With recent news overwhelmed by the financial difficulties of US state and national budget deficits, along with the continued financial difficulties in Europe there is a renewed focus on the impact of debt on national wellbeing.  This is especially important because most of the developed world is not far behind the major problems of these European nations.  The most important thing to understand about debt is exactly what it is, and by extension, what it is not.
What’s the Deal with Debt?
Fundamentally, debt is a financial magnifying glass.  It will amplify …

Most people have received a wide variety of financial advice over the years.  There is a particular brand of advice, supposedly dispensed by a semi-fictitious secondary parental character that has become particularly widespread.  This
philosophy contains many key points, some of which have validity and merit.
However, one of the key things that all investors need to consider whether the advice they are receiving is a fact, or a fallacy.  The unfortunate truth is that much of the advice being presented by popular authors and speakers as financial facts are actually financial …

Recent financial news has been dominated by the initial public offering of Facebook.  Morgan Stanley underwrote the initial offering last week of 400 million shares at an initial price of $38 per share.  This served as one of the most publicized IPO’s in the history of the stock market.  At $38 per share, this created an implicit market capitalization of $104B for Facebook.
This level of valuation is approximately 107 times earnings.  For comparison, Apple’s P/E is approximately 13, and the S&P 500 index is valued at roughly 15 times earnings.  …

Recent news about the advent of rapidly rising gas prices has brought the subject of energy into the forefront of public opinion.  Unfortunately, the majority of the discourse occurs over typical “political football” issues such as profits from oil companies and proposals for higher taxes.  Recently, the topic has shifted toward the topic of exporting domestically produced oil to other countries.  Naturally, this is being portrayed as unpatriotic greed on the part of the oil companies who are subverting the national interest of the United States for their own selfish …

A persistent situation has developed among the current political and economic climate that forebodes of large potential problems in the future.  This situation finds its source in a phenomenon that we refer to as “Evading the Obvious.”A  The way this effect manifests itself is a stalwart refusal to recognize and adapt to the economic realities.  This issue is modestly problematic when constrained to people and absolutely catastrophic when employed by the political authorities.
The reason for this is because people are limited in the extent to which they can impact the …

In a press release from the Federal Open Market Committee released on September 21 indicates that by June of 2012, the Federal Reserve is going to simultaneously sell $400B worth of shorter-term securities and purchase $400B of longer-term securities.  Some refer to this decision as “operation twist.” The expected effect of this maneuver will be to place downward pressure on longer-term interest rates.  The Federal Reserve is expecting that the average maturity of bonds in their portfolio will rise from 75 months currently to approximately 100 months by the …

The recent rise of gold prices and volatility within the economy has begun to challenge the notion of wealth, productivity, and output that many people hold in their minds.  The typical situation for most people, is that they think of wealth as being measured in money.  For people like Ben Bernanke, money means currency.  For people like Bill Bonner, money means gold.  However, in both cases, wealth is something much deeper.
Wealth as Money
It is not surprising that most people view wealth and money as being the same thing.  After all, …

One of the most famous institutions in American cultural history during the 20th century is the Circus.  During the early portion of the 20th century, many Circuses moved from one small town to another, setting up a “Big Top” for their main show, and sponsoring side-shows, performance, and greasy food alongside carnival games in an area called the midway.  Traditionally, these carnival games were “difficult” (meaning that they were constructed so that you had an extremely low chance of winning) and required many attempts before the desired prizes were won.
When …

The recent release of an S-1 Document by Groupon for the purpose of a public stock offering has brought the failures of its business model into the light.  At the end of 2010, Groupon refused a reported $6 billion dollar buyout offer from Google.  Their public stock offering is for $750 million dollars, which is significantly less than what was offered to them by Google and will be insufficient to finance their current rate of operating losses for more than another couple of years.  In retrospect, it appears that refusing …

One of the ideas that have been advanced repeatedly during the recent economic crisis, recession, and prolonged stagnated recovery is the notion of “stimulus” as a way to revive the economy.  This strategy is based on Keynesian economic theory, and is predicated on the notion that when an economy drops into recession, the fundamental problem is a shortage of people consuming.  The solution offered by Keynesian economist is intervention by government entities through monetary expansion, and spending to fill the perceived gap in spending.  The fundamental underpinning of Keynesian theory …