The College Degree When we hear the term "valuable commodity" we might think about oil or gold. Yes, these are undoubtedly commodities (though their value has fluctuated over time), but many other less concrete objects are also considered commodities in our society today. A commodity is defined as "A raw material or primary agricultural product that can be bought and sold, such as copper or coffee." But the second definition is "a useful or valuable thing, such as water or time". Based on the second definition, one of the most valued commodities available in modern society is a college degree. While it may sound odd to refer to a diploma as a commodity, there's no denying that a college … [Read more...]
How Inflation Can Reduce Your Annuity Income (and what you can do about it)
Even though this is written from a UK perspective, it holds true for the rest of the world, too. ~ editor Annuity Income and Inflation Inflation as defined by Wikipedia is "an average index used to measure the rise in the general level of prices of goods and services in an economy over a period of time" which in layman's terms means the average amount by which goods and services are increasing. Monetarism an as economic theory identifies keeping inflation low as the main goal in achieving sustained economic growth, as opposed to reducing unemployment. The reason for this is that whilst unemployment is a burden on the people without jobs, high inflation (it is argued) impacts the entire … [Read more...]
Inflation Definitions
Inflation Adjusted Prices What is the inflation adjusted price of common commodities? Historical Oil Prices Chart - This Chart compares Monthly Average Oil Prices with their Inflation Adjusted Oil Price. Historical Crude Oil Prices (Table) - The first table shows Annual Average Crude Oil Prices from 1946 to the present. Prices are adjusted for Inflation using the Consumer Price Index (CPI-U) as presented by the Bureau of Labor Statistics Inflation Adjusted Electricity Prices - Residential electricity prices in the U.S. have risen from an average of 7.83 cents per kilowatthour in 1990 to an average of 11.44 cents per kwh in 2010. This is a 46% increase in 20 years and sounds like a … [Read more...]
The Effects of Inflation on Life Insurance
How Life Insurance Works Premiums on term life insurance are usually paid (monthly, quarterly or annually) for between 10 and 30 years, depending on the particular policy you've chosen. One of the ways that life insurance works is that you pay a fixed rate for the length of the policy and the value of the insurance does not change. Whether you die tomorrow or 20 years from now, your beneficiaries would still receive the same dollar amount of insurance settlement. Therefore, if you have a $500,000 term life insurance policy, as long as the premiums are paid it provides $500,000 worth of coverage from the day you buy it until the day the term ends or it is paid out. The Effects of Inflation … [Read more...]
Effects of Inflation on Savings
Inflation Effects Everyday we hear of commodity prices going up and the value of money going down. We've also heard of inflation and the global economic crisis having a far-reaching effects on the world economy. But have you ever stopped to think how inflation is affecting your everyday financial matters? How is it affecting your savings account? If you haven't given it much thought, perhaps it is time to do so. Below are few ways inflation affects your savings. By giving it a bit of thought, you can work out an alternate plan or be prepared, so you can keep more of your savings. Take a close look: Inflation Reduces the Value of Money: Initially you may have been able to buy … [Read more...]
Inflation and Commodity Prices
It is critical to understand the correlation between inflation and commodity prices and the effects of inflation on commodity prices themselves. In recent years, the global financial markets have been in flux as they've gone up and down repeatedly. The commodities market has been especially volatile with items like gold and oil going up significantly. While a number of different factors contribute to the prices of commodities, inflation is one aspect that has a direct impact on the price of commodities. Inflation and Commodity Prices Inflation is a process that occurs when the purchasing value of a currency is lowered. This is usually determined by comparing the prices of a good or … [Read more...]
Using Forex to Hedge against Inflation
Forex Hedge According to Wikipedia-A foreign exchange hedge (FOREX hedge) is typically used by companies to eliminate or hedge foreign exchange risk resulting from transactions in foreign currencies. In other words, if a company in based in one country most of its expenses are denominated in the currency of that country. So if a company is based in the U.S. most of its expenses are in dollars. But if it sells a significant portion of its products in another country like Mexico then a portion of its income will be in Pesos. If the Peso depreciates against the Dollar the value of their income could cause them to lose significantly even though they thought they were selling at a profit. This … [Read more...]
What Is Inflation Accounting?
What Is Inflation Accounting? Inflation has an effect on consumer prices, to be sure, but there are effects on corporate finance as well. Typically, in developed countries, inflation rates are fairly steady and somewhat predictable. However, in times of hyperinflation, prices soar and corporate financial reports can be misinterpreted without accounting for inflation. Inflation accounting offers a more accurate view of a company or individual’s financial situation because it looks at those finances through the lens of inflation. According to Investopedia "Inflation accounting requires statements to be adjusted according to price indexes, rather than rely solely on a cost accounting basis." … [Read more...]
Inflation-Busting Tips To Help You Get The Most from Your Money
Rising inflation has been a major concern over the past few years. The real value of your money can be quickly eroded if the interest on your accounts fails to keep pace with the rising cost of goods and services. So what can you do about it? Here are some Inflation-Busting Tips to help with your investments: Inflation "The Silent Thief" Price Inflation is the measure of the rising costs of goods and services across a period of time, also described as the “rising cost of living”. Sometimes described as ‘the silent thief’, savers are often left unaware of the effect that inflation is having on their savings. While you may not physically lose money as a result of rising inflation, the … [Read more...]
Impact of Inflation on Bonds Part 1
Impact of Inflation on Bonds Bonds are often considered a risk-free (or nearly risk-free) investment suitable for "widows and orphans". While they are generally safe, they have several weaknesses in the modern marketplace, inflation, rising interest rates and default risk. Before buying a bond, make sure you understand how bonds work and how inflation can have an effect on bonds. The Nature of Inflation Inflation is often described as the general rise of prices in the economy. However, the increase in prices is merely the effect, called "price inflation." Monetary inflation, which is the expansion of credit in the financial markets, is what often (but not always) drives price inflation. … [Read more...]
