Category: Inflation
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Will Silicon Valley Bank’s Failure Lead to More Inflation?
What Happened? SVB, like all banks, was highly leveraged. Before the collapse, SVB had only 8% capital, which in the world of banking, is considered well-capitalized. When a bank is highly leveraged, even a relatively routine loss in on the asset side of the balance sheet can wipe out its…
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Should you hedge against inflation?
Although the terms hedging and diversification are sometimes used interchangeably, the two terms actually refer to different areas along a spectrum. That spectrum is the correlation of returns. HedgingIn plain English, hedging refers to the process of holding one asset (such as a stock), and then also buying another asset (such as a put…
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The First Recorded Hyperinflation
Pop quiz: What was the world’s first recorded hyperinflation? We have described that politicians, including the Roman Emperor Diocletian, use inflation as intentional policy. Sometimes politicians get so carried away that they cause hyperinflation. The term hyperinflation is often thrown about carelessly. To economists, Hyperinflation is defined as inflation of over 50%…
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Is Inflation Here to Stay?
To answer the question, let’s start with this basic fact: the federal government benefits from inflation. In 2022, the government “made” at least $2,000,000,000,000 (that’s $2 trillion!) from inflation.[1] That $2 trillion had to come from somewhere, because “printing” money creates no value. As Warren Buffet says about the poker…
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The Lincoln You Don’t Know
We’re celebrating Presidents’ Day instead of Lincoln’s birthday. But Lincoln’s birthday isn’t the only part of his history we’ve forgotten. We all know Lincoln as the president who saved the Union and ended slavery. But did you know that Lincoln also instituted the nation’s first income tax and created the…