The No-B.S. Guide to Building Real Wealth in Your Self-Directed IRA or Solo 401k
A recent Onion News article has hit dead on what is wanted right now by the masses of the American public. As ridiculous as this article sounds, this type of mentality is exactly what’s been behind many “investment decisions” of the average American in recent past.
Read the article here, and then keep reading my blog if you’d like a more sound approach to investing.
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P.S. Just to be on the safe side, I’ll give you a heads up that The Onion is a satirical, “fake news” organization.
In Part 1 of this post, we examined the facts concluding that inflation is caused by monetary debasement. In this follow up, we’ll observe the reason behind why common belief is that inflation is at 3% – 5%. First, let’s recap what was already covered:
Inflation is the steady, continual rise in the price of goods. It is typically measured using a “basket of goods”. In this approach, the prices of many different goods are tracked and then integrated using some sort of logical weighting calculation.
In most developed countries, money is created by a central banking system. In the US, our central banking system is that of the Federal Reserve, a private bank. Money can be created by the Federal Reserve depositing newly created money into its member banks in exchange for US bonds. This increases the amount of money in existence. Additionally, every bank in the US has the ability to lend out 7 to 11 times as many dollars as it has in deposits. This also increases the amount of money in existence. With an increased money supply, prices rise. A continually increasing money supply, aka monetary debasement, causes inflation.
This is where there is a difference of opinion. For decades, inflation has been estimated using a “basket of goods” approach. In this method the price of each of a variety of goods is tracked, a logical weighting is applied, and the output is the rate of inflation, usually annualized. Under this method we can see inflation swinging up and down through economic cycles. In the early 1980′s, this data shows inflation at nearly 15% per annum. This is based on the published figures of the US Bureau of Labor Statistics.
In the early 1990′s the methodology of inflation reporting changed drastically, thus rendering the BLS “official” figures virtually useless. Unfortunately, these BLS figures continue to be used as if they were accurate.
Around 1993, Alan Greenspan argued that there was a flaw [Read more...]
****** A note from Jeff Nabers ******
I asked attorney Dan Marsh to shed a bit of light on entity maintenance and its importance. With a general purpose LLC, failing to properly maintain the entity can result in “piercing the veil” which means subjecting creditors to assets of the LLC owner(s). With a special purpose IRA LLC, “piercing the veil” could mean a prohibited transaction resulting in hefty taxes, penalties, and interest.
Entity maintenance is important and it shouldn’t take too much time or money… yet it could save you a lot of time and money in the long run. I suggested Dan keep this post brief, but instead he did what attorneys are supposed to do: he was thorough. Rather than ask him to dumb it down and shorten it, here’s the article in its entirety…
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Some of the most prominent explanations of the cause of inflation can be extremely confusing and often end up leading the reader/inquirer to conclude “Ahh, it’s just too complicated. We can’t really put our finger on it, and there are many different factors.” In this post, I aim to undo that surrender of understanding and replace it with a simple, accurate explanation.
Inflation is the steady, continual rise in the price of goods. It is typically measured using a “basket of goods”. In this approach, the prices of many different goods are tracked and then integrated using some sort of logical weighting calculation.
“Too much money chasing too few goods”. This is the theory that says inflation is caused by demand out pacing supply. Believers of this theory pat themselves on the back about inflation as if it is evidence of a growing economy. This kind of fantastical belief is possible only through naivety. A global review of inflation teaches us that some of the most rapid inflation occurs in economies that aren’t growing at all. Conclusion: False.
“When companies’ costs go up, they have to raise their prices to maintain a profit margin.” This may explain fragmented price fluctuations, but remember that inflation is the steady rise in price of goods (in general). If prices are stable across the board, but wheat spikes in price, it won’t single handedly result in substantial inflation. Even if wheat is in the “basket of goods” that we use to calculate inflation, its rise in price will minimally affect the overall computation for inflation. Another thing to note is this: What is causing the companies costs to go up? The Cost-Push Inflation theory is almost like saying “Rising prices are caused by rising prices”. Huh? Conclusion: False.
Supply & demand of goods have nothing to do with inflation. Let’s look at the rising price of oil, and examine [Read more...]
