People often confuse Deflation and Depression perhaps because in the 1930s the U.S. experienced a lot of both of them at the same time. This combined with the similarity in the sound of the words tends to compound the confusion. But they are not synonymous, it is quite possible to have an inflationary depression as the Hyperinflation in Weimar Germany from 1919-1923 shows. Just as inflation is more than just rising prices, deflation is more than just "falling prices". In both cases, the terms "inflation" and "deflation" actually refer to the macro "cause" while the change in prices is simply the "effect". Unfortunately, lazy speech tends to confuse the "cause" with the "effect". So when … [Read more...]
How Does Inflation Affect Foreign Exchange Rates
Inflation affects every consumer, business person and investor in some way or other. Inflation is one of the key factors that affect consumer prices, financial markets including Stocks, Bonds and Forex. As such, it is important for consumers, investors and traders to get a deeper understanding of what is inflation and what causes it. What is Inflation? Understanding inflation is often complicated by the fact that the cause and the effect are often muddled together in people's minds due to the lazy way we often refer to inflation. The effect of inflation is what people see when they go shopping and see increases in the general price of goods and services. When the individual prices of just … [Read more...]
Debt and Inflationary Pressures: A Lesson in Economic Interactivity
Does debt cause inflation? If so what kind of debt? Personal debt? Government debt? Corporate debt? And what exactly is inflation? In this article, we will look at all these issues. Price Inflation occurs when the cost of a representative basket of goods and services is rising. The key factor is the general trend that takes place in an economy, it is possible that individual items such as foreign automobiles, the price of coffee, or corn could rise while other items that require a larger portion of your disposable income are falling (or vice versa). So the Bureau of Labor Statistics uses a "weighted basket of goods" i.e. they calculate what percentage of an average person's salary goes … [Read more...]
Hyperinflation and Government Debt
By Doug Casey The over-leveraging of the U.S. federal, state, and local governments, some corporations, and consumers is well known. This has long been the case, and most people are bored by the topic. If debt is a problem, it has been manageable for so long that it no longer seems like a problem. U.S. government debt has become an abstraction; it has no more meaning to the average investor than the prospect of a comet smacking into the earth in the next hundred millennia. Many financial commentators believe that debt doesn’t matter. We still hear ridiculous sound bites, like “We owe it to ourselves,” that trivialize the topic. Actually, some people owe it to other people. There … [Read more...]
Living in a Free-Lunch World
It seems that every once in a while, we awake from a deep sleep with what appears to us to be a brilliant revelation. Unfortunately, if we don't write them down they are usually forgotten by morning. Sometimes in the light of day they turn out to be totally ridiculous... but occasionally they actually do turn out to be a flash of inspiration. I had one such experience a few weeks ago. Of late I have been increasingly disturbed by the growing gulf between Liberals and Conservatives. It seems that they can't find any common ground and for all intents and purposes might be living on entirely different worlds. My revelation, although perhaps not earth-shattering, was to me at least … [Read more...]
What’s So Bad about Shutting the Government Down?
It all seems a bit silly. On Monday the National Park Service declared that the open-air Veterans Memorial would be closed during the shutdown. After all they have to prove there is some "pain" involved in shutting down the government. But a bunch of 80-90 year old veterans would have none of it and they tore down the blockades. So the park service made a 180-degree turn and declared their visits now constitute protected “First Amendment activity” . Basically they had no choice, what were they going to do? Shoot the old war heroes? Put them all in jail? It's like a bit of a joke. No their backs are against the wall, somehow they must impress on us common rabble how important the … [Read more...]
In the United States, The Belt-tightening Has Just Begun
The Day of American Austerity: What Will It Look Like? In the United States, the belt-tightening has just begun Since the start of the European sovereign debt debacle, the word "austerity" has been bandied about a lot. It wasn't an everyday word, and may send some people to the dictionary. Merriam-Webster defines "austerity" this way: enforced or extreme economy. But even knowing this definition might leave one wondering how "austerity measures" relate to Europe's debt crisis. The Associated Press (5/13) provided this overview: Austerity has been the main prescription across Europe for dealing with the continent's nearly 3-year-old debt crisis, brought on by too much government … [Read more...]
Is Gold Backwardation Now Permanent?
Its Weight in Gold: The Real Prices of Things By Keith Weiner, Casey Research Worldwide, an incredible tower of debt has been under construction since President Nixon's 1971 default on the gold obligations of the US government. His decree severed the redeemability of the dollar for gold and thus eliminated the extinguisher of debt. Debt has been growing exponentially everywhere since then. Debt is backed with debt, based on debt, dependent on debt and leveraged with yet more debt. For example, today it is possible to buy a bond (i.e., lend money) on margin (i.e., with borrowed money). The time is now fast approaching when all debt will be defaulted on. In our perverse monetary system, … [Read more...]
Why the System is Coming Unglued
It is ironic that a country that was built on a system of checks and balances now has a monetary system that is accountable to no one... the way our monetary system is structured, the government can literally print money and spend it on anything, no matter how foolish ... it has no checks and balances. And so according to many estimates the unfunded liabilities run $75 to $100 trillion... these can never be paid off. It has grown to this level because there are no real operating principles other than buying the votes needed to get re-elected and to stay in office for as long as they can. If you would have asked anybody on this planet five, six years ago, if the US government could run a … [Read more...]
Five Things You Need to Know About the Economy
By David Galland, Managing Director, Casey Research At any point during the recent negotiations in Washington over the debt, did you seriously think for even a second that the U.S. was about to default? Of course, in time the U.S. government (along with many others) will default. However, they are highly unlikely to do so by decree or even through the sort of legislative inaction recently on display. Rather, it will come about through the time-honored tradition of screwing debtors via the slow-roasting method of monetary inflation. Yet most people still bought into the latest drama put on by the Congressional Players – a troupe of actors whose skills at pretense and artifice might … [Read more...]
