In this article, Professor Daniel Lacalle examines the relationship between Federal debt and crony capitalism. ~Tim McMahon, editor. Key Facts: Congress has raised the debt ceiling 78 times since 1960 US debt to GDP is 123.4% 8% of the budget goes to pay interest Discretionary spending is around 30% of the budget Fiscal year 2023 outlays = $5.9 trillion The United States budget is unsustainable More Federal Debt Means More Taxes, Less Growth, and Weaker Real Wages By Professor Daniel Lacalle Since 1960, Congress has raised the debt ceiling 78 times, according to Bloomberg. The process of increasing the debt limit has become so regular that markets barely worry … [Read more...]
3 Factors Causing the Current Gold Rally
A variety of factors affect the price of gold. Currently, many of them are combining to drive the price of gold to all-time record highs. Let's look at a few of the factors that affect the price of gold. 1) Uncertainty- Gold is a Crisis Hedge We have said this many times over the years but it bears repeating again gold is more of a crisis hedge than an inflation hedge. When uncertainty rears its ugly head... gold does well. That uncertainty can take many forms and one of them is "monetary uncertainty". So if people don't know what the value of their money is going to be in the future (i.e. inflation) they will shift some of their assets to gold (driving up the price of gold). So as far as … [Read more...]
Why Inflation Affects Various Individuals Differently
The cause and effect are both commonly called "inflation" which can cause some confusion. Typically, "Inflation" is defined as "an increase in the cost of a basket of goods over time". Technically this should be called "Price Inflation" which is often the result of "Monetary Inflation". As we have discussed in "What is Inflation", monetary inflation can also be referred to simply as "inflation." Inflation is a common phenomenon that affects millions of households every year. Let's look at how it affects various types of individuals. Inflation and Income A fixed income combined with rising prices decreases the ability of people to purchase the same number of goods. As inflation … [Read more...]
The 2008 Financial Crisis
Approximately every 50 to 80 years the world experiences an economic meltdown of catastrophic proportions. The one most people think of is the “Great Depression” of the 1930s. But the more recent example is the 2008 Financial Crisis. This crisis had the potential to be as bad as the Great Depression but Government action i.e. Unemployment Insurance and massive liquidity pumping was able to mitigate the effects somewhat. However, even with those actions, U-3 unemployment reached 10.6% and U-6 unemployment which is more like the measurement used in the 1930s reached 18%. What Caused the 2008 Crisis? The 2008 crisis is the culmination of a series of missteps and failed legislation. … [Read more...]
5 Reasons to Invest In Gold
Gold has a long history that goes back to thousands of years. As we said here, "Gold came in common use in 3000 B.C. when Egyptians started making it into jewelry. It wasn’t until years later that gold began being used as a medium of exchange." It has cultural significance in most parts of the world. Throughout most of this time, gold was money. Paper or "fiat currency" did not exist until fairly recently. However, today the investment trends in gold have changed. Now, people invest in gold mostly for economic reasons. Investors all around the world buy it because they see gold as an inflation hedge. Here, in this blog, we'll discuss five important reasons to invest in gold right … [Read more...]
Could a Strong Dollar Actually Cause Problems?
It seems that there is the possibility for danger no matter which way the economy goes. You would think that a strong dollar would be a good thing... after-all it allows us to buy things more cheaply on the global market. If our money goes further we are richer, oil is cheaper, imports cost less, etc. But the flip side is that our products are more expensive on the world market and so we export less. In today's article we look at the inherent risks of a strong dollar. ~Tim McMahon, editor. Outside the Box: How the Rising Dollar Could Trigger the Next Global Financial Crisis By John Mauldin This week’s Outside the Box continues with a theme that I and my colleague Worth Wray have been … [Read more...]
Why would Gold fall during an Investment Crisis?
Editor's Note-- In the article Is Gold really a good Inflation Hedge? I said, Gold is actually a "crisis hedge." So it should be performing extremely well with all the uncertainty in the markets right now. In this article Andrew Gordon explains how gold is currently in limited supply and demand is booming due to the crisis and what is currently affecting the price. -- Tim McMahon, editor Has Gold Lost its Investment Luster? By Andrew Gordon Gold dropped from $915 to $859 on Friday [October 10, 2008]. That’s not supposed to happen while the market is crashing. What’s going on? … [Read more...]