On September 22, 2021, the Federal Reserve reported its current policy position. Currently, the FED is creating liquidity (i.e., printing money) through its Quantitative Easing (QE) program at the rate of $120 billion per month. The market has been fearing that the FED would begin tapering, i.e., cutting back on its liquidity creation. Rumor was that the FED would start reducing their QE by $10-$15 billion per month due to inflation concerns. The last time the FED embarked on a tapering plan back in 2017, they used a two-prong approach of raising the FED Funds rate and reducing the monthly printing by $10 Billion every three months (i.e., roughly $3.3 billion per month). The result of … [Read more...]
June 2021: Highest Annual Inflation since 2008
Inflation Summary: Annual Inflation up sharply to 5.39% CPI Index rose from 269.195 in May to 271.696 in June. Monthly Inflation for March 0.71%, April 0.82%, May 0.80%, and June was 0.93% . Next release August 11th Inflation for the 12 months ending in June was 5.39% for the Largest Annual Increase since July 2008's 5.60% Last month's 4.99% was the largest increase since August 2008's 5.37% but at 5.39% June 2021 was actually slightly higher than that. (Although the BLS reported them both as 5.4%). If inflation tops the 5.6% of July 2008, we have to go all the way back to the 6.29% of October 1990 to find a higher peak. We have been predicting Annual Inflation would … [Read more...]
March Inflation Skyrockets
Inflation Summary: Annual Inflation up from 1.68% in February to 2.62% in March. CPI Index rose slightly from 263.014 in February to 264.877 in March. Monthly Inflation for February was 0.55% and March was 0.71%. Next release May 12th Annual inflation for the 12 months ending in March was 2.62% We have been predicting Annual Inflation would shoot up in March due to higher gas prices and negative numbers falling out of the annual calculation. Further increases to come in April and May. Since the BLS rounds their numbers to 1 decimal place they reported February as 1.7% and March as 2.6% for a monthly increase of 9/10ths of 1% taking inflation well above the FED's 2% … [Read more...]
Why Hasn’t the U.S. Dollar Experienced Hyperinflation?
I recently answered this question on Quora and thought I'd share the answer here as well. Why hasn't the U.S. dollar experienced hyperinflation? That is an excellent question. As we can see from the chart the FED has engaged in 4 major phases of Quantitative Easing (QE) where they drastically increased their “assets” and one phase of Quantitative Tightening (QT) where they tried to decrease their assets. FED assets is sort of a euphemism for money printing. Basically, it involves creating money out of thin air and then buying something. That “something” becomes an asset on the FED’s books. Prior to 2008, the primary thing the FED bought was U.S. Treasury debt i.e. Treasury Bills, Bonds, … [Read more...]
Annual Inflation in October is 1.18%
Inflation Summary: Annual Inflation fell from 1.37% in September to 1.18% in October. CPI Index rose slightly from 260.280 in September to 260.388 in October. Monthly Inflation for September was 0.14% and only 0.04% in October. FED Funds Rates decrease slightly while FED Assets inch up. Next release December 10th Annual Inflation Chart: Looking at the Annual Inflation Chart since 1989 we can see a marked downward trend. Current Inflation Situation Looking at just the most recent 10 years the trend is … [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...]
Inflation Quintuples… Still Below 1%
Annual Inflation Rebounds Annual Inflation rose to 0.65%. CPI Index rose from 256.394 in May to 257.797 in June. Monthly Inflation for June was 0.55%, May was 0.002%, April was -0.67%, March was -0.22%, February was 0.27%. The FED may be slowing its "Quantitative Easing" in an effort to prevent hyperinflation. FED Funds Rate up slightly but still remains near Zero. Next release August 12th The Bureau of Labor Statistics Released the Inflation Data for the 12 months ending in June on July 14th. Monthly Inflation SOARS to 0.55%. Annual inflation for the 12 months ending in June was 0.65%, May was 0.12%, April was 0.33%, March was 1.54% down sharply from February's … [Read more...]
Is the FED Tightening or Is Hyperinflation on the Horizon?
Recently a prophecy has been trending on YouTube. In it, the possibility of major upheaval in November is mentioned, combined with the possibility of hyperinflation. As I've mentioned before, beginning in March 2020, the FED created massive amounts of liquidity through Quantitative Easing in an effort to combat the monetary effects of shutting the country down due to the virus. If that is combined with a reduction in the quantity of goods and services created due to the virus or riots shutting down the means of production we could see hyperinflation. So that would play into fulfilling that prophesy. Back on April 1st, I wrote an article entitled Will the $2 Trillion Covid-19 Stimulus … [Read more...]
May Inflation “Astonishingly Low”
The Bureau of Labor Statistics Released the Inflation Data for the 12 months ending in May on June 10th. Inflation is virtually ZERO at 0.12%. Annual Inflation Retreats Annual Inflation fell again to 0.12% in May from 0.33% in April. CPI Index rose marginally from 256.389 in April to 256.394 (virtually identical). Monthly Inflation for May was 0.002%, April was -0.67%, March was -0.22%, February was 0.27%... typically January through May are highly inflationary so this is VERY unusual. The FED continues to crank up the "printing presses" using "Quantitative Easing" in an effort to stimulate the economy in the wake of COVID-19. FED Funds Rate remains near Zero. Next … [Read more...]
What are Central Banks?
History of Central Banking Like everyone, kings like to spend money, whether it is to wage war or to build palaces, but they often didn't have all the money they "needed", so they had to borrow it. To facilitate this large scale borrowing, they created a Central Bank to handle that function. In 1790, "Federalist" Alexander Hamilton advocated for a Central Bank in the United States. Democratic-Republicans, Thomas Jefferson and James Madison believed that the Constitution did not grant the Federal government the authority to create a bank, based on the 10th amendment i.e. that all powers not endowed to Congress are retained by the States (or the people). But Hamilton argued that although … [Read more...]
