The government and the FED have been making lots of excuses for the current wave of price inflation but it hasn't occurred by accident, because of oil shocks, or Russian invasions. The foundation for the current wave of rising prices was laid brick by brick over a long period of time. And because of this foundation of debt, a severe financial crisis looms not far ahead. The following article by Antony P. Mueller was reprinted by Creative Commons Permission. ~Tim McMahon, editor 05/02/2022 A Deeply Flawed Monetary System A monetary system that allows the creation of money out of thin air is vulnerable to the fits of credit expansion and credit contraction. Periods of credit expansion … [Read more...]
How Families Are Adjusting To The Crazy Inflation Rates
On April 12th of, 2022, the U.S. Bureau of Labor Statistics (BLS) announced that the annual US inflation rate had reached a record high of 8.5%, a level not seen since December 1981. This level of rapid price increase is being felt all over the nation and even in Europe. Those with low incomes are having the hardest time adjusting to the rapidly increasing cost of living, as is often the case. But working families across the nation are also being forced to adapt and change in order to cope with rising prices. This has impacted every corner of our society, from gas to prices at the grocery store. Adjusting to this level of inflation hasn’t been easy, and here is how some families are looking … [Read more...]
The History of Inflation in the United States
By John Steele Gordon Author, An Empire of Wealth: The Epic History of American Economic Power Money is just another commodity, no different from petroleum, pork bellies, or pig iron. So money, like all commodities, can rise and fall in price, depending on supply and demand. But because money is, by definition, the one commodity that is universally accepted in exchange for every other commodity, we have a special term for a fall in the price of money: we call it inflation. As the price of money falls, the price of every other commodity must go up. And what causes the price of money to fall? The answer is very simple: an increase in the supply of money relative to other goods and … [Read more...]
How Inflation Helps Some and Hurts Others
Inflation is NOT monolithic i.e. it doesn't affect everyone equally. This has been known since the 1700s when Richard Cantillon, an Irish-French economist, author, and banker, wrote a treatise explaining the Missippi Bubble and the Tulip Mania. We first discussed this issue in an article entitled Who Does Inflation Hurt Most? In the following article, Mark Thornton looks at the effects first postulated by Richard Cantillon and how inflation helps some and hurts others. ~Tim McMahon, editor. Cantillon Effects: Why Inflation Helps Some and Hurts Others By Mark Thornton We now turn our attention to what happens with an increase in the money supply rather than an increase in savings. … [Read more...]
Don’t Blame Putin for High U.S. Inflation… Yet
With Annual Inflation reaching 40-year highs in February, the current administration is frantically searching for a scapegoat... any scapegoat no matter how absurd... to deflect responsibility for the current high inflation rate. First, inflation was "transitory"... then when it was obvious it wasn't... it was supply chain disruptions, and when that narrative fell apart, along comes Putin... Well, inflation was a problem long before Putin invaded Ukraine. So although the "Putin Effect" might result in HIGHER inflation soon, it hasn't been the cause of inflation in the February 2022 inflation numbers. In today's article, Ryan McMaken looks at this issue. ~Tim McMahon, editor Price Inflation … [Read more...]
February 2022 Inflation- 7.9%… Is 11% Next?
The Bureau of Labor Statistics reports February 2022 Inflation Hits Another Record High. Inflation Summary: Annual Inflation highest since January 1982. CPI Index rose from 281.148 to 283.716. Monthly Inflation for February was 0.91% The next release is on April 12th February 2022 Annual Inflation was 7.87%. Jan. 2021 -- 1.40% ** Jan. 2022 -- 7.48% ** Feb. 2022 -- 7.87% Inflation soared again in February 2022. The last time inflation was higher was in January 1982 when it was 8.39% but then it was declining from the March 1980 peak of 14.76%. Although we calculate it to two decimal places the Bureau of Labor Statistics reported February's inflation rate as 7.9%. BLS … [Read more...]
How Should You Invest to Benefit From Inflation?
We've been a bit spoiled over the last couple of decades because inflation has been relatively tame. The first thing to remember about inflation is that it is primarily a loss of purchasing power. That means that to keep up with inflation, you need to have "more money" in other words, with 7.5% inflation, you have to have $107.50 next year to be able to buy the same thing you could buy for $100 this year. So the first rule of inflation is "don't lose purchasing power". But unless you can earn at least 10% on your money, you are probably losing ground. Why 10%? Because you still have to pay taxes on your gain. If you invest $100 and make 8% i.e. $8 and then have to pay the government 20% … [Read more...]
January Inflation Nears 40 Year High
The Bureau of Labor Statistics reported Another Record High Annual Inflation Rate in January. Inflation Summary: Annual Inflation highest since February 1982. CPI Index rose from 278.802 to 281.148. Monthly Inflation for January was 0.84% The next release is on March 10th Annual Inflation for the 12 months ending in January was 7.48%. Jan. 2021- 1.40% -- Jan 2022- 7.48% 2021 Inflation Rates Feb 2021 1.68% -- June 2021 5.39% -- Dec. 7.04% Inflation soared from January 2021 to January 2022 reaching an almost 40 year high. The last time inflation was higher was in February 1982 when it was 7.62% but then it was declining from the March 1980 peak of 14.76%. As you … [Read more...]
Former Treasury Secretary Larry Summers on the Current Inflation Situation
Larry Summers was the 71st United States Secretary of the Treasury from 1999 to 2001 under Bill Clinton and Obama’s head of the National Economic Council from 2009 to 2010 and the president of Harvard University (2001–2006), so he might know a little about inflation. Recently he is quoted as saying that although there are some “transitory” components of the current inflation situation, we are also “moving towards higher entrenched inflation”. One of the factors he mentioned was “expectations,” which we have discussed in previous articles. When expectations of higher inflation start, it becomes almost a “self-fulfilling prophesy” because employees fight for higher wages expecting their … [Read more...]
How Quickly Can The FED Get Inflation Under Control?
This is an interesting question. How long DOES it take to get inflation under control? I've often said that the economy is like a cruise ship; it doesn't turn on a dime. A cruise ship can't just come barreling into the harbor at full speed and slam on the brakes when it's near the dock. If it tried that, it would end up destroying half the town. Typically, it takes AT LEAST 9 months for the economy to see the effects of the FED's actions. In order to control inflation, a successful FED has to anticipate where the economy will be nine months to a year down the road and then take measured steps to correct it before we get there. We haven't seen that this time. What we have seen is a FED in … [Read more...]
