Don’t Fight the FED
There is an old stock market saying that says, “don’t fight the FED” and that turns out to be pretty good advice. The FED can access trillions of dollars to influence the market direction.
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Non-Fungible Tokens (NFTs): Another Financial “Fumble”
Over the years, we’ve discussed various iterations of the “blockchain” and some of the possibilities it has for finance, industry, and even gaming. We looked at What are NFTs and Why are They Going Crazy?, How Blockchain’s Unique Innovations Can Prevent Money Remittance Scams, How Is Technology Affecting Global Trading Markets, and Metaverse vs. Multiverse- What are They? And Where are They Leading? Over at InflationData, we covered Cryptocurrencies and Inflation, and Can Crypto Solve Venezuela’s Hyperinflation Problem?, which we followed up with How has Venezuela’s Bitcoin experiment Fared? So we’ve looked at Crypto quite a bit. Today we are going to take another look at NFTs, which looked a lot like a crazy bubble right from the start.
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Will Loan Forgiveness Raise College Costs?
For years we’ve been tracking college costs and adjusting them for inflation. See Education and Tuition Inflation for more information. During that time, I’ve repeatedly said that one of the primary drivers of increased education costs was the ease of getting a loan. Unfortunately, the vast majority of college freshmen see a loan as “free money” and don’t seem to understand the difference between a “Loan” and a “Grant”. And apparently, this past week, many college loans effectively became grants.
Looking at it from a different perspective, we might wonder what lessons former college students will learn from this largess. Will they determine that debt is good? Or perhaps, they will surmise that no matter how stupid their decisions are, the government will always bail them out. Today’s article comes from the halls of Academia but doesn’t praise the government’s philanthropy as you might expect. ~Tim McMahon, editor
Biden’s College Loan Forgiveness Program Will Raise College Costs
When I interviewed for a teaching job at private college in Alabama more than twenty years ago, the recently elected governor had won partly on a platform in which the state would install a lottery system that would give students a $3,000 grant for college. As the provost and I discussed the prospects of this new program, he smiled and said, “We hope this lottery passes. Then we can raise tuition by $3,000.”
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Is The U.S. A Powerful “Empire” In Decline?
Recently I’ve been giving a lot of thought to the idea of global “empires”. Back in the 1970s one of my teachers discussed the parallels between the U.S. and the Roman empire and those parallels are even more striking today. A simple search on the term, “Parallels Between the U.S. and the Roman Empire” will generate pages and pages of results on this topic from such esteemed writers as Doug Casey, Seeking Alpha and even Salon.
In the U.S. we tend to bristle at the idea that we are an “empire” but a recent YouTube Video by Ray Dalio got me thinking about this subject once again. The characteristics of an “Empire” are fairly consistent and specific. Truth in History lists 36 characteristics of an empire. These include:
Being the “World’s Policeman”.
Meddling in the political affairs of foreign nations.
Original citizenry becomes rich, lazy, fat and demands “bread and circuses”.
Has an expanded immigration policy.
Accepts foreigners into its realm as unskilled laborers.
Ray Dalio’s video explains how the ascendency to Empire status occurs and he focuses on three recent “empires” including the Dutch, British, and the U.S. He calls this “the Big Cycle” and focuses primarily on the financial aspects of Empire.
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How Low Can the S&P 500 Go?
So far in 2022, the S&P 500 peaked at 4,818.62 on January 4th and reached a low of 3,674.84 on June 17th. That is a -1,143.78 point loss or -23.74% in 5 months. If that is the end of it, it will be considered a “mild correction”. Only 3 of the seven previous corrections lasted 5 months or less, while the other four lasted much longer.
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France’s War on Terror Uses Eagles to Catch Drones
When you think of drones, you think of harmless toys or maybe Amazon package delivery systems. But with terrorism on the rise, terrorists might turn to drones to deliver a different kind of package. And dealing with that threat might be difficult for law enforcement, after all, how do you shoot a drone out of the sky without injuring bystanders? Although no one was injured, at the time, the French began becoming concerned about drone attacks in early 2015, when drones flew over the presidential palace and a restricted military site.
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Keynesians and Market Monetarists Didn’t See Inflation Coming
The following article by Robert Murphy looks at the different views of inflation from the various economist’s camps. It also addresses the issue of why early Quantitative Easing (QE) didn’t produce the expected inflation. As I’ve said before the primary reason is that the deflationary forces of a contracting stock and housing market were great enough to counteract the massive money creation by QE.
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Elon Musk Ambushes Twitter
In the ongoing saga of Musk vs. Twitter, we first heard that the iconic billionaire founder of X.com aka. Paypal, Tesla, SpaceX, Hyperloop, etc. started acquiring significant quantities of shares of Twitter. On March 14, 2022, he had a 5% stake in the company. By April 1, he had 9.13% of the total outstanding shares, valued at the time at $2.64 billion, making him the largest shareholder in the company.
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Can Ruthless Governments Make Crypto Worthless?
Why Governments Villainize Assets That Protect Against Inflation
For years, in an effort to drive down prices, gold was attacked as a “barbarous relic” that paid no interest. But it was the only financial asset that wasn’t simultaneously another person’s liability. When an asset is also a liability it’s always possible that the liable party will be unable (or unwilling) to make good on that liability. In that case, the asset becomes worthless. But if you hold physical gold it will always be worth something. The price may fluctuate wildly, but it will never be worth zero. Being a commodity with many real-world uses (in addition to just jewelry), gold also tends to maintain its value during both times of inflation and deflation, plus gold tends to appreciate faster than inflation in times of crisis.
For years it seemed that governments around the world wanted to discourage their citizens from owning gold (while simultaneously hoarding it for their own treasuries). One reason for this seemingly duplicitous behavior is that without an alternative, citizens are forced to spend (and save) using the government-sanctioned currency. If you have the alternative of opting out of depreciating currencies most logical people will do so, once the benefits outweigh the costs.
Another reason governments dislike alternatives to the official currency is that alternatives reveal the true value of the government currency. Governments with perpetually high inflation rates like Argentina often will publish dubious “official” inflation rates in an effort to convince their populace that inflation isn’t as bad as their pocketbook tells them that it is. But with a non-shifting yardstick like gold, their lies become apparent. So they discourage gold ownership and thus leave people foolish enough to listen to their lies, defenseless to the ravages of inflation.
Now with the advent of cryptocurrencies governments have a new villain to demonize. It almost seems that gold has fallen out of favor and crypto has become the new gold. Millennials seem more likely to turn to modern alternatives like bitcoin rather than the antiquated (and time-tested) gold. And it is easy to see why. In recent years gold has remained relatively stable while crypto has skyrocketed.
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In What Universe is $100+ Crude Oil Cheap?
Everyone knows that Gasoline and Crude oil are currently expensive right? I recently updated several of our charts and when I got to the Crude Oil vs Gold chart I was in for a shock. According to that chart either Gold is expensive or Crude oil is cheap. Not as cheap as it was in 2020 but still historically cheap but it is actually simply approaching the long-term average ratio.
The thinking of the ratio is this… if the value of dollars is constantly changing the best way to tell if a commodity is expensive is to compare it to other commodities. Historically, gold has been money so what better commodity to compare to?
Looking at the chart of Gold vs. Oil we see that oil is still relatively cheaper than gold. Now as we have said many times Gold is a Crisis hedge so in times of crisis, gold appreciates. Therefore, we would expect gold to currently be expensive and it is, but it is not currently at all-time highs. Read the Full updated Gold vs. Oil Article here.
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