Category: Money & Finance

Where is the Inflation?

Money_falling_from_sky_inflationLegendary investor Warren Buffett recently admitted that he was wrong on interest rates, noting at the Berkshire Hathaway annual shareholders meeting, “It is so hard for me to believe that you can drop money from a helicopter and not have inflation, but we haven’t.” Many like Mr. Buffet are wondering the same thing. After dire predictions of the coming inflationary tsunami from sound money advocates, where is inflation?

When most people talk about inflation, they mean a general rise in the level of prices, usually measured by the CPI. After bouncing between 1-2% for the last few years, the CPI has recently made a dramatic downturn and has even posted a small negative year-over-year rate for March. But as many of our readers know, the true definition of inflation is literally inflating the money supply – the general rise in prices is merely a symptom or consequence of this.

Using this definition, we see that the money supply is indeed being inflated by a number of measures. The M1 money supply (cash and checking) continues its march upward, still growing around 10% per year; M2 (M1 plus savings deposits) shows similar constant growth, but growing around 6% per year. But if we have established that the money supply is growing, why haven’t general consumer prices risen?

If consumers did receive a “helicopter drop” of money in their front yard, we probably would see an almost immediate increase in prices as they would go out and bid up goods and services with their new money. But the growth in the money supply we have seen is done through a different channel. When the Fed engages in things like QE, it doesn’t send regular citizens a check in the mail; rather, it buys government bonds and lowers interest rates.

So if newly created money is going to financial assets, we would expect to see increases in those assets as well as interest-ratePicasso_inflation sensitive assets, not in the prices of consumer goods and services that the CPI measures. Not surprisingly, this is exactly what we find. Publically traded stock valuations are at all time highs, private company valuations are ballooning, and bonds yields are at record lows with forty-five percent of the world’s government bonds yielding less than one-percent, and many even showing negative yields (which means their prices are at record highs.) When he was chairman, Bernanke noted that higher stock prices will create a “wealth effect” as consumers will be wealthier, helping to increase confidence and therefore spending. Unfortunately, only fifty-five percent of Americans own stocks. As stocks and bond valuations get frothy for the wealthy, we would then expect money to start flowing into other assets to preserve wealth. Art is one example of this, which has recently been on a tear; this past week a Picasso sold for $179 million, a new world record. Real estate is also seeing a boom and price surge in the ultra-luxury markets.

So to see where the inflation is, one only needs to look at where the newly created money is going. Yes, general consumer prices aren’t running away (except for healthcare and tuition expenses, but that’s another topic); however, prices of assets that are affected by QE and low interest rates certainly are. Remember, the CPI didn’t go to the moon during the last housing bubble either, staying around 3% even though house prices and the stock market were bid up.

Finally, it is also helpful to remember the true definition of inflation because today’s definition can mask a lot of small but constant inflation. For example, if entrepreneurs can find a way to deliver a product to consumers for five percent less than the current price, the consumer benefits. Yet if inflation causes the price to increase back to its former price, the CPI will register 0% inflation, yet there is indeed a loss of purchasing power here.

Keeping the true definition of inflation in mind reminds us how and why asset bubbles can form and also why inflation will continue to erode standards of living and the need for personal wealth preservation.

Chris Kuiper, CFA is currently a student and researcher at George Mason University pursuing a Master’s of Economics. His previous experience includes asset management, investing and banking.


Crowdfunding Regulation Cools Down

Better late than never…

Crowdfunding has the potential to be “the people’s Wall Street;” but the SEC worked out the final rulemakings of the JOBS act, set to address the regulatory environment for equity crowdfunding platforms. Last month, the SEC took another small step in addressing this, issuing final rules on “Regulation A+.” This has been creating a buzz in the investment community as the new rules are set to go into effect starting June of this year.Vector crowdfunding concept in flat style

To review, “crowdfunding” is the concept of raising money for a business, project or product through small amounts from a large amount of people, rather than big chunks of money from only a few select backers. Crowdfunding is best known for getting music albums, movies and gadgets to the market through popular sites like Indiegogo and Kickstarter. However, these platforms only allow people to receive products in return for their financial backing, not shares of equity, because current securities regulations do not allow it.

The JOBS act, signed into law April 2012, was set to address this issue. Another piece of this legislation has now been outlined through the SEC’s final rulemaking on “Regulation A+.” Regulation A was a little used exemption in the securities regulation that allowed companies to raise up to $5 million; but since they still had to comply with all federal and individual state disclosure agreements, the prohibitive compliance cost was too high relative to the amount that could be raised. The new Regulation A+ will allow companies to raise up to $50 million by selling securities to the general public. The other big change is that it is likely individuals will not have to be “accredited investors” (which means they are wealthy) to participate. It also pre-exempts all of the individual state “blue-sky” laws making it much easier and cheaper to comply.

This is certainly a step in the right direction as it removes legal barriers and reduces compliance costs for small businesses and startups whose capital is especially precious.

laws_piggy_bankWhile certainly a welcome development, it has taken the SEC years to get to this point of merely amending an already existing federal exemption rule. Rules for Title III of the JOBS act, which are particularly targeted at equity crowdfunding, are not yet complete. Unfortunately for small businesses, they must continue to wait which leads to opportunities lost and jobs not created. While the SEC and others may want to protect small investors from losses and scams, it is ironic that people can currently choose to risk their savings in a host of other ways, such as gambling (including state sponsored lotteries no less!), yet when it comes to making investments they cannot be trusted. Rather than taking a precautionary approach where citizens, entrepreneurs and investors need permission for any new financial innovation, the SEC and others should let people experiment on their own, letting them succeed or fail in the process. When unleashed, entrepreneurs have given us incredible innovations in a host of areas in our lives, financial markets and capital raising should be no different.

Chris Kuiper, CFA is currently a student and researcher at George Mason University pursuing a Master’s of Economics. His previous experience includes asset management, investing and banking.

Swiss Bank Refuses Large Cash Withdrawal

Swiss BankSwiss Bank Baulks

Swiss banks used to be world-renowned. The nation has had a reputation for banking secrecy and international neutrality, making it a relatively safe place to store wealth. Unfortunately, the costs of Swiss banking might soon outweigh those benefits. As negative interest rates continue to permeate the Swiss economy, at least one bank has declined a customer’s request for a large cash withdrawal. This probably occurred at the direction of the Swiss National Bank (SNB).

The negative interest rates took effect at the central bank in January 2015 amidst a failing Russian economy and crashing oil prices. Private lenders have been forced to follow suit. Instead of paying interest on deposits, some now charge customers for the use of their money. This has been a huge blow to the fiscally responsible Swiss. Those with retirement funds and similar investments are now losing money by keeping it in the bank.

Further problems arose when one pension fund manager tried to avoid those losses. He wanted to withdraw his fund’s money from the bank and move it to a separate storage facility. That would save his clients 25,000 Swiss francs per year for every 10 million francs in the fund. Storing cash in an insured vault would still cost money, but it would be far cheaper than keeping it in the bank.

Withdrawal Request Denied

WithdrawalSomewhat unexpectedly, however, the bank denied this request and provided little explanation for the decision. A letter to the fund manager simply stated that his expectations could not be met within the specified time period. Many have speculated that the bank’s actions were spurred by a directive from the SNB. The central bankers might feel that large withdrawals could lead to a cash shortage and cause banks to fail. If that happened, Europe could face an even more serious economic crisis.

At least one banking expert has suggested that the bank’s refusal was clearly illegal. Even if the SNB did issue a directive, it should not have superseded the law. The fund manager’s contract dictated that he should have been allowed to withdraw his money at any time and the private bank should have been legally obliged to honor that request.

In the financial sphere, there are all kinds of deposits, and some do take time to mature, but the pension fund’s account was not like that. It was known as a sight deposit account. The SNB itself defines sight deposits as “Funds which can be transferred immediately and without restriction to another account or which can be converted into cash.” Based on that definition, the bank should not have been allowed to withhold the pension fund’s cash.

Distressing News

Financial FreedomThis news is so distressing to many because Switzerland is supposed to be one of the world’s most economically free countries. (Switzerland is ranked at number 5 and the United States is number 12.) If the Swiss government can start restricting withdrawals on a whim, how much worse could things end up in countries that are less free? This might be an important sign that the global economy is still precarious and securing wealth in trusted, physical assets is essential.

Daniel Brown is the editor-in-chief of You, Me, and BTC. He’s also the “Everything Elf” at

Noah’s Gold Ark

Noah's Gold ArkWhy Noah’s Gold Ark? Noah saved man and animal-kind from the flood, but he should also have brought gold and silver along, to use as money and to conserve as an enduring store of wealth.


Death is a certainty, but we try to minimize the impact by living each day to the fullest. So it is with the financial flood waters rising fast. We must be like Noah and prepare for that eventuality by securing our wealth the best way we can; and that means owning physical 100% pure gold and silver, my friend.


While the people scurry about their mud-brick homes in the rain, repairing holes in the thatched roof against the coming storm, Noah is putting the finishing touches to his sturdy Ark, a stoutly built vessel that will stay dry and secure above the coming maelstrom of churning waves. With The Ark completed, Noah begins stacking gold and silver bars in the hold, two by two. Soon, Noah’s Gold Ark is safely afloat while everybody else drowns in the rising waters.


Everyone knows the clichéd definition of insanity: doing the same thing over and over, but expecting different results. However, the current insanity – printing trillions of dollars, running up impossible entitlement debts, a tax-and-spend policy that will cripple America – is insanely stupid. ‘Stupid’ because the government pursues strategies that have never worked before and will certainly fail again. Consider these absolute truths:

Ark Flood Gold-       No nation with a fiat currency has ever maintained the value of its money. EVERY fiat currency, since the Romans first began the practice in the first century, ended in devaluation and eventual collapse – collapse of the currency and of the economy.

–       When fiat currencies fail, throughout history people always turn to gold and silver: Noah’s Gold Ark.

–       With near-zero interest rates and a devaluing dollar, the longer you hold dollars, the less they are worth (today worth 4% of their value 100 years ago) .

–       The bank owns the money you have in your account, in return for which you can claim a credit against the bank’s assets. You may not know this, but it is terrifyingly true. Check it out.

–       No nation has ever taxed itself into prosperity.

–       No government has ever continually spent more than it received in revenue, without eventually having to cut back severely on spending and also invoke austerity measures.

–       No nation on earth has a government-run health care program that works. Not one. They are all inefficient, over budget, plagued with widespread and blatant fraud, intrusive of patient rights and privacy, and none of them put the health of the patient first.

–       In fact, can you name a U.S. government program of any kind that does work?

TRUTH TRUMPS INSANITYsafe secure gold silver

Truth versus insanity. When the truth is staring you in the face, with a 2,000 year history of failed fiat currencies to prove it, how much longer are you going to keep stuffing that toilet-paper money under your mattress (or worse, in a bank account)? When the financial flood waters swirl around your ankles, don’t you want to be with Noah – and your own gold and silver – safe and secure on Noah’s Gold Ark?

Only Americans who own physical gold and silver will have their wealth protected…… are YOU already counted in this select group?

Billions Of Your Dollars

Savings…. stolen from you, by your government. How is that, exactly? If Americans really understood the vast confidence trick that their government has unleashed on them via the financial system, there would be blood in the streets over the government theft of billions of our savings dollars.


First, you need to understand how interest rates are manipulated. In the U.S., the authority for interest rate decisions is divided between the Board of Governors of the Federal Reserve and the Federal Open Market Committee (FOMC), and rates are reported by the Federal Reserve. From 1971 until 2013, the central bank benchmark interest rate (CBBIR) in the U.S. averaged 6.14%, reaching an all-time high of 20.00% in May 1981 and a record low of 0.25% in December 2008 – where it has pretty much stayed ever since.

The CBBIR is also the overnight rate at which central banks make loans to the commercial banks under their jurisdiction. By adjusting the CBBIR, the central bank is able to impact the interest rates of commercial banks, the nation’s inflation rate and also the dollar exchange rate. Reducing the interest rate usually correlates with an increase in business activity, a rise in the inflation rate and a weakening of the dollar. Increasing the interest rate usually correlates with a decline in business activity, a decline in the inflation rate and a strengthening of the dollar.


As you know, Baby Boomers refers to those born between 1946 and 1964, aged from 49 to 67 in 2013 and numbering around 72 million survivors today. This is the age group for whom retirement savings are of paramount importance. Yet the bank interest rate on dollar savings accounts – which for many years averaged 6.14% – has languished around 0.25% for the last five years.

Imagine you are a Baby Boomer in December 2008 with $250,000 in savings in the bank, facing retirement in December 2013. Look at the following two intriguing examples.

Example A: After 5 years of bank interest at 0.25% (artificially held down to this rate by your government), your $250,000 savings now amounts to $253,141 in December 2013 (plus $3,141).

Example B: After 5 years of bank interest at 6.14% (approximately what the rate should have been), your $250,000 savings now amounts to $336,772 in December 2013 (plus $86,772).


Makes you pretty mad, right? But wait, it gets worse. The dollar has lost approximately 98% of its value in the 100 years since the Federal Reserve was created in 1913, or around 1% loss-of-value each year. The official inflation rate is notoriously underestimated, but real consumer inflation has actually been averaging over 5% each year. But for simplicity’s sake, let’s combine these two factors into a rounded-off inflation rate of 5% each year.

Example A: 5 years of 0.25% interest from your savings bank, combined with 5 years of 5% inflation, reduces the ‘spending power’ of your original $250,000 savings in 2008 to an equivalent of $195,875 in 2013.

Example B: 5 years of 6.14% interest from your savings bank (what you should have been earning), combined with 5 years of 5% inflation, increases the ‘spending power’ of your original $250,000 savings in 2008 to an equivalent of only $260,587 in 2013. Pitiful, even if you had got the 6.14% bank interest you really deserved.

Meanwhile, government printing presses are rolling out $85 billion a month in new currency, further weakening the U.S. Dollar.


The foregoing examples make it pretty clear that paper money – dollars – are neither safe nor prudent for savings. Gold and silver are the hard currencies of choice, and now is the time to transfer increasingly worthless dollar assets into real wealth – gold and silver – and to store them safely outside the banking system.

If you are still not convinced, ponder this. If you had converted your $250,000 savings into gold in December 2008 at $870 perGold Silver ounce (287.36 ounces), it would be worth $1,400 per ounce  in December 2013 (a conservative estimate, we believe), or $402,299. But regardless of the 2013 dollar value of your gold, you would still own 287.36 ounces of valuable gold!

Start protecting your wealth today by opening an account at It is simple and secure and you can do it online in just 4 minutes. And you only need $25 to start funding your wealth account and to get you started on protecting your financial future!

Dollar Is Dead

tv news anchorWhat if you awoke one morning and the U.S. Dollar – long past its prime – was dead, having become a worthless U.S. Dullard overnight? Day by day, it is becoming more of a probability  than a possibility. One thing is certain: when it comes, it will be sudden, swift, silent and totally unexpected.

Diary entry reads………


Woke up at dawn, restless. Turned on tv. News channels all blaring, everything is Breaking News. The U.S. Dollar has collapsed on international exchanges and is no longer the world’s reserve currency.

No one saw it coming. Video plays of SWAT teams roaming Wall Street. The police are nowhere to be seen, although sirens drown out the live coverage. Stragglers hurry past shuttered banks; they only contain worthless dollars anyway. Trains, buses and taxis are at a standstill. City and rural services are closing down. Stores are barricading doors and windows, afraid of looters. The news anchor says a report just came in that communities are forming militias to protect themselves. A scrolling ticker line has just appeared along the bottom of the tv screen, quoting live prices for silver (now $79) and gold (just hit $2,431).


There is a rush to exchange worthless paper money for goods. Barter is back, big time. Silver and gold are the new currency – the timeless store of wealth and value – and they are skyrocketing. It’s a race against time for those with their net worth in dollars, trying to swap garbage paper currency for valuable goods or precious metals, “before the music stops”.

But the music has  stopped. Overnight, and without warning. The morning’s cold grey sky is a harbinger of uncertainty and chaos. Facebook and Twitter servers have crashed, with everyone posting the same question: “Where can I get…?


silver goldSilver is now at $194 and gold has reached at $6,806. The tv reports an impromptu market, setting up on a nearby street corner. It’s for barter only: dollars are not welcome. My neighbor bangs heatedly on my door. “Do you own any guns?” he yells. Is he crazy, or thinking ahead? I can’t decide which. I check the lock on my door and close the blinds. Have to think. Prioritize. What should I do first?

I am glued to the tv. Frozen. Helpless. Unfolding tv scenes remind me of watching the Twin Towers in disbelief. But once again, it’s a real-life disaster movie, unfolding frame by frame in front of me.


More Breaking News. No word from The President, and the White House is on lock-down. Hey, there is no official word on anything. Here comes another Special Report, but it’s all hearsay and rumor. The news anchor wipes his forehead on camera, then composes himself. He frowns and then announces that the world has lost faith and confidence in the U.S. Dollar, and “no one knows where this is all headed.

I switch channels. Silver and gold prices are scrolling constantly now, on every channel. It’s like watching the National Debt Clock. Silver passes $350 an ounce and now gold is passing $20,000……


A news anchor is trying to coin a phrase, calling it ‘The Day The Dollar Dived’. He stares into the camera and asks derisively, “Printing $85 billion a month… how long did The Treasury think this could last?”


Ask yourself, were you one of the smart ones who bought gold and silver, when you were advised to do so?