Economic Insights on Markets and Investing | Economic Prism Part 37

One prominent issue in legislative processes is their overcomplexity, often stemming from a lack of transparent governance.

A straightforward and honest approach to managing the debt and debt ceiling is to maintain a budget surplus, using any excess funds to mitigate the existing debt. Unfortunately, the political climate renders this impossible.

Unless a significant shift occurs, the Senate is likely to soon approve the debt ceiling bill. By the time you read this, it may have already happened. Is that a cause for celebration?

If you value limited government, individual freedom, and a hopeful future for coming generations, then you should be concerned. Elevating the debt ceiling stands in stark contrast to those principles, presenting a direct threat to your ideals and lifestyle.

Regrettably, many Americans appear indifferent to the debt ceiling increase. They are too preoccupied with accumulating their own consumer debts to pay attention to the actions in Washington. Much like the federal government, when they hit financial limits and max out their credit cards, they simply borrow more. For them, tomorrow seems never-ending. Continue reading →

How do we effectively manage risk and navigate through uncertainties? Is trying to solve this conundrum simply a futile endeavor?

Recently, the Popocatépetl volcano erupted, showcasing an awe-inspiring display of nature’s power—billowing smoke, ash, and 1,500-foot lava fountains erupted from its peak.

Locally known as El Popo, this volcano lies about 45 miles southeast of Mexico City, with approximately 25 million residents living within a 60-mile radius.

The eruption prompted the Mexican government to raise the alert level to “yellow phase three,” indicating that residents should be ready for evacuation.

Fortunately, the volcanic activity may subside soon—at least for now. However, in reality, there’s no efficient means to evacuate 25 million individuals from a single region.

For instance, during the panic of the 1992 Los Angeles riots, residents striving to escape found the highways jammed. Opportunistic vendors walked through the stalled traffic, selling bottled water and canned sodas at exorbitant prices.

These parched evacuees had no choice; they were trapped and had to pay up. The escape route from the LA Basin had effectively disappeared. Continue reading →

Do you consider yourself a diligent worker who saves and invests with the goal of building lasting wealth?

If so, you’ve probably noticed a disconnect between conventional economic wisdom regarding financial markets and your real-life experiences. It seems there’s more at play than simply financial figures.

The core aspect of economics revolves around prices—how they are set and how consumers respond. This interaction determines how prices adjust to the forces of supply and demand.

Through their experiences, buyers learn what constitutes a good deal and adapt their purchasing behaviors accordingly. Sellers, in turn, experiment to find the ideal price point that maximizes their profit margins.

For example, when airfares drop, a father might opt for a long-distance flight to an exotic vacation destination. Conversely, when ticket prices soar, he may choose a more economical road trip and spend time camping in a national park. Continue reading →

America’s economic environment is currently overwhelmed with numerous challenges, including consumer price inflation, interest rates, GDP fluctuations, and rising unemployment. Here, we will delve into the troubling realities we face.

To start, consumer price inflation continues to exceed the Federal Reserve’s target of 2 percent. This week, the Bureau of Labor Statistics reported that inflation, according to the consumer price index, is ascending at an annual rate of 4.9 percent.

Even when using the Fed’s preferred inflation measure, the personal consumption expenditures price index, consumer prices are rising at 4.2 percent annually—still more than double the Fed’s desired limit.

Additionally, short-term interest rates have risen significantly compared to the last 15 years. Transitioning from 0 percent to over 5 percent in just 18 months has had profound and adverse effects on credit markets. As the former managers of Silicon Valley Bank recently learned, what seemed like secure Treasuries can rapidly turn into risky assets. Continue reading →