The rate of inflation is the measure of the rise in prices of goods and services in an economy over a certain set time period. When prices rise, for the same level of income, the consumer can purchase less, which means they have less purchasing power and are “poorer” compared to the previous time period. The inflation rate is the annualized level of price changes. Excessive growth of the money supply is one cause of inflation. When the government adds more money to an economy, it devalues each bill already in circulation, lowering the value, as it now will take more money to purchase the same good or service. The inflation rate is not a problem if it is very low, but once it escalate,s it causes severe economic problems.
If you listen to the Wall Street analysts, January consumer confidence numbers weren’t really all that bad. The preliminary University of Michigan Consumer Confidence index came in at 80.4 versus a forecast of 83.4—and down from 82.5 in December. (Source: “Tale of two consumers continues as US consumer sentiment slips,” CNBC, January 17, 2014.) Some attributed the blip to the polar vortex that swept through most of North America earlier in the month. The warmer winds of February are expected to pick up the disappointing slack in U.S. consumer confidence levels next month. But Iâ ... Read More
The central bank of Japan has taken center stage when it comes to using extraordinary measures to revive growth in an economy. In an effort to boost the Japanese economy, the central bank has resorted to quantitative easing. And unlike the U.S. Federal Reserve, Japan is also involved in buying exchange-traded funds (ETFs) and real estate investment trusts (REITs), not just government bonds and mortgage securities. Unfortunately, the central bank is outright failing. One of the main goals of the Bank of Japan is to inject inflation into the Japanese economy through money printing, aiming for an inflation rate of two percent. Sadly, this isnât happening; inflation in the Japanese economy is runn ... Read More
Whether youâre in Pamplona, Spain or on Wall Street, when it comes to running with the bulls, the object is to stay ahead of the pack. This means not getting gouged physically or financially. However, there are an increasingly large number of investors out there right now who think theyâve got a handle on the bull market. Why? The Federal Reserve says it wonât taper its generous $85.0-billion-per-month quantitative easing policy until the U.S. economy improves. And by that, it meansâfor now at leastâan ... Read More
Bad news on Main Street is good news for Wall Street. Illogical heads prevailed on Tuesday after the U.S. government announced that the unemployment rate dipped to an ever-so-modest 7.2% in September, from 7.3% in August. The U.S. added just 148,000 new jobs in Septemberâfar short of the forecasted gain of 180,000 jobs for the month. (Source: âThe Employment Situation â September 2013,â Bureau of Labor Statistics web site, October 22, 2013.) The number of long-term unemployed (those without a job for at least 27 weeks) remains stubbornly high at 4.1 million, and the und ... Read More
Skepticism is very high among individual investors. Institutional investors who run buy-and-hold mutual funds donât need to be as worried; they get paid to buy stocks. The stock marketâs run makes total sense in that the Federal Reserve continues to promise low interest rates and continues to increase the money supply, while revenues and earnings from corporations are growing modestly. Other than real estate, there is no other place for an investor to put his or her money to generate income above the inflation rate. So the stock market is likely to keep ticking higher over the near-term. Now, all the power is with corporations. I believe weâre on the final leg of the bull market recovery from the March ... Read More