Signs of deflation are visible but the public will be fooled Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt). -- Conquer the Crash, 2nd edition (p. 88)Has the United States met that precondition? Well, consider that total credit market debt as a percent of U.S. gross domestic product was 280 percent in 1929 at the start of the Great Depression 380 percent in 2008 The current build-up of credit goes far beyond major -- it's unprecedented. It's been rising steadily for 60 years. The slope literally looks like the side of a steep mountain. Bank credit and Elliott wave expert Hamilton Bolton … [Read more...]
Gasoline 20 Cents a Gallon?
Many of us aren't old enough to remember Gasoline at 20 cents a gallon. I can remember gas during the 1960's at 29.9 cents a gallon. The last time that gasoline averaged 20 cents a gallon was in 1942. That was during WWII ! But if you know us here at InflationData.com you probably know that we usually talk in inflation adjusted prices. So adjusting for inflation, the price of gas in 1942 would have been $2.78 if you are paying in January 2012 dollars. But that is still a long way away from the average price of Gas in 2011 of $3.48. We track the inflation adjusted price of gasoline based on the annual average price using the Consumer Price Index (CPI) generated by the U.S. Bureau of Labor … [Read more...]
How Inflation Affects Personal Debt Consolidation
What is the effect of inflation? As a result of inflation, the value of tomorrow’s money decreases with regards to today’s money. In other words, you can purchase less with the same amount of money. This is commonly seen as prices having increased. This can make the situation appear more appealing for borrowers because they can buy today and pay back with less valuable dollars. But lenders and creditors don't appreciate receiving less valuable dollars. So, in order to offset the declining value lenders and creditors increase the interest rates they charge. Thus inflation in general results in increased financial problems all around. It not only results in rising commodity prices but … [Read more...]
Is There a Correlation Between Inflation and the Stock Market
When inflation is high and commodity prices are rising on what seems like an almost daily basis, have you ever wondered how that might affect the price of stocks? Recently I received the following question: "In the years leading up to the great depression and the great recession, the DJIA nearly quadrupled. My question is... what the cost of living did in these time periods and if there is a correlation between the stock market and the cost of living? John Kelsch" ************ John, Great question! You would think that if all commodities are going up stocks would probably go up as well, since companies produce commodities. But that isn't always the case. Often high … [Read more...]
Fed To ‘Hold Off’ On QE 3
We noted extreme levels of optimism earlier today. What could possibly trigger a correction in stocks and commodities? If the Fed fails to signal and/or announce another round of quantitative easing (QE), it would undoubtedly leave the markets disappointed. The Fed uses the Wall Street Journal (WSJ) as a medium to communicate with the markets. It is possible someone at the Fed picked up the phone and said, “We need to temper short-term expectations for another round of QE. Can you help us out?” Friday’s WSJ has an article titled “Fed Holds Off For Now on Bond Buys”. Notice the word “may” is not included. Here is the first paragraph of the article: Federal Reserve officials are waiting … [Read more...]
How Global Financial Developments are Affecting the Price of Gold
Let’s face it. With the US economy facing the bitter consequences of extravagance and unscrupulous spending, it has become quite difficult for the US to manage both its public and private debts now. In this phase of post recession hangover and economic meltdown, the U.S. federal government has bumped up against its permitted borrowing limit. According to Alison Fraser, director of the Roe Institute for Economic Policy Studies, America’s debt just crossed $15 trillion, which means presently, the amount owed by the United States government to the world, is equivalent to the amount produced by the American economy per year. All these factors lead to higher prices and intensifying inflation … [Read more...]
Another Way to Measure Inflation
In this article Jeff Clark shows us how to think about prices and purchasing power in a different way. The true measure of inflation is in relation to how much stuff your money can buy and in reality it is also related to the return you can get on your investment. If you can get 10% on your money a 5% inflation rate isn't so bad. But if you own any assets and they are only appreciating at 1% (or worse yet depreciating) and prices are increasing at a 5% rate the value of your assets are declining (i.e. they are being insidiously and secretly being stolen by the government printing presses). In this article Jeff will give you another way to look at the issue of prices and perhaps open your … [Read more...]
The US’s Education Bubble
By Doug Hornig and Alex Daley, Casey Research In the world of finance, there is always talk of bubbles – mortgage bubbles, tech stock bubbles, junk bond bubbles. But bubbles don’t develop only in financial markets. In recent years, there's been another one quietly inflating, not capturing the attention of most observers. It's an education bubble – just not the one of student debt that has graced the pages of the New York Times and so many other publications in recent months. The problem is not that we are overeducating ourselves as many would have you believe. Rather, it’s that we are spending a fortune to undereducate ourselves. The United States has always been a very educated … [Read more...]
Adam Fergusson: “Inflating your economy means playing with fire”
GoldMoney founder James Turk interviews When Money Dies author Adam Fergusson, who discusses the parallels and differences between the Weimar inflation and the situation in the US and Europe today. "I don't see how any of these [Western] economies can grow their way out of the extraordinary debts that they have." … [Read more...]
America’s First Deflationary Depression: Is a Bigger One Ahead?
Social psychology precipitates economic depressions Don't blame Martin Van Buren for America's first deflationary depression. Social mood rode higher in the saddle than did our 8th President, who only stood 5' 6". Elected in 1836, by the time Van Buren assumed office in March 1837 a speculative bubble had burst and a banking crisis was at hand (sound familiar?) -- the national mood had turned south and the "Panic of 1837" followed. Van Buren was known as "The Little Magician," but he could not pull an economic recovery out of the hat. He met defeat seeking a second term. America's first deflationary depression lasted until 1842. Van Buren blamed over-zealous business practices and a … [Read more...]