Protecting Wealth in This Economy

Author: Tommy Leung | 07.29.2008 | Category: Economics, Life, Money

I write a lot about inflation. It is amongst the greatest evils in the world as it robs us invisibly. Unfortunately, it is not a very popular subject. Our economy has been getting worse and worse with each passing day. Prices have been skyrocketing in everything we buy–some relief may lie ahead with the recent correction in oil. With inflation and economics being such an uninteresting topic to most people, I figured I’d write about something we all care about: money.

The economy is in bad shape. Banks are failing, the national debt is increasing, home prices continue to fall, inflation is rampant, jobs are being lost, and wealth is being destroyed. One can argue that no real wealth was created in the last several years as the boom was due to inflation but, whatever. We have dollars and we generally measure our wealth in dollars.

The likely scenario in this potential economic Armageddon is massive inflation. Some analysts and economists say the dollar will go to zero. I don’t think the dollar will go to zero–that is a nightmare scenario. I think inflation is going to get worse as our government is ready to spend any amount of money to keep our current financial system from falling to pieces. The House recently passed a bill to bailout Fannie Mae and Freddie Mac. It is awaiting the president’s signature. The bill basically says the United States government will insure Fannie and Freddie no matter what happens–these two institutions account for about $5 trillion in mortgages.

The Great Depression was a time of deflation so while unemployment were in double digit highs and pain and suffering was abound, things were cheap. Our situation–not that we are headed for a Great Depression–is that of high and increasing prices. The reason for these high prices is inflation–a devaluation of the dollar. So, if the dollar is losing value you will be wise to not hoard any.

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I.O.U.S.A Movie

Author: Tommy Leung | 07.23.2008 | Category: Economics, Politics, Videos

I didn’t know about this movie until after I wrote about our almost $10 trillion national debt. Now that I do, I will be sure to watch it this August. Check out the trailer above.

The $10 Trillion Problem

Author: Tommy Leung | 07.22.2008 | Category: Economics, Money, Politics

Secretary Henry Paulson has been calling for a bailout of the insolvent Fannie Mae and Freddie Mac and the Democrats in Congress are looking to pass a bill to raise the limit on the national debt. The national debt is over $9.4 trillion already and the deficit for next year is approaching $500 billion. The bailout for Fannie and Freddie is estimated to cost $25 billion by the government.

So, if you and I were in $1,000,000 of debt that was accruing interest on a daily basis, would extending how much more debt we are willing to take on going to solve our problem? Is it a good idea? Of course not! The kicker here is that this $10 trillion of debt is OURS! We are even making monthly payments on it–the government steals money from us every paycheck. Unfortunately, the money that is being taken from us is also being spent instead of paying down debt.

Our national debt in 2001 was in the $5 trillions. We will have almost doubled that by the time Bush leaves office. Neither the Republicans or the Democrats in Congress are fiscally responsible. They are like teenagers with their daddy’s credit card. Paulson has also recently said that we are turning the corner in this housing crisis. Even if that were true, we have just added to another problem: the $10 trillion problem.

Jim Rogers on Asia, Dollar, and Fed

Author: Tommy Leung | 07.10.2008 | Category: Economics, Health and Fitness, Video Games, Videos

I’ve read Rogers’ books and have seen many of his interviews. I consider him a pretty smart guy when it comes to investing and economics. He discusses Asia, the US Dollar, and the Federal Reserve in this video. Rogers’ predicts the Federal Reserve will be gone within the decade–I would hope so.

Video on Gas Prices

Author: Tommy Leung | 07.07.2008 | Category: Economics, Politics, Videos

Found this video at The Freetarian blog, you might know him better as Val Venis of wrestling fame. Does a great job explaining the real reason behind why the price of gas is so high today. I’ve wrote about it but, this is a quick two minute explanation; perfect for those who don’t like to read. :)

Why Are Gas Prices So High?

Author: Tommy Leung | 07.02.2008 | Category: Economics, Politics

I live in New York City so I don’t really have to drive anywhere if I didn’t want to but, I do have a car: Nissan Altima with a decent MPG. My frequency of driving has gone quite far down since prices have started spiraling out of control. The last time I filled up the tank, regular unleaded was at about $4.15 a gallon. I saw prices at almost $4.40 the other day. These high and ever-increasing prices are incredibly irritating. Even those who do not drive are affected by it because the prices of everything else will also go up as long as gas is used in the transportation or manufacturing of the product. While politicians are trying to come up with bad new policies to try and lower the price of gas, we should be asking: why are gas prices so high?

As a student of Austrian Economics, the recent increase in prices of everything did not come as a surprise. Austrian economists have been talking about the problem of inflation and bad monetary policy for years. Most people hate economics. It probably has something to do with schools generally teaching Keynesian Economics. Did you know how to pronounce that? Probably not. The Keynesian teachings are generally flooded with lots of charts, graphs, and math. I’d imagine most people get turned off by that–I certainly do. Austrian writings are a lot easier to understand and don’t turn economics into physics with a multitude of formulas, equations, and symbols.

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You Are Being Robbed

Author: Tommy Leung | 06.26.2008 | Category: Economics, Money, Politics

The talk of economics usually puts people to sleep. We feel the affects of high food and gas prices and we know it has something to do with inflation. What if I told you the reality is that you are being robbed? Inflation is the talk of the town these days. That is why prices are so high. Not the other way around. The prices are not causing inflation–popular thought is a misunderstanding of cause and effect. I’ve read headlines and articles that keep referring to inflation as an increase in prices. Simply put: it is wrong. The truth is, you are being robbed.

The concept of inflation is not hard to understand. It is not mystical and not a topic we the people can’t grasp. Trust me, you are smart enough. The Federal Reserve met today, the 26th of June, and decided that they were not going to change the interest rates. So, what the hell does that mean? It means that the Federal Reserve decided not to rob us. When interest rates are lowered, money is more freely available through loans. This increases the amount of money in circulation. The law of supply and demand tells us that if there is a greater supply of something, it will be worth less. That is the net effect of a lowering of the interest rate. The rate has been lowered several times in the last year.

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