The Economy Guy

Stagflation Anyone?

So, I will divert your attention to a way to turn a Stagflation into a fortune.  Let me start by saying that I am NOT recommending this for anyone to actually do.  It involves very risky investments, and you can lose more than your shirt.  In Stagflation the Fed pushes short term rates (by lowering the Fed Funds rate) down, and inflationary pressures push the long term rates up.  So you get a “steeper” curve.  If you plot treasury interest rates vs. the term (years) of the bond, you should get a curve that increase with increased term.  In a Stagflation, that curve gets “steeper.”

How do you make money???  You bet that the curve will get “steeper.”  I won’t bore you on how to make that bet – as there are a lot of “professionals” out there more than willing to help you gamble with your life savings.

Today’s News

Over the weekend, the Iranian Revolutionary Guard drove your little putt-putt boats directly at the US Navy.  The US Navy was cruising along with a cruiser, frigate and destroyer.  Now, the US Navy doesn’t take kindly to people playing “chicken” in international waters.  The Iranians went beyond playing “chicken”, they also broadcast they were going to sink the US Navy ships.  Standard “rules of engagement” when we aren’t at war would make the US Navy hold back from immediately launching their lethal force.  However, I am positive they gave the Iranians some very “strongly worded warnings.”  The papers said the Iranians turned back just before the US Navy was about to open fire.  These types of provocations are normal and natural between two “not-so-friendly” nations.  The US used to harass the Russians in the “good ole days,” and vice versa.

This is a great example of how a nice, calm weekend could turn out to be an international disaster.

Would you like to move to England??

Some hot-shot Oxford Economics consultancy stated that living standards in Britain are set to rise above those in America for the first time since the 19th Century.  What was the measure of “living standard” you ask?  It was the gross domestic product (GDP) per capita.  It predicts that the GDP/head will be $47,000 in Britain, and only $46,500 in the USA.

What a wonderful example of how to make something as nebulous as “living standard” into an absolute measure.  What moves the measurement more than anything?  It is the exchange rate between the US and the UK.  It moved dramatically over the past few years!!!!  Do you think that the “living standard” moved as dramatically over the past few years????  What a joke.  This is only meaningful is you really intend to move to England, or an Englishwoman intends to move to the USA.