REAL Yield Purchasing Power

cropped-bob-shapiro.jpg   By Bob Shapiro

I read an article by Keith Weiner, which highlighted the evil that is interest rate suppression – sometimes called financial repression. He points out that, after a lifetime of saving, a senior earning near zero interest return on his money would be forced to liquidate his savings to live.

He’s absolutely right, but he gives a false impression when he starts comparing today’s “Yield Purchasing Power” with the experience from 1979. Keith dismisses the importance of rising prices as he concentrates on yield, but it’s the REAL yield which matters.

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THERE’S Your Hyperinflation!

By Keith Weiner – Re-Blogged From http://www.Gold-Eagle.com

Hyperinflation is commonly defined as rapidly rising prices which get out of control. For example, the Wikipedia entry begins, “In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of inflation, rapidly eroding the real value of the local currency…” Let’s restate this in terms of purchasing power. In hyperinflation, the purchasing power of the currency collapses. Before the onset, suppose one collapsar buys ten loaves of bread. Soon, it buys only one loaf. Shortly thereafter, it buys only one slice. Next, it can only purchase a saltine cracker. Pretty soon the collapsar won’t buy any bread at all. Stick a fork in it, it’s done.

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Falling Yields, Rising Asset Prices

By Keith Weiner – Re-Blogged From http://snbchf.com/gold-standard/

Our monetary system is failing, but explaining that isn’t easy. The most popular argument is that the dollar has falling purchasing power and rising inflation. The problem with this argument is that consumer prices aren’t skyrocketing now. So, of course, people remain skeptical.

Yields across all markets were falling worldwide. This causes the income generated from assets to fall. I wrote about this serious problem last time, introducing the concept of yield purchasing power—which is how much you can buy with the interest on your savings.

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Thinking Differently About Purchasing Power

By Keith Weiner – Re-Blogged From http://www.Gold-Eagle.com

The dollar is always losing value. To measure the decline, people turn to the Consumer Price Index (CPI), or various alternative measures such as Shadow Stats or Billion Prices Project. They measure a basket of goods, and we can see how it changes every year.

However, companies are constantly cutting costs. If we see nominal—i.e. dollar—prices rising, it’s despite this relentless increase in efficiency.

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