How to Avoid Shipwrecking Your Retirement

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Nilus MattiveDear Rich Lifer,

You’ve worked incredibly hard in order to save up to retire. The road to retirement can be a difficult one that requires both social and financial sacrifices in order to save enough for a comfortable retirement. This is why it’s crucial  to avoid as many financial  mistakes that  could compromise the security of your retirement plan as you can.

Not to fear! I’ll highlight some of the common mistakes people make with their retirement funds so that you can avoid these slip ups.


  1. Not Having a Plan


According to the Retirement Confidence Survey from the Employee Benefits Research Institute, 48% of workers haven’t calculated how much money they need to save for retirement. If you don’t have a plan, you are setting yourself up for failure. In fact, Fortune magazine published a study which showed that people with written plans end up with an average of five times the amount of money at retirement as compared to those with no written plansThere is no “one size fits all” when it comes to a financial plan, but experts suggest you aim to have enough saved up to in your retirement account and income from other sources to equal 80% of your income at the time you retire..


  1. Taking Social Security Too Early


Although you can start collecting Social Security Payments at age 62, your monthly checks are reduced if you start collecting benefits so soon. This could mean your benefits are reduced by almost 30%! To claim your full benefits you must sign up for Social Security at your full retirement age, which varies based on date of birth. So, for a worker eligible for a $1,000 monthly Social Security benefit at his full retirement age, claiming at age 62 reduces their monthly payment to $750 if his birth year is 1954 and if they were  born in 1957 it brings the amount down to $725.

Of course, there can be reasons to start collecting social security early, such as health concerns or an issue with your work status, but if you have the choice, make sure you think long and hard about when the right time is to start your collection.


  1. Cashing Out Before You Retire


It’s very tempting to dip into a sizable retirement fund, but as much as you tell yourself you will pay yourself back, once that money is gone it is usually gone for good. It is also important to remember that you have to pay income tax on any money you withdraw from an IRA. You also can face a 10% early withdrawal penalty if you withdraw money before the age 59 ½. If you absolutely must take out funds from your 401(k), there is a loophole you can use to take money out with no penalty. You can take penalty-free 401(k) withdrawals beginning at age 55, if you leave the job associated with that 401(k) account at age 55 or later.


  1. Spending Too Much Too Soon


When most people retire they are still living active and healthy lives. This will most likely result in wanting to spend money on activities such as trips, vacation homes, or boats. However, always make sure you are keeping track of your spending. If you live into your 90s you will still need resources in order to take care of yourself for your whole life.


  1. Playing the Stock Market


This one may seem a bit counterintuitive, but hear me out. Most people automate their 401(k) savings and investments while they are actively working so they can focus on other things. However, once retired some retirees think they are smart enough to take on Wall Street and take control of their own financial fate. My advice here may seem harsh, but unless you have experience with the market, or have someone who does know what they are doing, most likely you are not smart enough to beat Wall Street at it’s own game. Ultimately it may be  a much better idea to stick to a low-cost diversified ETF or mutual fund. Either way, if you decide to play the stock market, make sure it is with funds you are comfortable losing. Never invest money you can’t afford to lose.


  1. Failing to Account for Inflation


Right now the government states that inflation is barely 2%; however, there is no way to tell if, or when, higher inflation will occur. Inflation is often an issue for retirees because pensions may not be adjusted for inflation. Further, many jobs fail to offer a traditional pension plan. In fact, Only 17 percent of private industry employees were offered a traditional pension plan in 2018, according to Bureau of Labor Statistics data.

Social Security payments are adjusted for inflation annually; for example, recipients will get 2.8 percent bigger checks in 2019. However, this often only accounts for the increase in Medicare costs. So make sure you should keep a portion of your savings invested in assets that increase with inflation, such as real estate, stocks or rental properties.

  1. Failing to Prepare for Medical Expenses


Many retirees have Medicare which covers most medical bills, alongside supplemental insurance. However, many forget that you must also be prepared to pay for deductibles, uncovered procedures and copays. These costs can add up over time. In addition, some health expenses, such as dental, eyeglasses, or hearing aids, are not covered by Medicare. Putting aside funds for health expenses that are likely to occur later in life will save you a lot of headache down the road for unexpected medical expenses..

Also remember, most people become  eligible for Medicare during the months around their 65th birthday. If you don’t sign up for Medicare during this initial enrollment period, you could be charged a late enrollment penalty for as long as you have Medicare.


  1. Not Spending Enough


This may seem odd, but it is possible to be too cautious when it comes to spending your retirement savings. Of course it’s great to leave your kids an inheritance, but there is no reason to scrimp and save if you have enough money in the bank. Don’t put yourself through  Unnecessary financial hardships that could be easily avoided by being realistic about your spending plan.

I hope that these tips will be helpful to you as you move forward with your retirement plan! I know it can seem like a daunting task, but with the right research, and planning, you can retire comfortably, and live out your golden years the way you always pictured them.

To a richer life,

Nilus Mattive

Nilus Mattive

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7 Retirement Sins You Don’t Want to Commit

This post 7 Retirement Sins You Don’t Want to Commit appeared first on Daily Reckoning.

In general, Americans are pretty fearful about retirement and it’s easy to see why.

So today I want to talk about seven different things that can totally derail anyone trying to work toward more financial stability in their golden years.

Retirement Planning Sin #1: Counting on Social Security, Pensions, and Other Traditional Plans

At this point, I’ve probably written a million words on the problems with our traditional retirement systems and you’re free to read my thoughts in past articles and interviews I’ve done over the years.

But just to recap:

  • Social Security is now taking in less than it pays out and is projected to do so every year going forward…
  • Without changes, the program’s trust fund will be exhausted in 15 years and only 75% of promised benefits will be paid out…
  • Many pension plans – both governmental and private – have been suffering from similar shortfalls and systemic problems…
  • A number of pension plans are already trying to go back on the promises they’ve made to retirees…
  • And while near-term retirees will probably be the least affected group, I wouldn’t treat any guarantee as sacred.

Now, it needs to be said: These are not just abstract concepts. I’m not saying these things for shock value.  These are real issues that impact a lot of people in my own life.

For example, my father has two different state retirement plans after working in various mental health facilities for four decades.

My mother-in-law receives her retirement income from a pension provided by Dupont, her life-long employer.

And even I have a small pension from more than a half decade working at Standard & Poor’s.

I hope all of our payments keep coming as they should. But I’m telling my father, my mother-in-law, and everyone else not to just blindly depend on it!

Instead, you should always be saving and investing somewhere else on the side… just as a fall-back plan. 

Retirement Planning Sin #2: Failing to Have a Budget

For about 15 years, I urged my mom to keep track of her spending so she would have a good understanding of what her cash flows looked like.

In response, she gave me all kinds of excuses. She didn’t have time. She already had a basic idea of what she was spending. That there was no possible way to even keep track between her credit cards, her check payments, and all the various cash transactions she was making.

Then she turned 66 and got serious about retiring.

Sure, she knew what all the big numbers looked like – property taxes, car payments, etc. But did she have any idea how much was being spent eating out with her friends? Or going overboard buying Christmas gifts for my daughter?

Not really. Without that knowledge it was going to be impossible for her to design a sustainable life on a very fixed income.

Now she’s actually retired and keeps better track of the money coming in and going out because she has to. But she could have been even better prepared… and probably saved a lot more money ahead of time… if she had started sooner.

So please, if you don’t currently have a budget… one that accounts for ALL your expenses… please get one up and running.

I do this in an excel spreadsheet for my own family and we meet at the end of every year to revisit things.

But the process can be as simple as a $1 notebook from the drug store. And all you have to do is write down how much you spent and on what – no matter what payment form you use.

Then, after a few months, add up the numbers and put them into basic categories. I think you’ll be surprised at the patterns you see… and where you might have room for additional savings.

One other thing – if you share your finances with anyone else, it’s absolutely crucial that you include them in this process and that you have open and honest discussions about how the money is getting spent.

Speaking of which, there’s one major expense you might NOT be factoring in. And that’s why the third deadly sin is

Retirement Planning Sin #3: Ignoring Inflation, Especially in Health Care Costs

I’m sure you understand the general concept of inflation and you already have a sense that today’s budget might look different ten years from now simply because of rising prices.

But perhaps no single expense is rising faster – or impacting more retirees – than soaring healthcare costs.

Every year, Fidelity takes a look at how much a typical 65-year-old couple will spend on out-of-pocket healthcare costs during retirement.

This year the number was an eye-popping $280,000.

Five years ago, the number was $220,000.

That’s a 27% surge in just half a decade!

What’s more, this is assuming you have traditional Medicare coverage. Plus it doesn’t include costs associated with nursing-home care.

And that’s where things get really scary.

Unless you’re essentially destitute and qualify for Medicaid – or you’ve already purchased long-term care insurance – medical treatment outside a hospital is going to be your cost to bear.

The total outlay depends on a number of factors, including your local area. But according to Senior Living, the national average for a semi-private nursing home runs $82,128 a year!

Look, I’m not trying to depress you here. But the reality is that 70% of us will need long-term care services at some point in our lives… and sometimes it happens sooner than we think. In fact, 40% of the Americans in long-term care are between the ages of 16 and 64.

So whether you consider long-term care insurance or you simply set aside a big chunk of money and hope for the best, you at least need to consider the huge impact that health care costs will have on your family during retirement.

You’re looking at a quarter of a million bare minimum. And another $100,000 a year if long-term care becomes necessary.

That could be enough to drain even a very well-prepared retiree.

Which is why you should also seriously explore how you can protect your income and assets before they get taken or disqualify you from Medicaid.

The rules vary from state to state, and they’re always changing, but at the bare minimum you want to start thinking about this at least five years before long-term care becomes a real possibility.

For example, if you have a second home or rental real estate, you might consider signing it over to a trustworthy heir before you end up signing it over to a nursing home.

And speaking of protecting your assets…

Retirement Planning Sin #4 Is Not Using Tax Shelters!   

It doesn’t matter if you’re 30 or 60 – you should be using tax-advantaged accounts for the vast majority of your saving and investing.

Obviously, choosing which particular accounts make the most sense is going to vary based on your individual circumstances. But in general I recommend using the following process:

First, contribute enough to any employer-sponsored plan to get the maximum match…

Second, if you’re self-employed – which includes people who merely have side businesses – also consider opening a Solo 401(k) plan…

And third, use IRA accounts – traditional and/or Roth varieties depending on your goals and tax situation – to sock away even more.

This is what I do personally, and the same thing I recommend to everyone else I talk to regardless of age or income.

Retirement Planning Sin #5: Not Having “A Post-Work Plan.”

A lot of people don’t think this really matters – especially if they’re still relatively far away from retirement.

Heck, how could NOT working be hard, right? I mean, most people figure waking up without anything to do is a great problem to have.

However, I know someone who retired – from a job she didn’t even like – and she found the transition to be VERY difficult.

So much so that she had to take a class at her local senior center titled “Every Day Is a Saturday.”

In what amounted to a support group, she witnessed countless other new retirees literally breaking down because they didn’t know how to handle their newfound freedom – including a 70-year-old heart surgeon who cried profusely!

Rather than figuring this out as you go, start thinking about it now… and always keep that budget in the back of your mind, too.

There are countless resources available to retirees – free classes (even college educations in some places!)… special exercise groups… volunteer opportunities… mentoring programs… the sky is literally the limit.

The key is envisioning your future before it arrives.

And on a similar note…

Retirement Planning Sin #6 Is Being Inflexible

We never have any idea how things are going to turn out – in investing or life. So all we can do is plan for the best and prepare for the unforeseen twists and turns.

If you have a very narrow vision of what your future looks like, and you’re unwilling to change course, you’re setting yourself up for potential disappointment.

Just consider the thousands of retirees who are now discovering whole new lives in foreign countries they had never thought of visiting ten years ago!

Am I saying you should have to move to Thailand to get a comfortable retirement? Of course not. I’m simply saying that we should try to find joy no matter what… and embrace the excitement of trying new things no matter our age or circumstances.

That’s the real secret to a long, healthy, and happy life.

Which brings me to our final retirement planning sin… perhaps the biggest of them all…

Retirement Planning Sin #7: Procrastinating!

I started saving in a 401(k) the very first paycheck I got and I have increased the amount I sock away at every possible opportunity ever since then.

Two decades in, I have quite a lot in the bank already. Meanwhile, most of my friends are still treating retirement as some far-off thing.

Sure, there might be another two decades to go for anyone in my age bracket. But time flies!

That’s something to remember no matter how old you are… no matter where you’re at in terms of your goals… and no matter how much money you currently have.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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The Fed’s Dangerous Inflation Game

This post The Fed’s Dangerous Inflation Game appeared first on Daily Reckoning.

By now you’ve heard that the U.S. economy expanded at an annualized rate of 3.2% in the first quarter of 2019. That was reported by the Commerce Department last Friday morning.

That strong growth coming on top of 4.2% in Q2 2018 and 3.4% in Q3 2018 means that in the past twelve months, the U.S. economy has expanded at about a 3.25% annualized rate. That’s a full point higher than the average growth rate since June 2009 when the expansion began and it’s in line with the 3.22% growth rate of the average expansion since 1980.

It looks as if the “new normal” is back to the old normal of 3% or higher trend growth. Or is it?

The headline growth rate of 3.2% was certainly good news. But, the underlying data was much less encouraging. Most of the growth came from inventory accumulation and government spending (mostly on highway projects). But, business won’t keep building inventories if final demand isn’t there. That’s where the 0.8% growth in personal consumption is troubling.

The consumer didn’t show up for the party in the first quarter.

If they don’t show up soon, that inventory number will fall off a cliff. Likewise, the government spending number looks like a one-time boost; you can’t build the same highway twice. Early signs are that the second quarter is off to a weak start.

Dig deeper and you can see that core PCE (the Fed’s preferred inflation metric) cratered from 1.8% to 1.3%. That’s strong disinflation and dangerously close to outright deflation, which is the Fed’s worst nightmare.

The data just show that the Fed is as far away as ever from its 2% target. But why should it even have 2% as its target?

Common sense says price stability should be zero inflation and zero deflation. A dollar five years from now should have the same purchasing power as a dollar today. Of course, this purchasing power would be “on average,” since some items are always going up or down in price for reasons that have nothing to do with the Fed.

And how you construct the price index matters also. It’s an inexact science, but zero inflation seems like the right target. But the Fed target is 2%, not zero. If that sounds low, it’s not.

Inflation of 2% cuts the purchasing power of a dollar in half in 35 years and in half again in another 35 years. That means in an average lifetime of 70 years, 2% will cause the dollar to 75% of its purchasing power! Just 3% inflation will cut the purchasing power of a dollar by almost 90% in the same average lifetime.

So again, why does the Fed target 2% inflation instead of zero?

The reason is that if a recession hits, the Fed needs to cut interest rates to get the economy out of the recession. If rates and inflation are already zero, there’s nothing to cut and we could be stuck in recession indefinitely.

That was the situation from 2008–2015. The Fed has gradually been raising rates since then so they can cut them in the next recession.

But there’s a problem. The Fed can raise rates all they want, but they can’t produce inflation. Inflation depends on consumer psychology. We have not had much consumer price inflation, but we have had huge asset price inflation. The “inflation” is not in consumer prices; it’s in asset prices. The printed money has to go somewhere. Instead of chasing goods, investors have been chasing yield.

Yale scholar Stephen Roach has pointed out that between 2008 and 2017 the combined balance sheets of the central banks of the U.S., Japan and the eurozone expanded by over $8 trillion, while nominal GDP in those same economies expanded just over $2 trillion.

What happens when you print over $8 trillion in money and only get $2 trillion of growth? What happened to the extra $6 trillion of printed money?

The answer is that it went into assets. Stocks, bonds and real estate have all been pumped up by central bank money printing. The Fed, first under Ben Bernanke and later under Janet Yellen — repeated Alan Greenspan’s blunder from 2005–06.

Greenspan left rates too low for too long and got a monstrous bubble in residential real estate that led the financial world to the brink of total collapse in 2008.

Bernanke and Yellen also left rates too low for too long. They should have started rate and balance sheet normalization in 2010 at the early stages of the current expansion when the economy could have borne it. They didn’t.

Bernanke and Yellen did not get a residential real estate bubble. Instead, they got an “everything bubble.” In the fullness of time, this will be viewed as the greatest blunder in the history of central banking.

The problem with asset prices is that they do not move in a smooth, linear way. Asset prices are prone to bubbles on the upside and panics on the downside. Small moves can cascade out of control (the technical name for this is “hypersynchronous”) and lead to a global liquidity crisis worse than 2008.

If the Fed raises rates without inflation, higher real rates can actually cause the recession and/or market crash the Fed has been preparing to cure. The systemic dangers are clear. The world is moving toward a sovereign debt crisis because of too much debt and not enough growth.

Inflation would help diminish the real value of the debt, but central banks have obviously proved impotent at generating inflation. Now central banks face the prospect of recession and more deflation with few policy options to fight it.

So the Fed has been considering some radical ideas to get the inflation they desperately need.

One idea is to abandon the 2% inflation target and just let inflation go as high as necessary to change expectations and give the Fed some dry powder for the next recession. There are other, more drastic solutions as well.

I’ve discussed how Modern Monetary Theory (MMT) is becoming increasingly popular in Democratic circles, even though the Fed has disavowed it. But it can’t be ruled out if Democrats win the 2020 election.

That means 3% or even 4% inflation could be coming sooner than the markets expect if they’re pursued.

But those who want higher inflation should be careful what they ask for. Once inflation expectations develop, they can take on lives of their own. Once they take root, inflation will likely strike with a vengeance. Double-digit inflation could quickly follow.

Double-digit inflation is a non-linear development. What I mean by that is, inflation doesn’t go simply from two percent, three percent, four, five, six. What happens is it’s really hard to get it from two to three, which is ultimately what the Fed wants. But it can jump rapidly from there.

We could see a struggle to get from two to three percent, but then a quick bounce to six, and then a jump to nine or ten percent. The bottom line is, inflation can spin out of control very quickly.

If people believe inflation is coming, they will act accordingly en masse, the velocity of money will increase and soon enough the inflation will arrive unless money supply has been severely constricted. That’s how you get the rapid inflation increases I described above.

So is double-digit inflation rate within the next five years in the future? It’s possible. Just to be clear, I am not making a specific forecast here. But if it happens, it could happen very quickly. So the Fed is playing with fire if it thinks it can overshoot its inflation targets without consequences.

It doesn’t seem like a problem now. But one day it might.


Jim Rickards
for The Daily Reckoning

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“Is Inflation Dead?”

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Today we don the prophet’s motley, climb atop our soapbox… and holler a thumping prediction.

For we have indication — reliable indication — that an established trend will soon end. And that another will begin.

But what established trend? How will it end? And why so all-fired important?

Answers anon. But first an after-action report on today’s combats…

The bears won — if barely.

The Dow Jones lost 135 points today. The S&P was essentially even on the day. The Nasdaq, meantime, turned in a 16-point gain.

Mixed earnings reports — some swell, some not — largely cancelled each other.

We now turn and face the future, by first turning and facing the past — Aug. 13, 1979, to be precise.

“The Death of Equities,” 2019 Version

On that date BusinessWeek announced before the world “The Death of Equities.”

For nearly 15 years the stock market had been sunk in the crushing deeps of a bear market. Why should it end?

Dazzled and blinkered by the present’s brilliant focus, the wise men of BusinessWeek had forgotten about the past.

This time is different, they believed.

They forgot that markets move in clockwork cycles, that the wheel swings around eventually, that the full circle runs to 360 degrees.

The gods pointed, laughed… and plotted.

By 1982 the loveliest bull market in all of history was underweigh. It roared and raged for nearly 20 years following.

Come we now to this headline in another BusinessWeekBloomberg Businessweek — dated April 17, 2019:

“Is Inflation Dead?”

Is Infaltion Dead?

“It Is Always Different — Until It Is Once Again the Same”

As the case for stocks was laughed out of court in 1979, so the case for inflation is laughed out of court today.

As in 1979, today’s professional men believe this time is different.

They tell us globalization, a “savings glut” or productivity increases through technology have licked inflation for good.

Despite the heroic sweating of the printing press and all the angels and saints, they remind us, the Federal Reserve cannot work a sustained 2% inflation rate.

Why should it change now?

But it is always different — until it is once again the same.

Here at The Daily Reckoning we take the overall view, the long view — the view sub specie aeternitatis.

And in the grand sweep, the cycle completes.

Now that the Bloomberg men have tugged on Fate’s cape good and hard… now that they have suggested inflation’s permanent demise…

We have our perfect contrarian indicator.

We must conclude that inflation lurks in the offstage wings, awaiting word from the gods.

But if the Federal Reserve has proven unable to whip disinflation with its deep bag of tricks, how will inflation make its entrance?

How Might Inflation Return?

We have suggested it previously, if only from a glancing angle:

Modern Monetary Theory — MMT.

Come the next downturn, the Federal Reserve will blast us with the same quantitative easing and zero interest rates it inflicted upon us last time.

It may also have a go at negative interest rates.

But much of its “dry powder” the Federal Reserve used against the last crisis. Its stocks remain heavily depleted, despite efforts to reload.

Like last time, its false fireworks may scintillate the stock market — in the near run at least.

Also like last time, they will work limited effect upon the economy of people, places and things.

That is, upon the real economy.

And negative interest rates have failed to meet their advertising where tried, Japan and Europe being cases brilliantly in point.

There is little reason to expect they will succeed in these United States.

No, the central banks are tied hand and foot.

Now enter MMT…

The “Perfect Theory for Our Times”

MMT will parade as quantitative easing for Main Street.

Through the miracle of the printing press a healthy inflation will finally emerge from its cage.

If it strays too far or begins to snarl, the tax man will go chasing after it.

Higher taxes will simply vacuum surplus money from the economy and jam inflation back in its cell.

MMT further promises universal health care, full employment, college free of charge, a throbbing economic engine, a thermostatic correction of the planetary temperature… and more.

Thus MMT is the “perfect theory for our times” explains former Morgan Stanley global strategist Gerard Minack:

One reason this may be attractive is that it is increasingly clear that monetary policy is exhausted, at least in the developed economies…

It seems to me that MMT is the perfect theory for the times. It appears to justify a switch from monetary to fiscal policy as the key tool of macro management… it can also be used to fund popular policies… Put simply, this would see fiscal policy play the role that monetary policy has played for decades… The key point now is that MMT is being used as an argument to justify important policy changes…

An End to “Secular Stagnation” and the “Savings Glut”

And through public spending MMT promises to murder the “secular stagnation” and “savings glut” that presently ride and torture the economic establishment.

Lower interest rates and further monetary gimcrack cannot.


If this policy approach were implemented it would be fatal to secular stagnation… For 30 years the main policy response to this [problem] has been to reduce interest rates… The point is that it has required lower and lower rates to achieve any given growth rate. Increased public dis-saving is the direct antidote to the private sector’s rising saving… if there is a broad-based adoption of MMT in the next downturn, it will end the secular stagnation era. 

We are skeptical — deeply — that a “savings glut” has any existence whatsoever.

As well argue that a “wealth glut” exists. Moreover, that it takes the form of a public menace.

But our larger point, sharp as pins, is that MMT is beginning to get a hearing.

To date a mere handful of Democratic officials and presidential aspirants have bellowed for MMT.

But come the next downturn and the Federal Reserve’s botched rescue, the chorus will swell — depend on it.

Just so, you say.

But the Republicans will never let it through. They may be a gang of scoundrels in their own right. But even they will go only so far.

“Modern Monetary Theory for Conservatives”

But Republicans too sense changes in the wind. They too can jab a moist index finger in the air to determine which way it blows.

Might they hatch a “conservative” MMT to position themselves upwind of public opinion?

But does a conservative MMT even exist?

Yes, says a certain Steve Englander, who directs global research at Standard Chartered Bank.

He is also the author of “Modern Monetary Theory for Conservatives.”

From which:

A conservative version of Modern Monetary Theory (MMT) could arguably work just as well as the standard progressive version…

But instead of funding lavish and exotic government spending, a conservative MMT would finance tax cuts.

But have they not tried tax cuts already to little general effect?

Yes, but an MMT-backed tax cut would hacksaw taxes to the extent a progressive MMT would heave forth money.

Two Approaches, Same Result

The gargantuan tax savings would then go flooding onto Main Street.

Mr. Englander:

The economic outcomes from the lower-tax version of MMT would likely be indistinguishable from the higher spending version…

In the first case, the private sector is expected to do the spending, in the second, the government…

The same principles could be used to justify a very different agenda than is commonly associated with MMT. The core idea that central bank-financed deficits drive activity and inflation remains the same. 

This Englander says he does not advocate any such plan — merely that it is possible.

But might some enterprising politicos haul it out as a more “sensible” alternative to a lunatic progressive MMT?

Why not?

Might it blast identical holes in the deficit?

Well, maybe it would. But recall, deficits do not matter.

This we have on authority of a former Republican vice president.

Besides, you cannot beat something with nothing, he might say.

We must do something. This is something. We must therefore do it.

Progressive MMT, conservative MMT, the end is the same.

And either could be one good crisis away…


Brian Maher
Managing editor, The Daily Reckoning

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REVEALED: The True Inflation Rate

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The Federal Reserve has pursued its 2% inflation target with a monomaniacal determination… like a mad dog worrying a bone.

But it has largely been a juiceless pursuit… “as elusive as sheet lightning playing among June clouds.”

Inflation has bubbled a bit here, gurgled a bit there. But to limited general effect.

Headline inflation (including food and energy) sank from 2.9% last June… to 1.6% in January.

It is true that core inflation — excluding food and energy — runs somewhat warmer at 2.2%, annualized.

But the oven is nonetheless set to low temperature.

Experts dispute the causes — depressed worker wages obtaining from globalization, “secular stagnation,” a global “savings glut,” the astrological misalignment of stars and planets, etc.

Some accounts carry a greater plausibility than others.

We presently incline toward the astrological theory — but we are far from convinced.

Meantime, the February inflation numbers are due out tomorrow.

We expect no sharp departure from existing trends.

And they will likely offer the Federal Reserve additional justification to hold rates steady.

Here we speak of official inflation measures.

But is actual inflation vastly higher?

Yes, the Federal Reserve’s 2% sustained inflation hopelessly eludes it.

Yet assets such as stocks, bonds and real estate have been the scenes of dramatic inflation over the past decade.

The S&P — to take one example — has increased over 300% alone.

And therein hangs an epic tale…

Household net worth in these United States has increased some 73% since the Great Recession.

And Americans’ financial assets totaled over $85 trillion at the end of 2018.

Traditional inflation models exclude these asset prices.

But what if they were included?

The Federal Reserve’s New York headquarters hatched a model for that express purpose:

The “underlying inflation gauge,” or UIG.

This UIG incorporates not only consumer prices — but producer prices, commodity prices and financial asset prices.

Thus it promises a true inflation reading.

Claims the New York Fed:

The UIG proved especially useful in detecting turning points in trend inflation and has shown higher forecast accuracy compared with core inflation measures.

If we gauge inflation by this comprehensive model… the true rate of inflation substantially exceeds the Federal Reserve’s 2% target.

What is the true inflation rate as indicated by the UIG?

Roughly 3%.

From 3.06% in December, it slipped to 2.99% in January.

The true inflation rate nonetheless exceeds the core rate by nearly one full percentage point.

The lesson, plain as eggs:

Inflation lives and thrives. But largely in assets.

And the Federal Reserve could have begun raising interest rates as far back as Bernanke.

Danielle DiMartino Booth, former aide to ex-Dallas Fed President Richard Fisher:

Had the Fed been using a 2% target based on the UIG, [former chairs] Janet Yellen and Ben Bernanke would have been compelled to raise interest rates much earlier than they did. 

Sharpening the point is Joseph G. Carson, former global director of economic research at AllianceBernstein:

The UIG carries [an important message] to policymakers: The obsessive fears of economywide inflation being too low is misguided; monetary stimulus in recent years was not needed.

Obsessive fears of low inflation are misguided? Monetary stimulus in recent years was not needed?

This Carson heaves up strange and dangerous heresies.

The Paul Krugmans of this world will set him down as an agent of the Old Boy himself… and an enemy of civilization.

As well claim that Noah’s Ark did not house all the world’s species in duplicate… that George Washington did not fell the cherry tree…

Or worse — that gold is money.

But what if the UGI is correct?

Were decades of loose monetary policy an epic blunder?

Analyst John Rubino of

The really frustrating part of this story is that had central banks viewed stocks, bonds and real estate as part of the “cost of living” all along, the past three decades’ booms and busts might have been avoided because monetary policy would have tightened several years earlier, moderating each cycle’s volatility.

But if the actual inflation rate runs to 3%… what does it portend for the economy?

When this underlying inflation gauge crossed 3%, Zero Hedge reminds us, recession and bear markets often follow.

At 2.99%, it is currently hard against the 3% threshold.

So here we welcome our old colleague Catch-22 to the proceedings…

If the Federal Reserve resumes rate hikes at this late point, it would likely trigger a major stock market sell-off.

But if it does not raise rates, the true inflation rate will once again exceed the critical 3% mark, inviting recession… and a market sell-off.

Thus the Fed appears damned if it raises rates — and damned if it doesn’t.

But either way… damned.


Brian Maher
Managing editor, The Daily Reckoning

The post REVEALED: The True Inflation Rate appeared first on Daily Reckoning.

Why Inflation Is Here To Stay – The Case For Gold

January 3, 2019 @ 3:52 pm MARK SKOUSEN. Named one of the “Top 20 Living Economists,” Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.     “Fiat money and fiduciary credit are the pillar and post of our age of inflation.” — Hans F. Sennholz “The establishment of central banking removes the checks of bank credit expansion and puts the inflationary engine into operation.” — Murray N. Rothbard When the Federal Reserve was created in December 1913, it had two purposes: (1) To defend the gold standard and the dollar against inflation, and (2) To be a lender of last resort during a banking crisis. It turned out that in the first 30 years of the Fed, it kept its promise more with the #1 goal than the #2 goal. During the economic collapse of 1929-32, the Fed failed miserably to be a lender of … Continue reading

Credit Card “DECLINED” Notice — And 3 Stocks So It Never Happens Again

This post Credit Card “DECLINED” Notice — And 3 Stocks So It Never Happens Again appeared first on Daily Reckoning.

“Sorry, your card was declined.”

What the….!?!?

I was at the hospital cafeteria picking up some food for my little man who broke his arm this weekend. And for some reason my card wouldn’t go through. Was I really out of money?

The holidays can be stressful trying to make sure you cross everyone off on your shopping list. And then if you throw in some unexpected expenses like a trip to the emergency room, the stress can affect your finances!

Thankfully in my case, I just used the wrong pin for my debit card. But the experience made me think about how many families are spending money on holiday shopping this season.

More importantly, I started thinking about how you as an investor can protect your wealth and start cashing in on this year’s holiday spending.

Today, I want to show you three reasons why holiday shopping should be stronger than ever this year. And then we’ll take a look at three different ways to play this profitable trend.

So let’s get started!

Consumers Have More Reasons to Spend

Over the past year, we’ve talked a lot about the American “wealth effect.” Thanks to a strong job market, people have more money to spend, driving retail sales higher.

But in addition to that ongoing force, there are three additional reasons why shopping should be especially strong this year.

The first is tied to another trend we’ve been watching: the decline in oil prices.

Extra supplies of oil have been hitting the market driving oil prices lower. This means gasoline prices have also been dropping. And with less money being spent at the pump, consumers have more money left from every single paycheck. That money will come in handy when it’s time to buy those last minute holiday gifts!

A second reason shopping should pick up is low credit card debt.

Heading into the holiday season, consumers have been carrying lower credit card balances. That’s a smart financial move to keep from paying those awful credit card interest rates.

But knowing human nature, many shoppers will opt to spend more during this season, even if it means taking advantage of those credit limits. With more room to spend money on credit, we can expect to see higher holiday sales this year.

One final reason shopping should pick up this year is thanks to less inflation.

Inflation levels have been low over the past several years. And for us as shoppers, that means our money will go farther. I don’t know about you, but if I can still buy great gifts without paying unreasonable prices, I’ll definitely be in more of a buying mood.

Add these three drivers together, and it’s clear that this is going to be a season with plenty of spending here in the U.S.

But how do we take advantage of all of this spending?

I’m glad you asked!

Three Areas for Investors to Cash in on Spending

An obvious answer to how we profit from higher spending is by owning retail stocks.

But in today’s volatile market, you have to be very discerning with what you buy. After all, while retailers have reported strong revenues, some retail stocks have been moving lower alongside the broad market.

That gives us a chance to buy at a discount. But you’ll want to make sure you’re buying shares of companies poised to do very well this year.

Here are some great areas to start shopping for investment opportunities.

Maybe I’m biased because I have three teenage daughters. But I’ve been watching athletic apparel companies very closely this year. Stocks like Under Armour (UAA), Lululemon Athletica (LULU) and Columbia Sportswear (COLM) should be in great shape to move higher as sales beat expectations and investors jump in.

In some cases (like with LULU), the market pullback has given you a great opportunity to buy stocks that are growing, while paying a discount price. (Who doesn’t like a discount during the holidays!)

A second retail area to keep tabs on is the restaurant industry. Some of my favorite memories with my family have taken place going out to eat together. And with the culture in America getting busier — coupled with extra money to spend — it’s natural for more families to go out to eat.

A few attractive stocks in this area include Chipotle Mexican Grill (CMG), Cracker Barrel (CBRL) and Brinker International (EAT). When you hear Chipotle, you might think about the E. coli issues that they’ve had in the past. But the company has made headway in preventing issues like this from coming up again. And Chipotle’s commitment to fresh organic food should attract more socially conscious diners over time.

A final retail area to keep tabs on is the discount retail category. I’m talking about big stores that offer great deals like Walmart Stores (WMT), BJ’s Wholesale Club (BJ) and Costco (COST).

Even though consumers have more money to spend, there are still many shoppers (myself included) who want to make every dollar stretch. Stores that are famous for offering good products at discount prices will continue to grow revenue this holiday season.

And heck, you can probably make a profit from Costco based solely on the fact that I shop for our family of 9 there every week!

So there you have it… Three ways to profit from higher holiday spending in 2018.

I hope you’re enjoying this holiday season and remembering that while building our wealth is important, cash is only a tool to help us have more of an ability to focus on the things that really matter — like friends, family, and helping those that are less fortunate than ourselves.

Happy Holidays!

Here’s to growing and protecting your wealth!

Zach Scheidt

Zach Scheidt
Editor, The Daily Edge
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The post Credit Card “DECLINED” Notice — And 3 Stocks So It Never Happens Again appeared first on Daily Reckoning.

Global Inflation May Drive Gold to ‘$1400-$1500 This Year’

by Soren K. 29/03/2017 10:48 AM Global Inflation May Drive Gold to ‘$1400-$1500 This Year’ It is refreshing when a fund manager discusses their opinion before completely loading up. This speaks of confidence in their view, integrity in theri words, and a long view that is not worried about siggles i nthe day to day events. Incrementum AG’s MP Ron Stoeferle is such a person. We’re now seeing a pick-up in inflation all across the globe. Incrementum AG says that Gold ‘may be in the early stages of a [bigger] bull market’. The drivers behind this are negative real interest rates as a byproduct of inflation. Prices may climb to $1,400 to $1,500 an ounce this year, said Ronald-Peter Stoeferle, managing partner at the Liechtenstein-based company, which oversees 100 million Swiss francs ($101.5 million). Incrementum on What they Will Buy “For the short term, it’s in a bit of a technical no-man’s land, we … Continue reading