Posts filed under “Inflation”

How Columbus Caused Inflation

Click to enlarge
Chart
Source: Economist
 
 
According to the Economist:

“Some modern economic historians dispute Smith’s argument that the discovery of the Americas, by Christopher Columbus in 1492, accelerated the process of globalisation. Kevin O’Rourke and Jeffrey Williamson argued in a 2002 paper that globalisation only really began in the nineteenth century when a sudden drop in transport costs allowed the prices of commodities in Europe and Asia to converge. Columbus’ discovery of America and Vasco Da Gama’s discovery of the route to Asia around the Cape of Good Hope had very little impact on commodity prices, they argue.

But there is one important market that Mssrs O’Rourke and Williamson ignore in their analysis: that for silver. As European currencies were generally based on the value of silver, any change in its value would have had big effects on the European price level. Smith himself argued this was one of the greatest economic changes that resulted from the discovery of the Americas:

The discovery of the abundant mines of America, reduced, in the sixteenth century, the value of gold and silver in Europe to about a third of what it had been before. As it cost less labour to bring those metals from the mine to the market, so, when they were brought thither, they could purchase or command less labour; and this revolution in their value, though perhaps the greatest, is by no means the only one of which history gives some account.

The influx of about 150,000 tonnes of silver from Mexico and Bolivia by the Spanish and Portuguese Empires after 1500 reversed the downwards price trends of the medieval period. Instead, prices rose dramatically in Europe by a factor of six or seven times over the next 150 years as more silver chased the same amount of goods in Europe.

There you have it. Columbus ended price deflation by discovering lands rich in Silver.

Category: Inflation

Category: Inflation, Think Tank

U.S. Health Care vs. The World

 

click for ginormous graphic
US healthcare

 

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Category: Digital Media, Economy, Inflation

Commodity Prices and Inflation: The Perspective of Firms

Commodity Prices and Inflation: The Perspective of Firms Mike Bryan, Brent Meyer and Nicholas Parker July 16, 2013     We’ve been thinking a lot about commodity prices lately. In case you haven’t noticed, they’ve been falling. And with inflation already tracking well under the Federal Open Market Committee’s (FOMC) longer-term objective of 2 percent,…Read More

Category: Commodities, Inflation, Think Tank

Friday Funny: Higher Prices

This is brilliant: The Federal Reserve is awaiting That prices may start re-inflating, So they can foresee Unwinding QE, Whose tapering they’ve been debating. The Fed will not bother to taper Its purchase of Treasury paper ‘Til the jobless rate now And inflation allow An end to their stimulus caper. Bernanke must act with agility…Read More

Category: Federal Reserve, Humor, Inflation

Following the Fed Out of Bonds?

Click to enlarge Source: FT.com   Excellent explanatory chart from the FT.   Source: Bond Traders Take Cue to Exit Treasuries By Michael Mackenzie and Stephen Foley FT, June 20, 2013 4:52 pm http://www.ft.com/intl/cms/s/0/6d98edbc-d8dd-11e2-84fa-00144feab7de.html

Category: Federal Reserve, Inflation

What is Behind the Inflation Numbers?

Category: Inflation, Think Tank

Really!?! With Ben & Janet

Look Out Below, Fed Tapering Edition
click for updated futures
6.20.13 futes

 

Really!?!

Really traders!?! Did you really believe that the Fed was never going to stop buying bonds? Really?!?

Do you think that the Fed was going to have an infinite accommodation, and that rates were going to stay at zero forever? Is that what you expected from the Central bank. C’mon, Really!?

And what about the dreaded hyper-inflation you have been warning us about for so long? Inflation has been so low for so long that it had its name legally changed to Deflation. Really!

united-states-inflation-cpi
Source: Trading Economics

 

Where you out the day Bernanke said he was targeting Unemployment, which has fallen from nearly 11% to 7.6%? Did you forget about that? Really!?!

UNRATE_Max_630_378
Source: FRED

And this entire Risk On rally — did you really think it was going to last forever? Really? US Equity are up nearly 150% over the past 5 years, didn’t you think it had to eventually slow down? Did you actually believe Markets were a uni-directional bet? Really?!?

SPX 5 year

 

The Fed has a dual mandate — stable prices and maximum employment. Did you really think there was a third component of maximizing your risk free equity returns? Really!?

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This has been Really!?! With Ben & Janet.

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Category: Economy, Employment, Federal Reserve, Inflation, Trading

1988: Why is inflation so low?

Here is the Chicago Fed Letter circa 1988. Makes for fascinating reading  

Category: Inflation, Think Tank

Dormant Inflation Seen Giving Fed Time to Wait

U.S. core consumer price index’s increase since the latest recession ended in June 2009 Click to enlarge Source: Bloomberg   The amount of inflation since the end of the recession in June 2009 is the smallest for any multiyear recovery since the 1970s. The gauge of prices excluding food and energy rose 6.3% through April….Read More

Category: Federal Reserve, Inflation