The Root Cause of Inflation: Understanding Why it’s High
Econ-Intel
by John Righter
1y ago
The root cause of Inflation is the change in the ratio of money to the goods and services produced. The recent growth of the money supply has been massive and rapid. This coupled with a dramatic decrease in production and the resulting supply chain disruptions is the root cause of inflation. Other factors, such as expectations, play a role in the timing and pace of inflation. However, it is misguided to ignore money supply and production to focus on secondary items. Inflation is a virtual certainty when the money supply increases enormously and production drops dramatically. Ignoring this fact ..read more
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Does Greed Cause Inflation? Some Perspective
Econ-Intel
by John Righter
1y ago
Photo by Sandy Millar on UnsplashPhoto by Mufid Majnun on UnsplashGreed – “My money“Greed Does greed cause inflation? You have probably come across some variation of this statement, “Greedy corporations charging higher prices causes inflation”. But, is it true? Is greed the root cause of inflation? So, does greed cause inflation? The argument basically goes like this: The firm sees rising prices and takes that as an opportunity to raise prices. Let’s examine if this argument makes sense. Generally, firms will charge the profit-maximizing price at all points in time. If they could just raise pr ..read more
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Bank Failures: Solved or Just on Hiatus?
Econ-Intel
by John Righter
1y ago
The bank failures of Silicon Valley Bank and Signature Bank were significant economic events. These failed banks were taken over by the FDIC on March 10th and 12th. Regulators worked to calm the market on March 12th by issuing a statement that the banking system “remains resilient and on a solid foundation” . To really understand what is happening, let’s examine the banking data directly. Recently released figures now allow for a look at how banks are actually handling the situation. This makes it possible to assess the level of stress remaining in the banking sector. Direct borrowing from the ..read more
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What Really Happened at Silicon Valley Bank?
Econ-Intel
by John Righter
1y ago
What really happened at Silicon Valley Bank? Why did a bank with more than $15 billion dollars in equity collapse from a loss of $1.8 billion dollars? Banking woes at Silicon Valley Bank (SVB) have been widely covered. However, nothing has explained why a $1.8 billion dollar loss led to the collapse of a bank with $209 billion of assets and $15 billion dollars of equity. A $1.8 billion dollar loss alone would not cause this outcome. But, what really happened at Silicon Valley Bank? Reported so far As Silicon Valley Bank’s depositors faced rising interest rates, they began more heavily utilizin ..read more
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Fed Sets New Record: Biggest Loss Yet!
Econ-Intel
by John Righter
1y ago
Data: FRED database; Graphics Econ-Intel The Fed set a new record, recording its largest loss yet since its accrued earnings account became negative in September of 2022. In the most recent week, the Fed lost $3.275 billion. This edges out its earlier record of a $2.456 billion loss for the week ending January 4th, 2023. As of February 8th, 2023, the total accrued loss that the Fed must earn back before remitting additional funds to the treasury is $30.234 billion.  The Fed’s loss over the most recent week was its largest since its accrued earnings account became negative l ..read more
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February Begins With More Losses for the Federal Reserve
Econ-Intel
by John Righter
1y ago
Data: FRED database; Graphics Econ-Intel February begins with more losses for the Federal Reserve. The week ending February 1, 2023, concluded the same as recent prior weeks for the Federal Reserve – with a loss. For the week ending February 1st, the Federal Reserve lost $1.084 billion dollars. Until the accumulated losses have been recouped, the U.S. Treasury will not receive any of the Federal Reserve’s profits. The total accrued loss that the Federal Reserve must earn back before resuming remittances to the U.S. treasury is $26.959 billion, as of February 1, 2023. This means that the U.S ..read more
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Zimbabwe Wrangles with Inflation & the IMF’s Advice
Econ-Intel
by John Righter
1y ago
As Zimbabwe fights inflation, its gold coin continues to hold value, rising to $2016.79 as of January 25, 2023, according to the Reserve Bank of Zimbabwe. Their gold coin, known as the Mosi-oa-Tunya, has more than held its value. Initially issued at a price of $1823.80 on July 24, 2022, it has risen to $2015.79 on January 25, 2023. Meanwhile, inflation rapidly erodes Zimbabwe’s national currency. Zimbabwe’s annual inflation rate at the end of 2022 was 243.8 percent according to trading economics. So far, Zimbabwe’s gold coin has a track record as a solid store of value during this era of hyper ..read more
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Federal Government Spending : Big, How Big?
Econ-Intel
by John Righter
1y ago
Most people are aware that the U.S. Federal Government spending is massive. But when speaking about trillions, it is easy to lose perspective. So how does one put U.S. Government spending into perspective and understand how much money it is? How much does the Federal Government spend, in terms that make sense? To put the amount of money in perspective, let’s examine it by households, since that breaks it down into a unit that everyone is familiar with. First, here is the data for the most recent full calendar year regarding how high the U.S. Federal Government spending is: St. Louis Fed Additi ..read more
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How Much Can The Fed Tighten?
Econ-Intel
by John Righter
1y ago
Jump to updates since original publication. The financial wellbeing of the residents of the United States is dependent upon inflation coming back under control.  Current levels of inflation are driving real returns on many assets negative. This leads to diminishing real earnings and less buying power for most of the population.  Purchasing power further deteriorates due to rising interest rates on debt. The Fed’s ability to tighten the money supply is directly related to their ability to fight inflation. But, how much can the Fed tighten with current monetary policy? The impact of Fe ..read more
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Ample Reserve Regime: Great, How Did We Get Here & Why?
Econ-Intel
by John Righter
1y ago
A Brief History and Why to Know What an Ample Reserve Regime is: The Federal Reserve abolished the reserve requirements for banks operating in the United States.  Reserve Requirement Abolished! What Is the Fed Doing Now? covers this change more thoroughly. This change brought a new method to regulating banks. The Fed calls it an Ample Reserve Regime. But what is it and could it be dangerous?  The Federal Reserve released a memo on March 15, 2020 stating: For many years, reserve requirements played a central role in the implementation of monetary policy by creating a stable demand fo ..read more
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