Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Archive for September 2007

origins of inflation

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It’s been reported that the $270 Billion ($270,000,000,000) that was created out of thin air over the past month amounts to what would be the market cap of the 5th largest bank in the world. All that ‘new’ money that wasn’t in the economy this summer has to find its way into the economy somehow, and that’s how prices march upward. New money chasing the same supply of goods and services pushes prices higher.

Gold is blowing a big raspberry at the Fed’s rescue attempt by moving to multi-decade highs, along with oil (which is another global commodity.) You see, when an asset is in demand all around the world, and you have to pay for that commodity in a currency that’s losing value each day, you have to pay more units of your falling currency. In other words, your price goes up.

If a European banker bought our stock market in 2003 at the beginning of this great run, he’d probably have already lost his job. Why? Our market has done so well, right? Actually, when converted to the Euro, the value of his investment in US stocks has actually dropped over our huge bull run.

EDIT: additional news today that the Saudi government will start to de-link its currency from the US dollar. If this spins out of control into a full-blown dollar crisis Pres Bush will think Iraq is the least of his worries.

Why is it that the US media is not reporting our US Treasury Secretary was in Europe over the weekend meeting with his peers across the pond trying to avoid a dollar crisis?

Written by heyercapital

September 20, 2007 at 9:45 am

Posted in Austrian Econ