Since over a generation has passed since the United States has had a properly functioning economy, does anyone remember what one looks like?
First, over time commodities drop in price. Assuming that people don’t just destroy wealth, it accumulates. As there is less scarcity when wealth accumulates, cause and effect lowers prices. Yet another good reason to avoid war. This can be negated if our culture turns to needless destruction. For example, Mr. Obama caused a great many perfectly serviceable power generation plants to be dynamited. The one in my county would take $6 to 8 e9 to replace. There were bombing missions of massed B-17’s that caused less damage. The ‘Cash for Clunkers’ program needlessly destroyed many functional automobiles across the entire nation. Is this not vandalism that steals wealth from those who follow us?
One commodity to watch is gold. A mental flaw causes most people to equate gold with money. Mass psychology causes many others to treat gold as money as the market demands. In a properly functioning economy, gold is a stupid investment. It just sits there without growing. Worse, in those eras when the economy grows, gold drops in value. When the price of gold rises, people are saying they don’t trust their government or the economy. Gold retains value as currency is devalued. It’s value is independent of any government. Gold can be smuggled. Rising gold prices are a sign that trouble is coming.
[ One of my favorite stores of the Second World War: The National Socialists came to Hungary in a nicer face. At first Jews could leave alive if they took nothing but their clothes. A clever chemist put his family fortune into platinum wire. He bent it into wire coat hangers and painted it with cheap paint. He put old clothes on the hangers and walked out of Hungary. Who steals cheap wire hangers? He passed through Britain and ended up in America. Somehow he ended up rich here. Many scientists knew the story, but they generally avoided telling the name. He broke the laws of Hungary, Germany, Britain, and America. But it worked.]
Inflation should be low to zero. A negative inflation rate means that money grows outside the market. It is an incentive to hoard money and not move it around in a functioning economy. High inflation rates are just a way to steal from the people. Look at Venezuela today for the ravages of high inflation. A sane person would convert Bolivars into anything durable rather than hold currency. Heck, convert it into anything that ages slower than green bananas.
There has to be a way to invest your money so that it values the world. And the greater the risk taken, the higher the rate of return should be. A bank’s CD rates should pay decent interest. Here are the CD rates today:
Here are the current average rates for the week of May 2:
- 1-Year CD Rates: 0.59%
- 5-Year CD Rates: 1.21%
- 1-Year Jumbo CD Rates: 0.62%
- 5-Year Jumbo CD Rates: 1.26%
- Money Market Account Rates: 0.18%
Even the five year rates are below inflation. Who would give them money? If we do not invest, the economy suffers. If we invest at such a rate we prove ourselves fools. When an investment market does not deserve to exist, the money will flow elsewhere. Finding where is the hard job.
That is exactly what they do. If they don’t pay me, then they don’t get my money.