Economy 📍

📽️ Videos

NPR

|

With inflation still hot, the Fed takes a step towards rate hikes : NPR

The Federal Reserve is paving the way for possible interest rate hikes next year, in an effort to contain stubbornly high inflation.

At the conclusion of a two-day policy meeting Wednesday, the central bank announced plans to phase out its large-scale bond-buying program faster than initially planned. The Fed started purchasing bonds during the pandemic as a way to keep borrowing costs across the economy low and to prevent any market disruptions.

Ending the bond purchases earlier would give the Fed more flexibility to raise interest rates sooner, if necessary, to keep prices from spiraling out of control. The central bank said previously it wanted to stop its bond purchases before considering raising interest rates.

The Fed is taking a harder line against inflation after consumer prices in November jumped 6.8% from a year ago — the largest increase in nearly four decades.

In a statement, the Fed acknowledged the rapid runup in prices. Although the central bank still believes inflation is largely driven by factors tied to the pandemic, which should ease when the health outlook improves, policymakers are no longer taking that as a given.

Gold Bugs

|

I don’t really get the appeal of gold to gold bugs, people who obsess over gold and say it’s an essential commodity to have in one’s portfolio.🤑

Gold is shiny and popular for use by rich people for showy jewelry, 💎 it’s uses in the real economy are quite limited — it’s fantastic conductor and has some other uses in chemistry — but other then that is has no real value. Gold in certain electronics is an important use, but the gold typically used is only a few atoms thick and only a small portion of the gold mined and consumed every year. Gold might not be entirely without use, but most of it’s practical uses are in margin, a small part of production each year.📿

There is some value in investing in commodities or energy businesses as a hedge against inflation, especially energy-driven inflation like what we saw during the 1970s with the energy-crisis. That said, commodities are always risky, as you don’t know if products will be substituted for new products. Coal, for example, has seen a long decline in recent years as natural gas and renewable have replaced it as a cheaper source of energy.🛢 Energy companies, especially in broader form, are less risky then raw commodities, as they enjoy a larger degree of flexibility in the sources of energy they sell. Electricity companies will continue to have a dominate role no matter what their generation is fueled by, coal and oil companies have certain talents and land ownership that will make them leaders even if we move towards geothermal, wind and solar.

Most precious metals aren’t really the precious, even if they are rare.🐲 I am more interested in the real economy, something you can point to actual economic growth, rather then some dubious scam pushed by certain unscrupulous business people.

Gold Finch

NPR

|

Inflation surges to its highest since 1990 : NPR

Surging prices are steadily chipping away at Americans' buying power – as well as President Biden's approval rating.

The Labor Department reported Wednesday that consumer prices were 6.2% higher in October than a year ago. That's the sharpest increase since November of 1990.

Price increases were widespread, with energy, shelter, food and vehicles all costing more. Excluding volatile food and energy costs, prices were up 4.6%

Much of the upward pressure on prices is the result of a mismatch between booming demand and limited supply, as businesses struggle to find both parts and workers.

Many employers have increased pay in order to attract more workers. But growing paychecks have quickly been eroded by the rising cost of gas and groceries.