Navigating Inflation’s Big Bite

Last week we taped a Peak Moment conversation with a local financial market analyst who we first heard on our local community radio station KVMR about a half year ago. What Marc Cuniberti said on his “Money Matters” show made sense to us.

He talked about the Fed Reserve’s recently printing tons more money and thereby continuing to worsen inflation. He talked about protecting the purchasing power of the dollar. And he obviously cares about others: “I don’t want people to lose money.”

What Marc said resonated with what we’ve been learning about the money system via documentaries like “The Money Masters”, “Money as Debt”, “In Debt We Trust”, “From Freedom to Fascism” and “Zeitgeist.”

Pretty eye-opening stuff — money as debt, backed by nothing by promises, the power of the central banks to control our lives. We learned how fundamental the money system is to how we live, what we value, what we do. It’s the basis for our global industrial economy which requires infinite growth. As Michael Ruppert said in our Conversation on Pondering a Post-Petroleum Future: “Until you change the way money works, nothing will change.”

With the subprime mortgage debacle, credit crunch, and the Federal Reserve (which is a private corporation – not “federal” at all) printing gazillion more dollars, causing beaucoup inflation — well, we’ve been watching our purchasing power and nest egg going downhill, wondering what to do about it.

We knew we weren’t alone. So we invited Marc for the conversation. Marc isn’t a financial planner. Interested in the money economy since he was fifteen, he’s a market analyst. He talked about the causes of inflation and strategies to protect and even gain some money in a down market. Like getting out of debt, saving, perhaps having some gold and silver, investing in tangible things that people actually need (commodities like agriculture, precious metals, energy), and stocks that pay you to hold them by paying a dividend. He stressed the principle of using compounding interest in your favor: $100 saved today (with 6% return) can grow to $200 in 12 years.

Marc’s strategies are about working within the financial system as it is. He’s not trying to advise how to keep money local, or protect the environment, or do socially responsible investing. But keeping ahead of inflation (which Marc notes isn’t in small single-digits like the government touts, but more like 10%) is a primary economic survival tactic for many. As he likes to say about inflation, mortgage woes, credit crunches, and financial sector misdeeds: “You ain’t seen nothin’ yet!”

Related posts

About Janaia

Janaia Donaldson is the host and producer of Peak Moment TV. She has worked as a graphic designer, illustrator, and educator; and a user interface designer at Xerox.
Robin Mallgren is the director, videographer, and editor of Peak Moment TV. After completing a Ph.D. in computer science, she worked as a software development engineer at Xerox.

Comments

  1. from article marketing says:

    amazing stuff thanx :) You should be a sales expert.

  2. Hi free balance,
    The wise move is to get out of debt and stop paying interest at all. Certainly 0% interest makes sense as long as you can do so.

  3. I have a friend, with very good credit, who balance transfers to another 0% interest card each time the last one is about to run out. He now has 30 cards, is there a downside to opening new cards just to get 0%? He runs a few thousand $ on two cards.

  4. Lupe, what are you referring to? Insurance costs in different communities? Retaining doctors?

  5. that is a good point – would it be any different in some other locations?

  6. Haven’t yet seen “Sicko”, thanks for the reminder.

    We just had a local town hall meeting on Universal, Single-Payer health coverage, covered on our community radio station KVMR (hurrah for local independent COMMUNITY media!). One thing I learned is that folks in Washington or even Sacramento want Universal health coverage, but not single-payer. The bill that these folks support, from the grass roots, is both universal and single payer.

    Universal means everyone is covered. Small businesses like ours would *have* to pay in (forget democracy), but the multiple-payers (insurance companies) are retained, profiting nicely. Single-payer is like Medicare, which cuts out all the extra administrative costs of the insurance companies, a considerable reduction, according to these folks.

    We need to do something, because it’s harder for doctors to make it financially. Especially primary care physicians. We’ve lost quite a few in our community. And the cost of insurance has skyrocketed.

  7. Yes, Janaia, you’re right that medical costs are a scandal in the USA. All the other “developed” countries offer some form of national health care to their citizen’s. I liked Michael Moore’s “Sicko” documentary. Have you seen it? I think Bush just made prescription medicine cheaper for senior citizens with some kind of new entitlement program, didn’t he? I have been away from the USA too long!

  8. I understand what you’re saying about a windfall for senior citizens, and that the intent of social security was never to do what retirement savings should do. As one who is coaching her family members to tighten their belts, I can see how challenged people are to reduce their credit-card-supported lifestyles. The extremely high costs of medical care and prescriptions in the U.S. are a big factor in the inflation bite, esp. for seniors.

  9. Dear Janaia,

    I read the URL you suggested and have some comments (of course!). The manipulations of the CPI listed in the article (which have led to a 3% discrepancy between pre- and post-Clinton CPIs per the graph on the Shadowstats’ homepage) were indeed taken to dampen the Social Security payouts to senior citizens. These were increasing at an alarming rate (in the 1980’s) and would have led to “generational warfare” very quickly, when a declining younger population would have had to pay for retiring Baby Boomers.

    The article says Social Security Payments should be double what they are now, if we had stuck with the old CPI. I guess this should sound outrageous, but on further reflection it doesn’t. What was the original purpose of Social Security? Was it to provide a luxurious lifestyle for older people or was it supposed to ensure that they would not be impoverished? Clearly the last was the original purpose. As the article points out food and energy costs ARE in the official government CPI, but not in the so-called “core inflation rate” which is used by some financial reporters. The article lists them as 23% of the CPI.

    I remind you that CPI was originally set up to measure a typical urban family’s cost of living, not the circumstances of the aged. The Bureau of Labor Standards says on its homepage FAQ:

    “What are some limitations of the CPI?

    The CPI may not be applicable to all population groups. For example, the CPI-U is designed to measure inflation for the U.S. urban population and thus may not accurately reflect the experience of people living in rural areas. Also, the CPI does not produce official estimates for the rate of inflation experienced by subgroups of the population, such as the elderly or the poor. (BLS does produce and release an experimental index for the elderly population; however, because of the significant limitations of this experimental index, it should be interpreted with caution.)”

    The problem with simply increasing Social Security (SS) payouts by the CPI inflation rate is that it would give the elderly a windfall. Their expenses, when compared to a typical urban family, are much less. The cliche picture of the poor old starving senior citizen just doesn’t hold water anymore. This age group is the most asset-rich in the USA, sometimes drawing company pensions and usually sitting on (and in) unmortgaged homes.

    The article poo-poos Joe Dominguez’s point that a car today may be more expensive than 20 years ago, but it also gets better gas mileage, maintenance is cheaper, it’s safer and lasts longer, by making an inane comparison between a dial and pushbutton controls on a washing machine.

    This idea that we can insulate ourselves from inflation by automatically increasing SS payouts, salaries and wages by some official inflation rate was tried by Argentina and Brazil which “indexed” everything to the high inflation rates those countries were experiencing. This just made inflation permanent and everyone bought US dollars as fast as they could. People must EXPERIENCE higher prices. It gets us to modify our (often wasteful) spending and might lead to better alternatives. Ironically, China is using its dollar windfall to subsidize lower gasoline prices to stave off consumer discontent. Just how long do they think that’s going to work?

  10. Hi guys,
    You’ve both posted some really informative comments. CJ, the idea of a balance between hunting/gathering (male/female, public/private) economic systems is really intriguing. I’d heard about the Mondragon Cooperatives in the mid 1980s and forgotten about them since. That’s a model worth researching further. A form of cooperative, if I remember right. Haven’t they created their own banks? Did they create their own money system?

    Stuart, the information on how the CPI methodology has been changed is found on http://www.shadowstats.com/article/56. John Williams explains how and why the methodology has been modified since at least the Clinton years and even earlier. One bottom line seems to be to reduce entitlement payouts like social security. When I learned the difference between headline and core inflation numbers, it clicked why there was such a discrepancy between the reported numbers and my own experience. It was a reality check.

    Yes, the impetus (or perhaps the last straw) that kicked us into creating Peak Moment was our concern for the increasing cost and scarcity of oil in the near future; our society’s lack of preparedness, and the hardship that would cause, starting with folks in the lower economic brackets. (This “last straw” followed our concern for climate change after reading Bill McKibben’s The End of Nature in the early 1990s, and several decades of attention to topics around sustainability, ecosystem decline, and even Earth changes.)

    Back to being prepared for energy descent: economic survival or navigation is an important part of being prepared. That’s why I’m so glad you contributed and quoted from Your Money or Your Life: Joe and Vicki’s advice has and will help a LOT of people find a path to economic sanity (and remaining solvent). That’s why I asked Marc to be Peak Moment, to help people think of getting out of debt and using compounding interest in THEIR favor rather than against themselves in debt.

    I don’t think that addresses your point about inflation — perhaps being a side issue for Peak Moment–? Perhaps because at the moment, I can’t think of what else to say.

  11. CJ, thanks for bringing the Mondragon Cooperative to our attention. It seems to be a massive group of manufacturing, banking and retail distibution companies based in Spain. Maybe they have overcome the usual drawbacks of worker-managed companies: inflexibility, lack of innovation and excessive workforce. They certainly seem competitive with other corporations in Europe and are doing very well. I am not certain they are better positioned than any other corporate form to weather an economic collapse, though. It looks to me like they are heavily tied into the current oil-based world economy and would suffer just as much as other companies.

  12. Dear Janaia,

    Thank you for the wonderful postcard. I love Peakmoment.tv and am happy I can help.

    Regarding your comment: “Inflation, from what I understand, is not about increasing prices. It is about an increase in the money supply. And that’s what’s happening right now, with the Fed issuing more notes and credit.”

    I thought the whole point of Peakmoment.tv was that oil is becoming SCARCER and therefore the price is going up. Clearly the price does go up when supply goes down (or demand goes up). Certainly you are right, inflation can also occur if a government increases the money supply too much. I would even admit that the recent run-up in oil prices was not just China and India increasing their demand for oil, but lots of speculators buying up oil futures contracts. Where did these speculators get the money to speculate with? Obviously the U.S. government’s reckless expansion of the money supply helped them a lot.

    I got this from the official homepage of the Bureau of Labor Standards, the outfit that reports the CPI:

    “What goods and services does the CPI cover?
    The CPI represents all goods and services purchased for consumption by the reference population. BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

    FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
    HOUSING (rent of primary residence, owners’ equivalent rent, fuel oil, bedroom furniture)
    APPAREL (men’s shirts and sweaters, women’s dresses, jewelry)
    TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
    MEDICAL CARE (prescription drugs and medical supplies, physicians’ services, eyeglasses and eye care, hospital services)
    RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
    EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
    OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
    Also included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls. In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services.

    The CPI does not include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.)

    For each of the more than 200 item categories, using scientific statistical procedures, the Bureau has chosen samples of several hundred specific items within selected business establishments frequented by consumers to represent the thousands of varieties available in the marketplace. For example, in a given supermarket, the Bureau may choose a plastic bag of golden delicious apples, U.S. extra fancy grade, weighing 4.4 pounds to represent the Apples category.”

    Stuart again. Janaia, if this description is to be believed, food and fuel items are taken into account in calculating the CPI. I know that the CPI was changed in the Clinton administration, perhaps the weighting of these items was skewed in a biased fashion. I can’t imagine that a CPI which ignores food and fuel costs would be of any use to anyone. I again smell some Financial Sense paranoia here.

  13. I like Joe Dominguez’s reminder about the cost of some durable goods going down — and we see that continuing with other durables like computers (not only cost, but size). That has happened with food, too, because of our government’s subsidizing cheap food along with cheap oil (we were enlightened to see an interview with Earl Butz in the documentary “King Corn.” He really pushed cheap food for America in the 1970s; it may not be healthy but it’s cheap (e.g., packaged foods, ubiquitous corn sweetener, etc.).

    However, I don’t see it as an explanation of why the government removed food and fuel costs from the consumer price index. My understanding is that they’ve changed the “basket of goods” they base the CPI on. That’s slipping one over on us. Used to be steak, now it’s hamburger. It masks the truth.

    Inflation, from what I understand, is not about increasing prices. It is about an increase in the money supply. And that’s what’s happening right now, with the Fed issuing more notes and credit.

  14. Stuart M. says:

    I hope the “yourmoneyoryourlife.com” website will forgive me for posting this page here. This article by one of the authors of that famous book is perhaps a bit dated, but it explains why fuel and food price spikes were deleted from the CPI index. But Mr. Dominguez (now deceased) says it best:

    Busting Economic Myths: Inflation
    ——————————————————————————–

    By Joe Dominguez

    “Inflation is eating away our dollars!” “Prices just keep going up!” When was the last time you heard – or said – something like that? Very recently, most likely. But guess what? Many prices have been going down! We just can’t see it because it’s embedded in our minds that “inflation is forever.” Rethinking assumptions about inflation can reveal new options for anyone who has embarked on the simplifying process.

    Between 1973 and 1981-82 we did indeed experience rising prices. But even then, our assumptions about the extent of inflation did not match reality. Why? Because our notions about inflation come as much from what we hear as from what we experience at the store. Each month the government releases the latest Consumer Price Index (CPI). Only now, in 1993, are economists admitting that there are major errors built into CPI calculations. The Bureau of Labor Statistics recently acknowledged that the CPI over-reports inflation by at least 0.6 percent; other authorities suggest that the built-in-distortion may be 3 to 3 1/2 percent! The compounding of this error over the years creates enormous distortions. This means that what you read about the cost of living now compared to 20 years ago is not at all accurate.

    Another distortion in the CPI is that it compares apples and oranges. Take refrigerators, for example. You can’t even compare today’s middle-of-the-line refrigerator to the middle-of-the-line refrigerator of 20 years ago. Not only has the price actually gone down, but efficiency and durability have skyrocketed, so the effect of the price reduction on a family’s budget is multiplied.

    In 1967 I bought a car. It cost me $3,000, and I had to change everything – oil, spark plugs, distributor cap, rotor, condenser – about every 3,000 miles to keep it running in tip-top shape. About 30,000 miles is what the clutch would last in that rig. When was the last time you had to change a clutch or a condenser? Maintenance is totally different now. On top of that, I was getting only 12 miles per gallon! These days 30 miles per gallon is normal. The car of today may be cheaper in terms of per-mile cost! And what about durability? By 1972, that ’67 car was old. Now we have an 11 year-old Toyota, with 130,000 miles on it, which drives like new. A car produced in the 60’s would never last that long.

    Certain things have gone up in price a lot – “sickness care” for one – but other prices have decreased. What did a VCR cost in 1970? Or a computer? Or any music system that was listenable? Ten times as much, 100 times as much. Or maybe the item wasn’t even available.

    When we wrote Your Money Or Your Life, we went to the library and got 1970 Sears catalogues and food ads from the Seattle Times, and we compared those prices to 1991. We were amazed. In 1970 a 3-speed bicycle sold for $128 at Sears. I bought one in 1991 for $98. Of course, now you can get a mountain bike that’s measured in centimeters and has an ultralight frame. That fancy bicycle costs $500 instead of $98, and we register that price difference as an example of inflation.

    The real inflation is the inflation of our needs, wants and desires.

    When you shop intelligently, when you honor how you spend your money because you value the time you invested in earning it, you don’t end up spending more as the years go by. You probably spend less. The bottom line is this: consciousness grows faster than inflation.

  15. Hi Janaia and Stew,

    RE your comment, Janaia – “I really am looking for viable, practical, working models of economic systems wherein we can help our localities and stay a bit ahead of inflation. And ways to be further outside the money system. As always, I invite suggestions of places where people may be experimenting with these.”

    I tend to approach matters from a Sociobiological point of view, which immediately convinces most people I am a nutter, however to me it makes sense that you look at the past first. After all, you do not understand the end of a story without first following the plot thus far. There is a reason why we effectively have only two economic systems – socialism and free enterprise. Without going into it too much here, the free enterprise system is the male hunting system, and socialism is the female gathering system. They are meant to be complimentary systems held in balance, but when they are not, such as in the case of the US or the old Soviet Union, they create enormous imbalances both economically and socially.
    US historian Arthur Schlesinger Jr.:“…that there are 30-year cycles of American history that swing between eras of liberalism and conservatism” – periods he calls Private Interest and Public Purpose”. Another way to put this might be ‘free-enterprise and socialism’.

    This cycle, although variable, (due to the influence of war), is nevertheless strikingly apparent. Whether we are in a socialist society or free-enterprise society our instinctive desire to find balance between the two systems sees us forever pursuing what we ‘know’ to be the ideal. It is a pendulum swing in search of natural balance.

    So is there a modern system whereby the two natural systems work supportive of each other, as they are supposed to?

    Yes, such a system was started by a village cleric in the Basque area of northern Spain in a small village called Mondragon, shortly after the Spanish civil war. Since then the Mondragon system has spread right across northern Spain, and now appears in many foreign countries including the US. The reason for its rapid success is because it is more efficient than free enterprise and creates greater social equality and harmony than socialism.

    To my mind the Mondragon system will either slowly take over free enterprise, given time, or will supplant it due to economic collapse due to the oil crisis. Either way, there is hope because the new system is already here and working fine, just that most people don’t realize it. The more publicity that can be given to the Mondragon system, and the more times it is applied in local industries, the sooner we will have genuine change for the better.

    http://hk.youtube.com/watch?v=NORmQ8zaL1c
    http://hk.youtube.com/watch?v=TpdoNzXGmxM&feature=related

    The other thing that needs to be addressed is forcing all businesses to include nature’s input into all industrial outcomes as a listed economic cost. For instance a decade ago Costanza estimated that nature’s input to industry was roughly $35 trillion per year, while the combined economies of all nations at the time was only $18 trillion. So at some stage we must pay back this debt, or nature will just come and collect it.

  16. Hi Stew,
    I nod in agreement with what you’re saying. All of the examples you use show us who’s really in charge: big money. As a longtime environmentalist, I fear for the planet even as I see the American populace change their minds in favor of offshore drilling now that gas prices are up a bit. Richard Heinberg has noted this in his MuseLetters — when energy is in the crunch, environmental concerns get set aside.

    I wish that peak oil would let us “see off our old masters”, but I think only deep collapse will do that. I think they’ll use the system — which they’ve shaped — to continue profiting everywhere and every way they can. Because this Frankenstein we’ve created — the corporation — must continue making profits to survive, even if it means “burning the platform.” Or the image that Daniel Quinn used in “What a Way To Go” we are taking bricks from the bottom story of the building to create new stories on top.

    I like your investment suggestions. Being healthy, eating good local food, exercising are the best health insurance. We’re investing in infrastructure at our place in the Sierra foothills, wildfire country — building a compost pile, doing some pretty severe clearing for defensible space, looking at building resilience: another well pump as a backup.

    Learning new skills — that’s excellent advice. We’ll be taping a Peak Moment conversation this coming week with Paul and Sarah Edwards, authors of “The Middle Class Lifeboat”, about vocations and lifestyles for this leaner-energy future. Look for it soon in the Conversations.

  17. Hi again Janaia

    Thanks for your calm and considered response. You’re a great communicator!

    For environmentalists and progressives, learning about peak oil in particular can be a real mindblower. When you realise how dependent we are on this single resource and how precarious the supply of it actually is, it can lead you to seriously fear for the future in a way that supercedes the other ideas and moral positions you’ve developed over your life. However, I really feel we need to remain vigilent and not grasp at panaceas like nuclear power, more drilling, coal to liquids and other projects promoted by the same big business interests that got us into this mess. As classic libertarians, Financial Sense always blame the government for everything, but politicians hardly ever act independently of big business interests. US Energy policy was written by the oil industry and Enron, not Bernie Sanders. Californian politicians tried to give us zero emissions regulations and by extension cars like the EV1, but big business were quick to take them away. The US used to have tramcars but Detriot bought them up and shut them down. Though it comes with pain, the transition to a non-oil economy gives us great potential to see off our old masters. It is an opportunity to take control.

    Changing the subject, but regarding Social Security, here’s an old interview with Paul Krugman where he presents a different opinion to the one on your show.

    http://www.democracynow.org/2004/12/21/paul_krugman_on_social_security_the

    There seem to be big environmental problems with gold, but I can see its value as a store of wealth. As for investments though, often the best one is simply in yourself in the form of good food, adequate exercise, and leisure time to stay healthy, and in learning new skills to enhance your life and income potential. The payback there can be huge!

    Thanks again.

  18. Hi Stew,
    You’ve said a lot here and said it very well. I think that capitalism is one of the facets of empire that has led to so much social injustice, environmental degradation (as you note because the externalities–the biosphere!–are not included in the equation).

    I concur that the guys on financial sense have their own bias. I’m not familiar with the Austrian school (of economic theory?), but I certainly find their advocacy of “free trade” without government interference (via taxes, price controls, etc.) to be a too-narrow view; supposed free trade has made life far worse for many peoples.

    I personally have challenges because the media guy insists that global climate change isn’t happening, or at least not by humans. His denigration of environmentalists is so short-sighted. Their failure to include the big picture of not only peak oil but also climate change and even population overshoot really limits their perspective. By ignoring the environmental effects, as a friend says metaphorically, we are failing to notice that “the platform is burning.”

    What is helpful to us right now is their emphasis on investing in real tangible goods that people really need. It has helped us navigate our own financial ship a bit.

    I really am looking for viable, practical, working models of economic systems wherein we can help our localities and stay a bit ahead of inflation. And ways to be further outside the money system. As always, I invite suggestions of places where people may be experimenting with these.

    Thanks for your thoughtful response.

  19. Hi Janaia

    Thanks for doing peakmoment tv. I like the show a lot. Its great to hear about real people taking real positive action in response to peak oil and sustainability issues, as opposed to just predictions of future doom.

    Please note that the people at financialsense are obsessive libertarians who blame the excesses of capitalism simply on distorted markets, not in any intrinsic problems with capitalism itself. They are the exact parallel of Marxist-Leninists who claim there is nothing wrong with their beliefs and that the Soviet Union was simply a distortion which tells us nothing about how proper Marxist-Leninism would operate in practice. The media fellow in particular on financial sense, not the financial advisor, is a shill who idiotically describes the current US system as “socialism” at every possible opportunity, when only valid example of that would be corporate welfare. If you pay attention to the show, it is clear that they are Austrian-school obsessed and, like all too many libertarians I’m afraid, happy to blame America’s problems on immigrants, environmentalists, and progressives in general. Increased money supply is a very simplistic definition of inflation which ignores many other factors such as imbalances in the economy. If an increased money supply meant microlending (basically a fair, and nonpreditory version of subprime), for example, there would be a massive increase in US happiness. Access to capital (YES! DEBT!!) is vital in improving poor peoples’ lives. How can they start businesses and build eco-homes otherwise? You can save next to nothing on minimum wage. Instead of some sensible and equitable system though, a George Bailey friend of the community lender if you like, capitalism gave us lenders almost forcing money onto (alas financially illiterate) people simply to produce packages they could sell at a profit with a fraudulent AAA stamp on. A great big Ponzi scheme that has produced further misery for America’s most vulnerable.

    I’ll happily listen to financial sense when they have Matt Simmons, Richard Heinberg on, but peak oil aware people should not cheer on the show or take on its message simply because it appears as a peak oil aware oasis in a mainstream sea of ignorance. Similarly, no one should ever forget that T. Boone Pickens, the latest peak oil darling thanks to his wind plan, heavily funded the Swift Boat Campaign, one of the saddest exercises ever in dumbing down US politics. While wind power is a move in the right direction, the Pickens Plan is simply one possible application of wind, and appears to encompass a massive water grab over a local aquifer for the profit of Pickens’ Mesa Water. In the permaculture books written twenty years ago, Mollison described how small-scale biofuels are a massive positive for (individual or community) energy independence but warned how we would only see proper promotion of ethanol once large producers were in control of it. This was an extremely prescient warning, and to me, Pickens plan sounds like exactly the same but for wind power. America can have wind power without having major funders of George W. Bush build it. Nothing else will change if that is the path chosen.

    The major problem with capitalism is the question of externalities. If businesses can foul the environment for nothing, they have every incentive to do it as much as possible. In fact, perfect competition demands that they do so to keep up with their rivals. As capitalism works, those who profit from abusing the commons then have the funds to distort the political system to entrench their position. I would imagine that all of you know this already, but I am writing it here because you will never hear it stated by the hosts of financial sense newshour.

  20. Hi Janaia,

    My partner and I will be sure to check out the weekly audio webcasts you and Robyn recommend. We also usually watch your broadcast conversations weekly together and discuss it afterwards. You both do great work. Although it adds complexity to your life I’m sure Joe Dominguez and Vicky Robin also had to weigh relative simplicity with the added complexity of their work in helping people with their financial awareness/enlightenment. I’m sure it was especially difficult once Joe became ill.

    Thanks again for all you do! Its great to be part of the “virtual” community you and Robyn are building.

    Cheers,
    Logan and Tammy

  21. I stand corrected that the Fed isn’t just printing “tons of money” literally. But when the government bails out investment banks, and now probably Fannie Mae and Freddie Mac, and who-knows-who else soon, where does that money come from? American taxpayers, right? There’s more debt, and inflation.

    Robyn and I are listening to the weekly audio webcasts from “financialsense.com”. The commentators are hip to peak oil, and seem pretty savvy of the underlying fundamentals. Listen a bit and see what you think.

    Logan, I’m really glad you’re reading “Your Money or Your Life.” It changed our lives quite dramatically. Got us in touch with what we wanted to put our “life energy” into — financial life energy as well as time-energy, and where and how we want to live. I think we live more simply than many, although I freely admit that creating videos and putting them on the internet adds complexity not simplicity to one’s life. The advice in YMOYL sure turns on a few lights. Like, what one’s “gazingus” is. Mine used to be buying books; now I mostly get them via the library system.

    Janaia

  22. Hey all,

    As a caveat I’m a complete novice at financial matters. What follows is only my opinion formulated from a compulsive news hobby ;).

    The incongruence of news from a spectrum of sources ranging from blogs to BBC demonstrates that no one really knows what is going on with the financial markets and the only analysis that occurs is in hindsight of the numbers once the month has past. It seems that some of these markets have reserves/stockpiles of commodities (e.g. Saudi oil quantity) that are based on assumptions and projections making it very difficult to get a clear answer from the financial and economic analysts on how and why the markets are responding the way they are.

    In regard to money “printing”, I also think that may be a false assumption. I do believe the Fed is “creating” more money but I was under the impression that it was the Fed’s underwriting of certain sectors (“too big to fail”), extending time of loans to banks, and keeping the interest rates low that was the debated source of inflationary pressures and money creation. Of all the money in the United States I believe the statistic is roughly 5% in a solid (paper, coin) form and the rest (95%) is money that has been created out of debt offerings (promises). Inflation is a difficult issue.

    Great discussion Janaia! Please continue blogging! I have started reading “Your money or your life” that you suggested. The awareness the book generates is incredible!

    Cheers,
    Logan.

  23. Stuart M. says:

    Well, I certainly am not qualified to argue with someone with as much experience and market savvy as Marc. I must point out however that the government won’t decide one day to just “cash” all the T-Bills and bonds at the same time. As these mature, they are paid for with the proceeds from newly issued T-bills and bonds, not with printed money. So far, the USA has been lucky that foreigners and especially China have kept buying our government bonds. I am not defending this system, I do wish our government would live within its means, I just don’t like unnecessary fear-mongering. The effect of the American approach is not the same as that of the Zimbabwean approach, if it were, wouldn’t the inflation rate be 200,000% in America too?

    Marc doesn’t have to preach to me about the virtues of compounding, I am already a firm believer. Although my portfolio’s value is way down, the interest income from it is not and I religiously reinvest 50% of that interest. As he points out, if one is spending every penny one has on cable TV, hamburgers, candy, Dr bills, autos, paper and washing machines, yes, inflation would be seriously cramping that person’s style right now.

    Inflation may be raging, but I have taken the advice from the book “Your Money or Your Life” to heart: I do not have cable TV, I have been to McDonalds twice in the last 5 years, I don’t buy candy, I don’t have to worry about Dr. bills because Japan (where I live) has national health care, my car is 12 years old, although it runs fine, I don’t use it and walk/bike to work instead to limit gasoline expenses, and I could go on and on. Yes, I am pretty wierd.

  24. Marc Cuniberti says:

    Saving money at a compounding rate is to be an incentive NOT TO SPEND IT.

    Yes you will be losing to inflation but saving is better then spending it on cable tv.
    This is the point of the compounding reference. You can actually combine high interest paying dividend stocks to get over 10 % or more and diversify to have some safety in your placement.

    The reference to “printing” money is a way of detailing money creation by the FED that people understand. No, they don’t actually print money HERE in the US but they still do in Zimbabwe. The effect is the same either way however. The Feds issue Treasuries and bonds, yes, but what difference does that make except to keep track of it. Those T Bill and bonds are still OUT THERE and will be cashed as some point, then the money will be created to cash those in, and then you have the same effect as if you printed paper dollars.

    If you don’t see the “hysteria” in the market today, I can’t convince you it is there, but take my word for it, the meltdown is real and will affect YOU my friend, whether you want to acknowledge it or not. It already IS affecting you in higher prices and will continue to do so. Speculation is NOT driving up energy, DEMAND is and newly created money is. Higher prices is showing up in everything including oil. Are people speculating in hamburgers, candy, Dr bills, autos, paper, washing machines? Of course not. Prices are rising across the board and oil is NOT the most inflated asset. Many items are up 10 times more then oil. Oil is just on everyone’s radar.

    This is the reality of a government’s excessive rampant money creation. And it getting more apocalyptic by the day. Just watch the news.

    Marc

  25. Stuart M. says:

    I am getting a disconnect here. We are supposed to save $100 at 6% today so it will compound and become $200 in 12 years? And inflation is really running at 10%? That means we are losing 4% every year, doesn’t it?

    I also object to the hyperbole about the Fed Bank “printing tons more money.” Yes, the Fed Bank prints money, but only to replace worn out money. The vast majority of monetary transactions in America (and the world) are not done with physical cash, but electronic transfer/book entry. The money supply is “controlled” by the Fed Bank by manipulating the discount rate or interest rates. Ask yourself, if the Fed Bank were printing money willy-nilly, why would the government bother issuing government bonds?

    Now Zimbabwe is an example of a governemnt printing tons of money and its inflation rate is over 200,000% per year.

    I know Peak Oil sounds apocalyptic, but we shouldn’t get caught up in mass hysteria. I suspect the economies of America, Asia and Europe are going into a recession as a result of the mortgage debacle in America and the oil price shock. This will temper the current inflationary trends. Although the longterm trend for oil prices has to go up, I suspect the current commodity speculation is just another investment bubble getting ready to burst. But that is just my opinion.

Speak Your Mind

*