Inflation

Inflation, at the very core, is the rate at which the price level in an economy increases. It can also be called the rate at which the purchasing power of individuals is falling: as prices increase, less and less can be bought with each dollar. There are many factors that can cause inflation to increase, but two of the major ones are excessive money supply and reckless government spending.

Inflation is not a problem if it is low; but, once it escalates, it causes severe economic problems. To control inflation, central banks use different tools such as interest rates. In the U.S., the Federal Reserve targets inflation rate in the U.S. economy to be between two percent and three percent.

The inflation figures in the U.S. are reported by the Bureau of Labor Statistics (BLS) each month, for the previous month.

Since the financial crisis of 2008 and 2009, inflation in the U.S. economy has been very low. In 2013, prices increased by 1.5%, which was well below the Federal Reserve’s target. But, over the past few years, the central bank has printed a significant amount of money to boost the economy. The money supply, as a result, has substantially increased. In addition to this, the U.S. government has also spent, continuing to incur budget deficits year-over-year. Going forward, this could mean soaring inflation.


Economic Collapse: Venezuela’s Currency is So Worthless, People Are Using Money as Napkins

By Friday, August 21, 2015
Economic-CollapseSoaring inflation in Venezuela has left the country’s currency virtually worthless, leaving the troubled nation on the verge of economic collapse. But while economists try to describe the nation’s turmoil with facts and statistics, the story of Venezuela’s struggles was perhaps summed up best in a Reddit forum. On Monday,.

Jim Rickards: We Are in a Global Depression

By Saturday, August 15, 2015
China Stock Market CrashChina’s currency devaluation is a confirmation that the world’s second-largest economy could be on the verge of an economic collapse. At least, that’s the opinion of renowned analyst Jim Rickards. “There’s no such thing as a one-time thing in currency wars,” he told Amanda Lang on CBC. “It won’t be their last move.”.

U.S. Economic Outlook for 2015: Economy Strong but Markets Unstable

By Monday, August 10, 2015
Economic Picture for 2015 Not RosyStrong Economic Data Points to Growth in 2015? As 2014 winds down, many investors are wondering what the economic outlook for 2015 will be. If you look at the U.S. economic data that’s been trickling in, 2015 looks like it could be a very strong year. The U.S. announced strong third-quarter gross domestic product (GDP) growth of 3.9%..

Ron Paul: Real Inflation Rate is Over 6%

By Saturday, July 18, 2015
Ron Paul on Interest RateGage Skidmore / Flickr
Former Texas Republican Congressman and three-time Republican presidential nominee Ron Paul discusses the latest inflation numbers in June, as well as the likelihood of a rate hike. (Source: Inflation On The Rise, last accessed July 16, 2015.) In June, the Purchasing Managers Index (PMI), a leading indicator
.

Inflation: Consumer Price Index Climbs 0.3% in June

By Friday, July 17, 2015
The U.S. Bureau of Labor Statistics says inflation went up by 0.3% in June, solidifying market expectations that the Federal Reserve will raise interest rates this year. The BLS released its monthly Consumer Price Index report on Friday July 17th. The CPI is calculated by tracking the prices of “basket” goods and comparing it to .
Sep. 3, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter) $1014.15
Trailing 12-month Price/earnings multiple (Most Recent Quarter)

17.44

Dow Jones Industrial Average Dividend Yield 2.62%
10-year U.S. Treasury Yield 2.19%

Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.

Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.

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From: Michael Lombardi, MBA
Subject: Gold: The Stock Contrarian Investors’ Best Play of the Decade

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