Before I start an admission is in order. I am not a academically trained economist. My credentials are based on a 30 year self-taught education. My original rationale was performing large corporate consulting on strategy and dealing with internal economists - I had to hold my own.
Now my motive is based on 5 startups with the last one, this one, and how to navigate poor economic policy (as well as doing this series on economics). That has been the reason for this series - business owners must able to tell truth from BS and have a plan to use that knowledge to their advantage.
Today, like several weeks ago, we are going to take the pulse of the US and global economies.
EPISODE 41: WHAT IS INFLATION?
Let's start with a conversation on inflation because there are several definitions that occasionally turns into a tower of babel. The following is from Investopedia and consider the most more accurate:
Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.
This episode will focus in the loss of purchasing power, not an increase in prices because of supply and demand pressures.
EPISODE 42: WHAT DOES IT LOOK LIKE?
5 types of Inflation:
EPISODE 43: HOW TO STOP IT?
Here is the current trap for US politicians and policy makers - no viable painless solutions. The question is pain now or pain later, both severe and at the moment neither possible.
(MS) Mandatory Spending = $4.1T + (SD) Servicing the Debt = $305B for a total of $4.4T without any discretionary spending like Defense, Education, etc. The government estimates $4.2T in revenue. The $305B is based on 1.5% interest rate. Historical Average of 5.5% = $440B or $4.6T in mandatory payments.
2022 Federal Budget = $6.011 T
US GDP = $20.5T, US Debt = $28.4T (139%)
EPISODE 44: WHAT DOES 2022 LOOK LIKE GLOBALLY
Two issues globally to consider: increasing prices to consumers for imported goods and the impact on exchange rates of a devalued currency.
The United States is the #1 net importer of goods representing 15% of the world trade. Countries at the greatest risk:
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