Inflation is the increase in the price you pay for goods and services, which affects the purchasing power of your money. This is more accurately called "price inflation" as compared to "monetary inflation". As inflation increases, the value of your money decreases. There are many different causes of inflation, but the most important cause is an increase in a country’s money supply. When the government decides to print money or implement a quantitative easing program, the money supply is increased (i.e. monetary inflation), thus affecting the general level of prices. As we can see in the following chart, the Federal Reserve engaged in three phases of quantitative easing i.e. QE1, QE2, … [Read more...]
Gold as an Investment
The main idea behind investment is to grow and preserve wealth, and in many cases, find unique ways to generate more income. Popular wisdom has it that when interest rates rise gold prices fall because the opportunity cost of holding a non-interest bearing asset is growing. However, contrary to popular wisdom, recent interest rate hikes by the US Federal Reserve have coincided with a rising gold price. At the same time, investor confidence in the stock market is faltering due to the FED's actions. Thus many investors can be seen rushing to the financial security offered by safe-haven assets such as gold. Rising Interest Rates Quantitative Tightening This is why gold … [Read more...]
Inflation is Officially Back
January 2017 saw a 0.6 percent hike in the Consumer Price Index, which pushed the annual inflation rate to 2.5 percent. This is the highest inflation rate in five years. The rate is higher than what many economists had anticipated. After several years of economists worrying that prices might fall, inflation has officially come back for the first time since the peak created by the massive second round of "Quantitative Easing" i.e. QE2 in 2011. QE 1 and QE 2 The first round of Quantitative Easing (QE1) resulted in an inflation rate of 2.72% in 2010 but as soon as the monetary spigot was turned off, the inflation rate fell, so the FED instituted QE2 which then resulted in an inflation rate … [Read more...]
Investing in Gold
Throughout history, people have been attracted to gold. It is considered one of the most precious metals. In ancient times it was primarily used as jewelry or for fabricating religious items. Often gold was the only money so there was no such thing as "Investing in Gold" since holding gold coins was simply considered "saving". Today however, since our money is not based on anything but "the good faith and credit" of the government, investing in gold is not only possible but also advisable. But for all its history, there isn't really that much gold around. If you collected all the gold ever mined, from every corner of the Earth and put it into a single pile it would only fill a 5-story … [Read more...]
Choosing the Right Investment: Gold vs. U.S. Dollar vs. Bitcoin
Rosland Capital recently produced an interesting infographic comparing the ten most important traits of an investment or more precisely of a store of value or currency. They offer physical gold and precious metals backed IRAs as a method to add stability to the mix. Including gold and other precious metals in your portfolio lowers your risk by diversifying from paper assets, thus hedging against the economy and inflation. The infographic compares Gold, the U.S. Dollar and Bitcoin showing how each ranks for these 10 characteristics on a scale of "High", "Moderate" or "Low". The ten important traits are: Scarcity- Being in short supply or rare. This is important because in order … [Read more...]
Should You Invest in Gold?
Almost everyone will agree that making the right investments is one of the best ways to secure your financial future. Unfortunately, figuring out which investments are right for you is easier said than done and everyone knows only crazy people invest in gold, right? It's easy to assume that just putting all your money in a bank account is the safest thing to do. But with today's almost non-existent interest rates even low inflation could cause you to have a net loss in purchasing power over time. So obviously you need to find something that will provide a bit better return to counteract the effects of inflation. To do that, traditional wisdom tells you that you have to take on higher … [Read more...]
May’s Low Inflation, the Price of Gold and More
The U.S. Bureau of Labor statistics released the May inflation data on June 16th. Annual inflation fell from 1.13% in April to 1.02% in May. The Consumer Price index crept up to 240.236 from 239.261. Monthly inflation was 0.41% (40% of the total annual inflation). The primary factor in the increase was energy costs, gasoline was up 2.3% while fuel oil was up 6.2%. Many other items were actually down... airfares down -1.5%, used cars and trucks down -1.3%, food at home down -0.5%, of course physicians services and motor vehicle insurance were up 1% and 0.9% respectively, along with apparel which was up 0.8%. Current Annual Inflation Chart We’ve updated the current annual inflation chart … [Read more...]
Betting on Deflation May Be a Huge Mistake. Here’s Why…
Although this site is called Inflation Data for the last several years we have been talking a lot about the big "D"... deflation. Strictly speaking, the only true deflation (inflation rates below zero) occurred in 2009 and then very briefly in 2015. See Annual Inflation Rate Chart. But as the chart shows the overall trend since the peak in 1990 has been down with the occasional spike upward. Since the peak in September 2011 however, the trend has been sharply down (falling inflation rates = disinflation) until it bottomed in April 2015. Since then inflation has turned up and has crossed above its moving average. So does this mean that we are in for a bout of inflation? Possibly. … [Read more...]
Bank Closures “Could Never Happen Here”
By Jared Dillian I was watching the 6 o’clock news and saw images of closed banks in Greece and people lined up at ATMs. I’m sure you did, too.This must seem surreal to most people because it seems so remote. But put yourself in these people’s shoes for a second. You have money in the bank. Suddenly you can’t get to it. After standing in long lines, you can only get 60 euros at a time, which isn’t going to last you very long. What if you didn’t plan adequately and haven’t stashed away any cash? The banks will be closed for a while. What happens? How do you pay for rent? Or food? How does your employer pay you? Do you go homeless? Or hungry? Do you get really angry, take … [Read more...]
Annual Inflation Below 1%
The U.S. Bureau of Labor Statistics released their monthly Consumer Price Index (CPI) data on Friday January 16th for December and for the first time since 2009 reported annual inflation below 1% (although we calculated October 2013 at 0.96%). The Consumer Price Index (CPI) for December was 234.812 down from November’s 236.151 which was also down from 237.433 for October. This resulted in a monthly decrease in prices of -0.57% and an annual inflation rate of 0.76%. Overall energy on a “seasonally adjusted” basis was down -4.7% for the month and -10.6% on an unadjusted basis for the entire year. Fuel oil fell -7.8% for the month (adjusted) and a whopping -19.1% annually. Gasoline was … [Read more...]
