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Is this in our future for the US dollar? 

With inflation the worst in 4 decades, we look for reasons why prices are skyrocketing. Economist Milton Friedman said “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output”.

Put simply, increase the currency in an economy faster than the total output of goods and services increases and inflation will rise. The more imbalance of currency to production, the higher the inflation.

Washington for decades seemingly discounts Friedman’s theory. It’s no surprise to anyone that freshly minted money has poured out of Washington’s money conduit, the Federal Reserve, with the most egregious money creation occurring in the last 2 years or so. The more than generous handouts were an attempt to stave off the detrimental effects of CoVid and its subsequent worldwide shutdowns by governments everywhere.

Much of the blame coming out of Washington points the inflation finger at the Russian/Ukrainian conflict which has pinched down the supply lines of many commodities. Although there is little doubt the war has constrained supply, some argue that much of the inflation follows along the lines of Friedman’s hypothesis.

After all, Friedman was no dummy. He was fully aware of supply side effects on prices, yet if one rereads his inflation hypothesis, he unequivocally points the finger exclusively at monetary creation as the sole cause of inflation.

There are arguments stating worldwide economies cannot simply be shut down almost entirely for a year or more and then turned back on like a light switch. Supply conduits are complexed systems. Once halted, it takes months to start them up again and even more time to get them functioning to the levels they were prior to the shutdowns.

No doubt Friedman never imagined a total stoppage to the entire world’s workforce as was witnessed during CoVid, and one wonders what Friedman would have to say as it pertains to inflation. We will never know if he would have adjusted his exclusive claim that money creation is the sole source of a general increase in prices.

That said, there is little argument among scholars that the massive money creation that was bequeathed on individuals and businesses in the last two years has played a large part in the inflation we are now seeing. The total money supply in the U.S. was increased by 40% or so in the last two years. This is without precedent.

That said, there is still little mention in our political hallways that at least acknowledge that massive government spending is contributing to our record inflationary rates we are now seeing.

To validate that one, look no further than to the State of California who will soon be sending out yet more checks to its residents to help offset the rising costs consumers are struggling with. The irony, at least to those that believe Friedman’s hypotheses on inflation is correct, is that California is printing even more money to counteract the previous effects of previous money printing.  

Sounds like typical government reasoning to this analyst.

“Watching the markets so you don’t have to”

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, SDSU, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. 530-559-1214

(530) 559-1214

There is a reason

Losing one’s income can be devastating. Single income families are always teetering on the brink. With but a single breadwinner, family members who are the source of that income may feel a tremendous amount of pressure. Should the breadwinner lose his or her job, the family’s financial picture can suddenly turn ominous if other resources are not available like savings, retirement plans or extended family emergency assistance

During my times of being a financial advisor, I see financial snapshots that can scare the hell out of me. By nature, I am conservative guy, both in my investing and my operation of the family budget. Although the wife handles the bill paying, I handle the income side of things and am always scanning our financial picture with unnecessary foreboding.

Being somewhat of a nervous nelly when it comes to evaluating our finances, money in and money out, and our liabilities, I am always thinking worst case scenarios. As such, my brain is always thinking of ways not only to streamline expenditures, but to mainline our income streams.

Long ago, I knew that working for someone else put us at risk of job loss which essentially was the decision of someone else. That began the search for ways to be my own boss and eliminate the risk of having a bad hair day or telling the wrong joke at work and subsequently finding a pink slip in my inbox.

For my family’s sake, and for my sanity, I ventured out on my own very early on.

Right out of college I started selling houses, with a side job of selling cars. I also exercised my knowledge of the markets (B.A. in economics 1979) and began my career in the markets to supplement my income. Soon after I started an engineering firm, building off a full time job as an engineer working for someone else early one, then quitting and starting the firm.

Although maddening at times with the amount of work I had to put in to maintain my handful of endeavors, I found the multiple sources of income from my various endeavors not only gave me a sense of accomplishment, but provided multiple sources of income as well.

The experience showed me the key to success which is to hard work and put in the necessary long hours to grow the businesses.

Fast forward to today and I not only still have the engineering firm, but also a financial career, an insurance and annuity company and a successful media company.

This provides me with the basis of what I deem necessary to secure ones ongoing financial viability which is to have multiple sources of income.

That said, during years of scrutinizing other peoples finances, it’s amazing how many peoples financial snapshot gives me the willys.

For instance, during the real estate blow up in 2008, I met many a family that had only one breadwinner yet had bought big houses stuffed with big toys like boats, multiple cars, vacation homes and you name it.

Other investors owned multiple rentals, and although rentals can be a great source of income, they can also drag you down into the depths of bankruptcy should tenants start to experience financial hardship and stop paying the rent.

For instance, who would have forecasted a rental moratorium such as what we had during CoVid.

I would then also think “what happens if this person losses his or her job?”

Although many thrive and survive on single incomes, many others fall into the pit of hardship, or worse, into the hell that is a bankruptcy if a job is lost.

During times of economic prosperity, single incomes can be enough to provide the necessary finances that a family needs to prosper. But in times of economic distress such as 2008/09, the CoVid crisis or today’s inflationary environment, the gears of debt can crater a family’s financial future in a hurry should the single income disappear in a job layoff.

In conclusion, although some might not be able to work for themselves for a variety of reasons, securing additional sources of income through whatever mechanisms might be available and taking a hard look at expenditures and one’s financial exposures can go a long way in keeping their monetary viability intact.

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