Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Inflation

British Think Tank Predicts Financial Catastrophe for US

Titled “The Government Debt Iceberg”, the latest report from The Institute of Economic Affairs (IEA) in London was meant primarily for British eyes, but there’s enough in there to concern Americans worried about how

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President Proposes Doubling the tax Subsidy for the Poor

President Obama’s proposal to double the earned income tax credit (EITC) for the working poor on March 4 came with all the attendant benefits such an expansion would provide: it would reduce poverty while encouraging people not working to get a job. It would expand the existing law to cover an additional 16 million families with 30 million children.

In his State of the Union Address in January, the president warned this was coming,

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Latest CBO Outlook Ignores Birth Rates and Tipping Points

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, February 5, 2014:

Just reading the headlines, the average citizen is likely to think that now that the deficits are under control Washington can focus on problems elsewhere. The Congressional Budget Office (CBO) estimated in May that the current year’s deficit would come in at $560 billion, half what it was just two years ago. In its report released on Tuesday, it was pleased to note that

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Rosy CBO Report Leaves out Critical Factors

At first reading the latest report on the government budget and the economy released on Tuesday by the Congressional Budget Office (CBO) is all sunshine and roses. In its summary of the 182-page report the CBO noted that deficits this year (from last October to next September) will be even lower than initially estimated, dropping to $514 billion, down from $680 billion last year and $1.1 trillion in 2012. And, in the very short run at least, further declines in deficits are expected through 2015, perhaps touching a low of

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Argentina’s economy is cratering, again

While Wall Street declined by 3 percent over global growth concerns last week, few were noting or even interested in the 11 percent decline in the Merval, Argentina’s stock market index. It hit a high of 5,970 on Tuesday, January 21, the day before the Argentina government devalued its currency, and closed at 5,337 on Monday. The peso itself has been in decline far longer, having lost nearly

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Controversial Harvard Professors predict high inflation and defaults for the US

The two Harvard professors who made themselves famous, and then infamous, are at it again, now predicting that America will soon be forced to

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The IMF threatens a dangerous “wealth tax” proposal

The populist notion of taxing the rich once again turned up in the International Monetary Fund’s “Fiscal Monitor Report” released in October, but scarcely anyone noticed. In an arcane chart-laden 107-page long report that was competing at the time with the government shutdown, the failing rollout of Obamacare, and other concerns, crises and disasters, why would they?

Here’s why.

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Even Lower Gas Prices are Coming, says CNBC

On Friday Anthony Grisanti was jubilant. Writing for CNBC, he predicted that gas prices, down significantly from where they were in April, would continue to slide by at least another 10 cents per gallon, perhaps more. That would bring the average price, currently at $3.29 a gallon, closer to

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House Bill Offered to Study “Real World” Effects of Fed Policy

In anticipation of the upcoming 100th anniversary of the Federal Reserve on December 23rd, House member Kevin Brady (R-Texas) and Chairman of the House’s Joint Economic Committee, decided back in March to offer a bill to create a commission to

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The S&P 500 Index at a new all-time high? Not quite.

It’s nice to get confirmation about something I’ve held for years, especially from someone like Mark Hulbert who has been in the investment game for years: the S&P 500 Index is nowhere near a new all-time high, on an inflation-adjusted basis. Not even close.

The all-time high was back in

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Gary North is worth much more than $10 a month

My subscription to Gary North’s newsletter just paid for it self in one commentary. His analysis of this article helped improve my understanding of their conclusion: prices could decline in the near future.

I subscribe to John Mauldin’s free newsletter which today consisted of an outlook by two other very bright guys, Lacy Hunt and Van Hoisington. I have read both of them. And Mauldin used to be a partner of Gary North. Confused? Don’t be. This is just to say that they have immense credibility with me and I would automatically be sympathetic to their point of view.

But with North’s analysis I now have a better understanding:

The Fed is deliberately driving down the velocity of money (how fast money circulates) by keeping the banks’ excess reserves with them rather than letting the banks lend them out. They do that by paying interest on those reserves. Look at it from the bankers’ perspectives: why would you loan your precious reserves to risky customers, even those with excellent credit ratings, when you can make risk-free loans to the Fed and earn interest there? True, it’s less interest than you might get from a customer, but with them you run the risk of not getting your money back. You don’t have to worry about that with the Fed.

So North thinks it’s a deliberate policy to keep the banks from lending, which keeps price inflation from hitting the grocery stores. He says it’s the best of all possible worlds for the Fed: they can continue to finance the government deficits with digital money without price inflation.

If, however, the Fed decides to stop paying interest on those reserves, or worse, decided to start charging interest on those reserves, this action would force the banks to take back those reserves and start lending them out. This would result in price inflation almost immediately. North thinks that if the Fed does that (reverses course), we could see prices double in a matter of months. For the time being, however, the Fed has no interest in doing that. I’m not sure why the Fed would ever start charging interest on those reserves. So price inflation is highly unlikely, and we might even see some small decrease in the overall price level. This is helpful information. It agrees with the conclusion by Hunt and Hoisington but I have a better understanding, thanks to North.

Here’s the link to North’s analysis. You’ll see that it’s a paywall. I pay $9.95 a month to get over that wall and read his stuff. This single analysis of a well-written article which could have misled me and my understanding of the world has paid for my subscription for a least a year. I think North is way undercharging. Don’t tell him I said so.

Today is Tax Freedom Day, Except…

According to the Tax Foundation, “tax freedom day” – the day when the nation as a whole has earned enough money to pay all of its taxes for the year – arrived five days later this year than last year: Thursday, April 18th. The math is simple:

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I’m getting more than my money’s worth from the IRS

It’s always good to make sure I’m getting my money’s worth. I’m about to write a check to the IRS and I just did a little calculating on just what I’m getting for my money. I got a little help from a scholar at Cato, Richard Rahn:

First, I’m getting the best politicians that

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Colorado is now No. 19 and falling

This really breaks my heart. Yesterday the Mercatus Center released its third annual edition of Freedom in the 50 States: An Index of Personal and Economic Freedom, and Colorado has dropped precipitously from

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Does the Fed have a Plan B if inflation gets out of hand?

Two smart people from Cato don’t think so, and it makes them nervous. Henry Manne and Richard Rahn have a crystal ball but it’s cloudy. They stayed awake nights dreaming up scenarios that would trigger hyperinflation – a roaring escalation of prices at the retail level – and then ask

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The numbers behind the Dow are simply awful

Just as the Dow and the S&P 500 are reaching new highs, many are suggesting further gains are possible. That’s why this summary of how things look when compared to October, 2007, the day the Dow hit its previous all-time high, is more than a little unnerving.

  • Regular Gas Price: Then $2.75; Now $3.73
  • GDP Growth: Then +2.5%; Now +1.6%
  • Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
  • Americans On Food Stamps: Then 26.9 million; Now 47.69 million
  • Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
  • US Debt as a Percentage of GDP: Then 38%; Now 74.2%
  • US Deficit : Then $97 billion; Now $975.6 billion
  • Total US Debt Outstanding: Then $9 trillion; Now $16.4 trillion
  • Labor Force Participation Rate: Then 65.8%; Now 63.6%
  • Consumer Confidence: Then 99.5; Now 69.6
  • S&P Rating of the US: Then AAA; Now AA+
  • Gold: Then $748; Now $1583

Years ago when I was on a speaking tour for the American Opinion Speakers Bureau, I showed a cartoon of a man climbing a ladder. On his back were the words “stock market.” The first panel showed him climbing. The second showed him climbing higher. The third panel showed him reaching the top of the ladder. The fourth panel showed him continuing to climb, without the ladder. It always brought a laugh. Everyone understood that the market had become totally detached from reality. So it appears to be today.

Here’s where the Dow has to be in inflation-adjusted terms in order really to break a new high. Using an inflation calculator (which assumes that the CPI is a fair measure of price inflation – a dubious assumption), in order for the Dow Jones Industrial Average to equal its high of 14,164 touched in October, 2007, it would have to be at 15,630. At the moment, following the bad news out of Cyprus, the Dow is at 14,473. It would have to gain 1,157 points, or another 8 percent, just to get back to where it was, in real terms, in October, 2007, five and a half years ago.

The stock market might just continue moving higher, just like the man in the cartoon. But at some point reality is bound to kick in.

Ammo Shortages: More than simple Supply and Demand?

Awr Hawkins, a columnist for Breitbart.com, asked back in February if the present shortages of ammunition are a deliberate attempt by government agencies to so overwhelm existing manufacturers with orders for billions of rounds that it is resulting in “de facto” gun control. Hawkins asked:

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The “Dot.com bubble” burst 13 years ago.

Mark Hulbert makes several interesting points in his column today at MarketWatch, not the least of which is that the Nasdaq index, which most closely tracks high technology companies, is still down by half! He notes also, by coincidence, that

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The Profound Unfairness of Raising Taxes on the Rich

Benjamin Anderson tells the story of how a wealthy entrepreneur reacted to the imposition of much higher income tax rates in 1935 at the bottom of the Great Recession. Anderson’s Economics and the Public Welfare, a highly regarded study of the Great Depression, was based on his personal experience as an economist for the Chase Manhattan Bank and the editor of the Chase Economic Bulletin. Anderson recounts the case of one rich man who,

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Is the Middle Class stagnating? No, say two of my favorite economists.

Whenever Mark Perry or Donald Boudreaux have something to say, I listen, even if the topic is outside of my wheelhouse (economics and politics). I consider them to be two of the most

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.

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