Terms

Inflation

Inflation

Inflation is a quantitative measure of the rate at which the average price level of selected goods and services in an economy increases over a period of time. As it is characterized by an increase in the cost of living as the prices of goods and services rise, it also reduces the purchasing power of each unit of currency, demand, supply, and expectations. Inflation hits at every angle of the economy: food prices go up, transportation prices increases, gas prices rise, and the cost of various other foods and services skyrocket over time. Ideally, an optimum level of inflation is required to promote spending to a certain extent instead of saving, thereby nurturing economic growth.

Events

The Great Inflation

Terms

Interest Rate
Nominal Rate
Real Rate

Mentioned by the Following

Asset Classes

Cash
Commodity

Entities

Economic Cycle Research Institute
Economic Perspectives
FX Market
Macro Hive
One River Asset Management
Reichsbank
Sensible Money
VT Price Value Portfolio

Events

1980s Decade
Panic of 1837

Event Types

Hyperinflation

People

Allan Meltzer
Ben Breitholtz
David Kotok
Harry Dent
Jim Rickards
Kevin Muir
Mark Valek
Murray Gunn
Steven Bregman

Positions

Aftermath
Asian Pacific Financial Forecast Service
Austrian School for Investors
Between Debt and the Devil
Brazilian Derivatives and Securities
Building Wealth with Silver
Code Red
Common Stocks as Long Term Investments
Crash Proof
Currency Wars
Dividend Investing for Everyone
E.B. Tucker’s Strategic Trader
EPB Macro Research
End the Fed
European Financial Forecast Service
FRED
Financial Times Guide to Investing for Income
Foundations of International Macroeconomics
Global Forecast Service
Global Value
Gold Rush 2020
Gold, Peace, and Prosperity
Great Boom Ahead: New Era of Prosperity
Handbook of Inflation Indexed Bonds
How an Economy Grows and Why It Crashes
Inflated
Inflation Targeting
Inflation Targeting
Investing from the Top Down
Is Inflation Ending
Killing the Host
Less Than Zero
Liberty Through Wealth
Massey on Money
Money Mischief
Naked Money
Paper and Iron
Planning for Freedom
Political Cycles and the Macroeconomy
Sovereign Wealth Funds
Stabilizing an Unstable Economy
Structured Products and Hybrid Securities
Super-Easy Investing in Real Gold and Silver
Taxes, Loans and Inflation
The Age of Deleveraging
The Bible of Compounding Money
The Coming Soviet Crash
The Creature from Jekyll Island
The Demographic Cliff
The Dividend Machine
The Federal Reserve and the Financial Crisis
The Gold Book
The Great Devaluation
The High Income Factor
The History (And Future) of Inflation
The Next Great Bubble Boom
The Origins of Value
The Quick & Dirty Guide to Gold & Silver
The Structure of Production
The Ten Trillion Dollar Gamble
The Trouble with Prosperity
This Time Is Different
Trader Vic on Commodities
Trading the Fixed Income, Inflation and Credit Markets
Validea's Guru Investor Blog
Volatility and the Alchemy of Risk
Volatility at World's End
Your Smart Money Moves
eCONcomics

Publication Types

Cycles
Demographics

Strategies

Macroeconomics
Monetary Policy

  • One of the best ways to predict inflation is to look at workforce growth (2.5 year lag)
    • New works start to spend and require lots of goods, services, money, etc - they fuel the economy
  • Before central banks, inflation was relatively mild
    • House Prices in the US only rose 12% in the 19th century 
    • House Prices in the US only rose 50% from 1800 to 1913 (When US Central Bank Formed)
    • Previously most countries monetary policy operated on  the Gold Standad
  • Inflation is hidden tax on those who accumulate assets:  savers, retirees, annuitants and insurance policy holders


Inflation Triggers

  • Monetarists and Austrain Economists believe that Central Bank money printing (increasing money supply) causes inflatino
  • Population Growth (especially working age) - more demand for currency in the economy
    • Working age population consume a lot 
    • Having kids also requires significant consumption
    • Non-Working age are huge consumers (without any production)
  • Some believe that Inflation is now always driven by the money supply:


Inflation & Specialization = Good Thing (Harry Dent)

  • Specialization of Labor = More Transactions / Outsourcing = More Need for $ = Inflation
    •     We have to pay other people more money to do something than we could do it for ourselves
  • Specialization of Labor = Better Efficiency = Better Lifestyles = Good
  • Therefore:  Inflation = Good
  • Natural Inflation is a great economic indicator and sign of progress
  • However, unnatural inflation can be bad:
    • Massive Central Bank QE & Liquidly injections are like a drug
  • Compared to someone living remotely by themselves.  They do everything themself and have non need for currency:
  • Evidence:  Although there has been massive "inflation" in the US since 1900, inflation-adjusted wages and living standards have gone up far faster


Inflation According to Dr. Lacy Hunt