fact since the end of QE2 in June of 2011 inflation rates have fallen from 3.63% in July 2011 to 1.41% in July 2012. How is that possible? The first reason is that the FED is playing a game with the banks. The FED loans money to the Banks at nearly Zero percent interest the Banks turn around and loan the money to the Government at 3% interest to finance the deficit. This gives the banks plenty of profit to shore up their sagging balance sheets. But … [Read more...]
The Biggest Commodity: The College Degree and Academic Inflation
The College Degree When we hear the term "valuable commodity" we might think about oil or gold. Yes, these are undoubtedly commodities (though their value has fluctuated over time), but many other less concrete objects are also considered commodities in our society today. A commodity is defined as "A raw material or primary agricultural product that can be bought and sold, such as copper or coffee." But the second definition is "a useful or valuable thing, such as water or time". Based on the second definition, one of the most valued commodities available in modern society is a college degree. While it may sound odd to refer to a diploma as a commodity, there's no denying that a college … [Read more...]
Should I Invest in Inflation Indexed Bonds?
The question of "Should You Invest in Inflation Indexed Bonds?" depends on your personal situation and the current inflationary environment. If you want to have a low risk investment that will keep up with inflation you might consider investing in inflation indexed bonds. Inflation Indexed Bonds When Inflation Rates are High, you might be worried about what's going to happen to your savings. Inflation series bonds are one option to consider. These unique investments have the ability to fight inflation and protect your savings from total devastation. Types of Inflation Indexed Bonds There are two different types of inflation indexed bonds issued by the U.S. Treasury one is called the … [Read more...]
How Inflation Can Reduce Your Annuity Income (and what you can do about it)
Even though this is written from a UK perspective, it holds true for the rest of the world, too. ~ editor Annuity Income and Inflation Inflation as defined by Wikipedia is "an average index used to measure the rise in the general level of prices of goods and services in an economy over a period of time" which in layman's terms means the average amount by which goods and services are increasing. Monetarism an as economic theory identifies keeping inflation low as the main goal in achieving sustained economic growth, as opposed to reducing unemployment. The reason for this is that whilst unemployment is a burden on the people without jobs, high inflation (it is argued) impacts the entire … [Read more...]
Housing Prices and Inflation
Average Housing Prices- By Jared Diamond The great recession of 2008 has been a source of enormous anxiety in the financial world. The American economy survived a total meltdown, but just barely. As American society struggles to recover, a major beast looms on the horizon: inflation. There are already increases at the gas station and the possibility of a poor harvest could result in skyrocketing food prices. The housing industry has been buffeted by the financial whirlwinds and is only now beginning to recover from years of deflated prices. Even though average housing prices have dropped along with sales, there still is a question about whether or not housing will experience a near … [Read more...]
The Effects of Inflation on Life Insurance
How Life Insurance Works Premiums on term life insurance are usually paid (monthly, quarterly or annually) for between 10 and 30 years, depending on the particular policy you've chosen. One of the ways that life insurance works is that you pay a fixed rate for the length of the policy and the value of the insurance does not change. Whether you die tomorrow or 20 years from now, your beneficiaries would still receive the same dollar amount of insurance settlement. Therefore, if you have a $500,000 term life insurance policy, as long as the premiums are paid it provides $500,000 worth of coverage from the day you buy it until the day the term ends or it is paid out. The Effects of Inflation … [Read more...]
What is Hyperinflation?
Hyperinflation Hyperinflation is an extremely rapid period of inflation, usually caused by a rapid increase in the money supply. Usually due to unrestrained printing of fiat currency. See: How Does Gold Fare During Hyperinflation? Unfortunately, there is no exact percentage where inflation turns from "ordinary Inflation" to "Hyperinflation". So you can't say for instance that 9.9% inflation is ordinary but 10% inflation is hyperinflation. Typically in hyperinflation it just gets progressively worse. Every month the inflation rate just gets higher and higher until the curve goes hyperbolic. Classic Hyperinflation Classic examples are the Hyperinflation of Weimar Germany and the more … [Read more...]
How the Dollar Affects Gold Prices
Interview with Jim Puplava, by Jeff Clark, Casey Research Jim Puplava has robust convictions….The CEO of Financial Sense News Hour, Jim is a man you should listen to carefully if gold factors in your portfolio or if you are thinking about adding gold anytime soon. In this interview, Jim talks about how the dollar affects gold prices. He discusses whether we are moving into a phase of deflation or inflation and gives his views on what exactly that will mean to gold investors. He discusses the likely impact of inflationary or deflationary forces, which one he believes will win out, and the effect it will have on our economy. Finally, he makes a very interesting prediction. Of course, … [Read more...]
What is Demand Pull Inflation?
There are many different theories that aim to determine exactly what causes inflation. One of the more commonly used arguments by Keynsian's is known as demand pull inflation. What exactly is demand pull inflation and why is it important? Demand Pull Inflation The term "demand pull inflation" is a Keynesian economics term. According to Wikipedia, "Keynesian economics advocates a mixed economy — predominantly private sector, but with a significant role of government and public sector — and served as the economic model during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the tax surcharge … [Read more...]
Effects of Inflation on Savings
Inflation Effects Everyday we hear of commodity prices going up and the value of money going down. We've also heard of inflation and the global economic crisis having a far-reaching effects on the world economy. But have you ever stopped to think how inflation is affecting your everyday financial matters? How is it affecting your savings account? If you haven't given it much thought, perhaps it is time to do so. Below are few ways inflation affects your savings. By giving it a bit of thought, you can work out an alternate plan or be prepared, so you can keep more of your savings. Take a close look: Inflation Reduces the Value of Money: Initially you may have been able to buy … [Read more...]