Everyone knows that inflation hurts consumers by raising the cost of their purchases and that it hurts those on fixed incomes the most because although their costs are rising, their income isn't. In addition to impoverishing individuals, inflation has several less obvious ramifications. Perhaps the most insidious and detrimental consequence of inflation is the facilitation of more wars. How Inflation Promotes War Prior to the advent of fiat currencies, if a Monarch wanted to wage war, he had to figure out a way to pay for it. If his treasury wasn't large enough to pay for the means of war, the king would have to either raise taxes, or borrow the money, either way there were limits to how … [Read more...]
How Inflation Is Reshaping the Job Market for New Entrants
As you enter the workforce, there are myriad challenges and strategies to navigate — particularly around finding a job in the first place. Inflation rates only complicate this intricate dance you are doing to land a career as a recent graduate or new professional on the scene. Whether you’re sure or unsure about your career path, there are plenty of opportunities to be found in the current job market. Although the rate of rising prices changes things a bit, there are ways to be savvy about the system and land the job of your dreams. The Current State of Inflation and Wages There always seems to be a debate over whether or not wages are keeping up with inflation. However, it’s not always a … [Read more...]
April Inflation Sparks Market
The U.S. Bureau of Labor Statistics released its April Inflation report on May 15th showing Annual Inflation was down from 3.5% in March to 3.4% in April. (but since we calculate it to two digits, it was actually 3.48% in March and 3.36% in April.) The markets took this as a good sign and the NYSE rallied 157.68 points resulting in a 0.87% gain. The NASDAQ did even better gaining 231.21 points or 1.40%. Prior to the gain, our NASDAQ ROC was flashing a warning signal. But we did say that we needed to wait for confirmation before selling. Unadjusted monthly inflation was 0.65% in March which moderated sharply to "only" 0.39% in April. Typically inflation is highest in the first … [Read more...]
March Inflation Causes Market Concern
The U.S. Bureau of Labor Statistics CPI report released on April 10th, showed Annual Inflation was up from 3.2% in February to 3.5% in March. (but since we calculate it to two digits, it was actually 3.15% in February and 3.48% in March.) Monthly inflation was 0.62% in February and 0.65% in March. Typically inflation is highest in the first quarter of the year, so these numbers are a bit high but not that unusual. In March 2023 monthly inflation was 0.33%, so annual inflation jumped in 2024. Mr. Market didn't like the news because it drastically reduced the chances of a rate cut anytime soon. So, stocks fell on the release. The NYSE opened at 18,171.20 and that was the high for the … [Read more...]
February 2024 Inflation Up Slightly
According to the Bureau of Labor Statistics CPI report released on March 12th, Annual Inflation was up from 3.1% in January 3.2% in December. (but since we calculate it to two digits, it was actually 3.09% in January and 3.15% in February.) Monthly inflation was 0.54% in January and 0.62% in February. Typically inflation is highest in the first quarter of the year, so these numbers are not that unusual. In January 2023 monthly inflation was 0.80%, so annual inflation was lower in 2024 but monthly inflation was "only" 0.56% in February 2023 so annual inflation increased in 2024. The BLS's Seasonally Adjusted Monthly rate for January was 0.3%, and 0.4% in February. As you can see … [Read more...]
Inflation, High Inflation, and Hyperinflation
The following article was written by Dr. Thorsten Polleit and was originally published in October 2022. Since then, inflation has come down significantly, but his analysis is still valid. Dr. Polleit is Chief Economist of Degussa Bank and an Honorary Professor at the University of Bayreuth. He also acts as an investment advisor. ~Tim McMahon, editor. Inflation, High Inflation, and Hyperinflation The word “inflation” is heard and read everywhere these days. However, since different people sometimes have very different understandings of inflation, here is a definition: Inflation is the sustained rise in the prices of goods across the board. This definition conveys that inflation … [Read more...]
Inflation Adjusted Mortgage Rates
The interesting thing about borrowing money long-term is that inflation actually helps you repay the loan with cheaper money... At 7% inflation, prices double roughly every 10 years, which is only 1/3rd of the way through your 30-year mortgage. So, if your budget was stretched initially to make your mortgage payment, after 10 years (assuming your salary kept up with inflation) that same mortgage would only have half the impact on your budget. Thus, to get the true impact of mortgage rates, we need to adjust them for inflation. It has been a while since we addressed the issue of “Inflation Adjusted Mortgage Rates,” primarily because inflation and mortgage rates have been at historically … [Read more...]
September Inflation Virtually Unchanged
According to the Bureau of Labor Statistics CPI report released on October 12th, Annual Inflation was unchanged at 3.7% in September. (but since we calculate it to two digits, it was actually up from 3.67% to 3.70%.) Monthly inflation went from 0.44% in August to 0.25% in September. But, even though monthly inflation was lower than last month, Annual inflation increased. This is because monthly inflation in September 2023 was slightly higher than monthly inflation in 2022. Thus, as the 2022 number fell out of the calculation, it was replaced by a slightly higher monthly number, thus increasing the Annual Inflation number. September 2023 Inflation Summary: Annual Inflation rose … [Read more...]
How Germany is Fudging Their Inflation Numbers
Playing with Official Inflation Statistics: An Example from Germany By Karl-Friedrich Israel The Harmonized Index of Consumer Prices (HICP) consists of 12 subindices, which are weighted according to their shares in total household expenditures. If, for example, food and non-alcoholic beverages (subindex 1) account for 15% of expenditures, they should also be given a weight of 15% in the overall index. In this way, each expenditure category would be given the importance it has for an average household. This is the claim of official statistics. But here, too, as so often, aspiration and reality diverge. In Germany, the traditionally largest subindex covers housing, water, electricity, … [Read more...]
Increasing Inflation Now Shifting Insurance Rates
Inflation is making everything more expensive, and insurance is no exception. As prices rise for goods and services, insurance companies have to adjust as well. They factor in a variety of elements, including the average cost per claim made and the rising costs involved in repairing cars or homes. When these costs go up, insurance companies must pass it on by raising the price of premiums. Understanding Insurance Inflation Insurance inflation means the cost of your car, home, health, or life insurance is going up. What’s driving these increases? For starters, healthcare expenses are rising, so health insurance gets more expensive. Natural disasters like floods and fires can also make home … [Read more...]
