divorce settlements and family solicitors

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Divorce Settlements And Family Solicitors

Divorce - Sorting Out the Finance

Click To EnlargeYou have been an inspiration and helped to wake me up from this nightmare. Words cannottell you how gra....Mike (Jan 2009)... I am now divorced. thank you so much for your amazing advice throughout especiallydoing things at s....Ian (December 2010)

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Divorce is said to be one of the most traumatic events in a persons life, along withbereavement and moving house. The divorce process itself need not be a stressful one. It canbe however if you misunderstand what exactly is involved in obtaining a divorce and whatthis really means in terms of any financial settlement. Many believe that a divorceautomatically includes the settlement of financial matters and for this reason some peopledecide not to obtain a Final Order with regards to financial matters.

Anyone concerned about the financial aspects of their relationship will need specialist legaladvice. Woolley & Co offer an initial free half hourtelephone assessment to discuss the keyissues.

Why don't people sort out the finances?

Generally speaking people will give one of the following 5 reasons for not sorting out thefinances at the same time as they obtain a divorce, but to be honest none of these reasons aregood ones:


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1. We have no assets so why should we pay someone to obtain an order merelydismissing all our claims.

2. We will sort them out between ourselves we do not need somebody else to tell ushow to sort out our financial arrangements as we are still amicable.

3. I have had a quote from a solicitor to sort out financial matters and I cant afford it.4. We have agreed the matter between ourselves and therefore see no reason to involve

anybody else.5. We have decided that we have both had enough stress going through the divorce. We

are going to let matters rest for a little while and come back to settling our financialmatters perhaps when the children are older.

The Reasons you Shouldn't Delay

Unfortunately anyone thinking that matters will get easier as time goes by is sadly mistaken.

There are any number of circumstances that could create problems if this approach is taken.

For example, if one party receives an inheritance or wins the lottery after the divorce and no

Final Order dismissing claims has been obtained the other party may still have a claim on that

new money. Even if they dont have a claim, the cost of defending their action may be morethan if matters had been dealt with alongside the divorce.

If the parties have no assets then matters are relatively simple to resolve by agreement. The

parties can enter into a Consent Order dismissing all financial claims they have against each

other by virtue of their marriage to one another. There is no reason therefore to avoid sorting

it out.

Likewise, if you have already reached an agreement between yourselves then embody it in a

Consent Order. Any agreement you reach between yourselves does not become legally

binding unless it is in a Court Order. Before an Order is made one party could go back ontheir word and although you can attempt to prove that you had an agreement to the court, the

cost of doing so, is likely to be significantly higher than if you had had the matter dealt with

appropriate at the time of the agreement.

Property

Most people realise that if they sell a property that is not their main residence there will be

capital gains tax issues. What people fail to appreciate is that the Inland Revenue will only

give you a period (the current tax year) in which you obtain your divorce before one party

may be liable for capital gains tax. Therefore, by delaying matters, you may incur a tax charge

which can be avoided.

Child Residence

Waiting for the children to come of age will change the position of the person who lives with

the children. That is to say that their needs will change, and therefore financially they may be

in a less well off position to argue than they would have been had they settled when the

children were younger.


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Valuation

The question of what each asset is worth can be very difficult. It is an issue that must be

resolved before an agreement can be reached. Timing can make all the difference. If an

agreement cannot be reached the court will require up to date values of all assets at the time

that the court is considering the settlement. This could be some time after the divorce. The

court will not use values at the time that you separated if this was sometime ago. This canseriously disadvantage you if you have been paying for a property for sometime after a

divorce as the party who has not been paying may well benefit from the payments you have

made and visa versa. Obviously each party will want the valuation that is most advantageous

to them. This in itself may cause arguments. You could be disadvantaged significantly by

waiting.

You may have read about the case of footballer, Ray Parlour. His ex-wife was awarded one

third of his future earnings in a ruling which overturned conventional divorce law thinking.

This can happen in family law; all of a sudden a case comes along and changes everything.

No-one can guess what will happen to the law in the future. Your case will be governed by the

legislation and case law which is current at the time.

If your spouse does not wish to finalise financial matters, ask yourself why. If everything is

amicable and agreed then why not have it embodied in a Court Order? Are they really hoping

that you will get back together, or do they still wish to keep some degree of control over you?

If you have obtained a divorce, bring your financial relationship and obligations to an end too

and get a Final (Ancillary Relief) Order.

If you are the respondent within the divorce proceedings and you re-marry, you will be barred

from making any financial application in the future. This may mean that your ex-spouse could

retain matrimonial assets if they are in their sole name and you will not be able to make aclaim for financial relief. You may be able to make a different application other than one

under The Matrimonial Causes Act but you are likely to recover less, if successful, than you

would have been able to under The Matrimonial Causes Act. No other legislation gives the

court such wide powers to deal with a persons assets.

Our advice is, if you have decided to divorce or you are divorced; see to it that all matters are

properly concluded by obtaining a Court Order either by agreement or by a decision of the

Court bringing your joint financial relationship to an end. It may seem costly now, but failing

to deal with matters properly at the time could cost you a lot more in the future.

Family Mediation: using mediation in your

divorce how it works

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Click To EnlargeFamily mediation is a way of resolving disputes when a couple divorce or separate.

Mediation is only necessary where the couple cannot come to an agreement, either bythemselves or with the help of a family law solicitor.

Family mediation is often very useful in helping couples come to an agreement about the

parenting of their children, who they will live with (residence) and when the other parent will

see them (contact).

Family mediation is not compulsory, although from 6th April 2011 if a couple are unable to

agree about the split of their finances at or after divorce, or if they cannot agree to

arrangements for their children they will be asked to attend a Family Mediation Information

and Assessment Meeting to find out whether they might benefit from mediation.

Family mediation must be conducted by a suitably trained and qualified family mediator.

They will need to have completed a recognised training course and conducted a certain

amount of family mediation sessions. They should be used to working alongside family

solicitors and taking referrals from family law firms, to help their clients.

In Family Mediation the mediator can give information about law but cannot give any legal

advice about what you can or should do. An agreement reached in a mediation session is not

legally binding until you have had it drawn up as an official agreement by a family lawyer.

Yourfamily solicitor can help you before mediation starts, in between sessions and when an

agreement has been reached. It is essential that you check with your family solicitor that

whatever agreement you have reached is fair to you. This is especially important when you

are trying to reach a financial settlement.

The family lawyers at Woolley & Co, Solicitors all work alongside family mediators to


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ensure their clients receive the best possible support through their divorce or separation. Talk

to your family lawyer about mediation.

In a divorce or relationship break-up, it can be the children whosuffer more than anyone.

The life they have known is changed forever, there is oftenupheaval at home and it can have a lasting effect on them.

Deciding how best to look after any children, therefore, shouldbe one of the over-riding priorities for any couple going theirseparate ways.

This involves minimising the impact upon the childs daily life where possible, ensuring theyare provided for financially and making sure they continue to benefit from being with both

parents wherever possible.

The law is focused on the rights of the children, rather than those of the parents. You shouldconsider what is in the best interests of your children and try and put aside any personalfeelings you have for your partner.

What the law says

If you were married, each party hasparental responsibility and sois entitled to certain things, like knowing where the child isliving. They can also apply to the court over issues ofcontact orresidence for their children.

In most instances absent parents most commonly fathers have the right to regularly seetheir children, know where they are living and have access to certain information about theirupbringing, such as how they are doing at school.

If a couple split up and were not married, only the mother has automaticparentalresponsibility. The father may also have parental responsibility, depending on when the childwas born and if his name is on the birth certificate.

Step-parents also have a certain expectation of being involved in the lives of the children oftheir new partners. Their rights and responsibilities though are limited. More details are given

in the section Step-Parents Rights and Responsibilities.

Parental Responsibility

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Click To EnlargeParental responsibility is defined as all the rights, duties, powers, responsibilities andauthority which, by law, a parent of a child has in relation to the child and their property.

That means, if you have parental responsibility, you are recognised in the eyes of the law ashaving all the legal powers to make appropriate decisions in relation to the upbringing of yourchild.

It is also important to note that if you have parental responsibility, this does give you the legalright to see your child but DOES NOT guarantee contact. For more detail on this see ourarticle on Parental responsibility and contact orders the same thing?

On a practical level it will, among other things, allow you to contact your childs GP to obtainor discuss medical treatment for your child, and to play an active role in your childseducation, giving you access to school reports and parents evenings.

A mother automatically has parental responsibility, as does a married father irrespective ofwhether the marriage to the mother occurred before or after the birth of the child. As from the1 December 2003, unmarried fathers of children whose birth is registered on or after this date,

provided they are named on the birth certificate of the child, also have parental responsibility.

Fathers of children whose birth is registered before 1 December 2003 who havent acquiredparental responsibility by virtue of marriage, or unmarried fathers of children whose birth isregistered after 1 December 2003 and are not named as father on the childs birth certificate,

do not automatically have parental responsibility. This means that they are not recognised inlaw as having all the responsibilities relating to a child, such as being able to give permissionfor medical treatment or being entitled to updates on a childs progress at school.

How to obtain parental responsibilityMany people are shocked and hurt to find that, if parents are unmarried, it is only the motherwho has automatic rights with regard to their children.


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A father not married to the mother can get this if the two of them make an agreement called aParental Responsibility Agreement, or by court order. Without parental responsibility, a fatherhas no right, for instance, to consent to medical treatment or be involved in the childseducation.

So, if the couple split up, the mother automatically has the right to have the children with her

where she wishes and the father has no say at all, unless he has an agreement or court order.

Parental responsibility can be gained by:

marrying the mother of your child entering into a voluntary Parental Responsibility Agreement with the mother obtaining a Parental Responsibility Order from the court.

Before the court will make an order granting parental responsibility, a father would need toestablish that there is a degree of commitment to the child, a degree of attachment exists

between the child and the father, and that the application is being made purely in the interestsof the childs welfare.

Once you have parental responsibility, it must be exercised appropriately and jointly with themother of the child.

It is also important to note that once you have parental responsibility, this does give you thelegal right to see your child but DOES NOT guarantee contact. For more detail on this see ourarticle on Parental responsibility and contact orders the same thing.

Parental responsibility comes to an end when the child attains the age of 18, years or earlier ifa court order is made.

FAMILY SOLICITORS CROYDON

Family law is the term applied to the laws and rules developed regarding family relationships. This is the body of lawthat governs domestic issues. Family law has become a major component of the U.K. legal system in the last few years.

Family law is an area of the law that encompasses many different types of legal cases. Among them Divorce is theending of a marriage ordered by a court. Marriage is not ended until the court signs the final orders.

Marriage can end in a sudden explosion or die slowly over many years. Marriage is irretrievably broken if one of thespouses says it is. Divorce is a big issue that is not an easy or impulsive decision.

Divorce settlement cases are complicated and tricky at times, even for seasoned Family Law Solicitors. Divorce is a greatloss and a crisis which has a huge impact on the lives of everyone involved. If you have experienced, or areexperiencing divorce, my heart goes out to you.

The attorneys at Solicitors Croydon handle divorce, child custody, child support, divorce mediation and family law cases.We focus on providing practical and effective solutions for all of our clients facing a separation or divorce. What isDivorce law? This practice area is a subset of Family Law and is dictated by UK laws, statutes, rules, codes and commonlaw. Solicitors Croydon and its divorce lawyers in Croydon have been providing peace of mind solutions to family lawmatters for years.

Family Law and domestic relations issues concern much more than just laws and legal procedures; emotions play a bigpart on how a case is resolved. Family disputes and irreconcilable differences create a great deal of stress, uncertaintyand confusion. Family disputes can damage your closest relationships and affect many lives outside the family. Both thehusband and wife meet with an attorney who specializes in family law and is also certified as a mediator, as are all ofthe lawyers at Solicitors Croydon.


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Marriage is SUPPOSED to be a covenant that never ends, but the reality we live in is that some marriages do end.Marriage is a civil contract that the state has an interest in preserving because it provides benefits both to children andto society. Divorce, which legally ends a marriage, is often a highly emotional and stressful process for everyoneinvolved. A divorce will bring about significant changes in your life.

Children need to know that parents recognize the impact of divorce on children's lives. Child may be barred from seeingher non-biological parent, to her great detriment. Children often believe they have caused the conflict between their

parents. Children's understanding of parental divorce depends on their developmental stage. In the life of a child, thedivorce of his or her parents can be one of the most traumatic events they have yet encountered.Working amicably with your ex after a separation or divorce can feel like a tall order, but you have the power to putyour own feelings aside and do what's best for your kids.

Family Solicitors Croydon can help the parties understand the requirements for an irreconcilable differences divorce. Onearea of family law in which many clients seek the help of an attorney is divorce. Divorce and family law cases are alsooften a long process that is both emotionally and psychologically draining. Solicitors Croydon advises and representspersons in cases involving dissolution of marriage, community property characterization problems, child support andcustody issues, divorce taxation problems, alimony, paternity actions, and other family law issues.

Separation agreements often carry great weight with the courts in determining the final divorce settlement. Althoughseparation provides a "faultless" ground for divorce, fault may still be an issue when spousal support (alimony) is beingsought or can be a factor in determining the division of marital property. Family Law is closely related to Housing Law.

Let Family Law Solicitors Croydon help you resolve your case in a peaceful and civil manner. Our caring team ofsolicitors is here to help.


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Gold Prices Rising Due To Inflation

Gold and Inflation, Again

Posted on August 23, 2011 | 6 Comments

Question: When the relative price of gold increases in the short run, is this a sign of inflation ordeflation/disinflation?

This is somewhat of a trick question because either answer is possible. (Doesnt Scott Sumneralways say, dont reason from a price change?) The price of gold in and of itself tells us verylittle. One must look at other economic indicators to make any sort of prediction.

A number of individuals have claimed that the recent rise in the price of gold is a sign of a cominginflation. However, this doesnt square with the numbers or the gold market. Over the longerterm, gold prices have been rising due to the factors of supply and demand. Over the shorter term,the current increase in the price of gold is consistent with deflationary/disinflationary headwinds as economic theory predicts.

In the last five years, the price of gold has risen by nearly 200%. Yet, if we look at the price level(as measured by the PCE price index), we see that it has risen only 12% over the past five years.

So what can explain the run-up in gold prices? I talked about this back in December 2009 and the

analysis holds true today:

Lets examine the characteristics of the gold market. Gold has three uses on the demand side: (1)an investment hedge against inflation, (2) jewelry, and (3) industrial uses. On the supply side,there is an existing (stock) supply and a flow supply generated by mining. Changes in the stocksupply of gold are most often the result of central bank behavior.

To argue that the increase in the price of gold is the result of monetary policy, one would have tobe able to show that policy is loose and that the increase in the price of gold is being driven by


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investment demand. Readers know that I dont think that monetary policy is too loose. I will notrehash that argument. However, lets examine the gold market.

Over the last 5 years or so, we have seen the following changes:

Central banks have reduced the amount of gold that they are selling. Gold ETFs have increased the demand by purchasing gold for storage. Gold mining output peaked somewhere around 2001.

Supply declines. Demand increases. Price increases.

When you factor in the substantial increase in demand from India and China, this providesfurther evidence of a secular increase.

Of course, critics might argue that inflation expectations are accelerating the increase in the priceof gold above that secular trend. For example, gold prices have risen 14% this month and 30% inthe last six months. Such short term fluctuations could not be caused by the secular factors listedabove. So doesnt this mean that the recentrun-up in gold prices is due to higher

inflation/inflation expectations? No.

Under a gold standard, a relative increase in the price of gold is deflationary (by definition, sincethe gold price is fixed). An increase in the stock demand for gold causes a corresponding decreasein the demand for consumption goods and the relative price of gold increases (the relative price ofconsumption goods falls). Although the world is clearly no longer on a gold standard, a number ofindividuals as well as central banks are purchasing gold as a safe haven and therefore reducingspending or productive saving (i.e. saving that can be used toward investment).

Moreover, other liquid assets provide similar signals. The yield on the 5-year Treasury has fallen38 basis points since August 1. The yield on the 10-year Treasury has fallen 67 basis points in thesame time frame. This is contrary to what one would predict to coincide with higher inflationexpectations, but consistent with the view that rising prices on Treasuries and the rise in the priceof gold reflect a flight to liquidity and not increasing inflation expectations

Inflation Spurred by Rising Gold PricesDion Bisara & Muhamad Al Azhari | August 31, 2011

Turning to gold: A jeweler arranges rows of goldbracelets at the Pasar Tebet in Jakarta. (JG Photo/Safir Makki)

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Comments462648SonyLaksono12:27pm Sep 2, 2011To Sell your wedding ring or not to sell your wedding ring? That is the question.

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Inflation probably accelerated in August due to Idul Fitri festivities that pushed up prices of consumergoods and services such as gold jewelry, food and transportation.

But economists said that the rise in consumer prices would not be enough to prompt the central bankto raise its key rate.

The consumer price index may have increased 4.74 percent in August from a year earlier, based onthe estimate of five economists surveyed by the Jakarta Globe. The Central Statistics Agency (BPS) isdue to publish its monthly inflation data on Monday.

Inflation had been declining since hitting a peak of 7 percent in January. In July, consumer goods rose4.6 percent, the lowest increase since May 2010, after a 5.54 percent gain in June.

According to BPS data gold jewelry contributed to around 4.5 percent of the increase in the consumerprice index in July. Gold rose 10 percent in August, according to state-controlled gold miner Antam,and as prices soared to record, bullion purchases at Antams counter climbed.

It was odd in August because we saw gold jewelry become the main driver of inflation, rather thanbasic goods, Rusman Heriawan, head of the BPS, said on Wednesday. So far, its the highest solecontributor to inflation.

Anton Gunawan, chief economist at Bank Danamon, shares the same view as Rusman, saying asteady increase in core inflation is due to the rising gold price.

We may have seen a trend of rising demand inflation, money supply and price expectations. Theprice of gold accessories may have risen significantly as well, as the world price of gold hascontinuously risen in August.


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He forecasts inflation at 4.74 percent and core inflation, which excludes volatile food and fuel items, at4.72 percent. In July, core prices rose 4.55 percent.

During Idul Fitri, which marks the end of Ramadan, many Muslims who make up 85 percent of thepopulation of 240 million return home from the cities, and that often pushes up the price of rice,beef, chicken and beans.

Food inflation has fallen to as low as 5.2 percent year-on-year in July but will probably reverse itscourse in August due to the typical Idul Fitri effects, said Gundy Cahyadi, an analyst from OCBC Bankin Singapore.

In fact, rice prices have been trending higher in the past couple of months. The seasonal factorswould only accelerate food prices back to about 8 percent year-on-year in the month. We look toinflation returning to 5.0 percent in August each year, while core inflation may inch higher towards 4.8percent, Gundy said.

Despite rising inflation, analysts think the central bank is unlikely to raise its key interest rate, the BIrate, when it meets Sept. 8 even as other nations have done.

Bank Indonesia last raised the rate in February by a quarter of a percentage point from a record low of6.50 percent. In the past three years the central bank has maintained the spread between its key rateand inflation at about one to two percentage points.

We think that the central bank is unlikely to do anything at this stage. They have made it clear in theprevious statement that slowing global growth momentum is a concern at this point, Gundy said. Headded that inflation will probably fall within the official 4 percent to 6 percent target as the governmentis unlikely to raise fuel prices until next year.

Prakriti Sofat, an economist at Barclays Capital in Singapore, said that the BI rate would stay at thecurrent level in 2011. We came away from our recent trip to Jakarta with a sense that Bank Indonesiawill likely keep the policy rate unchanged at 6.75 percent for the rest of the year versus our previousexpectation of a 25 basis point hike in September, she said.

By Dave Brown Exclusive to Gold Investing News

Gold prices were discussed in a recent interview on BNN with Marcus Grubb, ManagingDirector of Investment for the World Gold Council. Mr. Grubbs investment thesis on gold

price determinants underscores considerable focus on the US, reflecting its economic andfinancial weight and the US dollars role as the major reserve currency for the internationaleconomy. Moving beyond some of the near term solvency problems in the US, globalausterity issues and debt contagion in Europe, a fundamental long run relationship betweenthe price of gold and demand would provide investors with valuable context and insight.Looking forward into the next few decades, the relative position of the US is expected tochange as the economic power and geographical base shifts towards faster growing emergingeconomies, particularly in Asia.

Inflation outlook

Asian markets, most notably China and India, have traditionally long track records of strongdemand for gold, both as a store of wealth and for jewellery. Increasing income and wealthlevels in the region have resulted in sharp increases in gold demand. The potential implicationof this increasing demand is that the price of gold would appreciate faster than the rate of USinflation, generating a positive rate of return. Additionally these countries historically havehigher levels of inflation than demonstrated in developed countries, and the need to protectthe real value of wealth against this may increase demand further.


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As well as rapidly growing demand, the increasing cost of mining may have a significantimpact on the market going forward. With the assumption that all easy sources of gold areexhausted, rising production costs are likely to limit supply if prices fall back too far fromtheir current high levels.

This scenario was exhibited most recently with Barrick Gold Corp. (TSE:ABX). The worlds

biggest gold minerreported strong earnings as the result of surging precious metal prices,improving payback prospects for several massive gold projects that are in development.However, the company said that currency moves, along with higher material, energy andlabor expenses are factors which may lead to decreased production levels. Given thecompetitive nature of the markets, these multiple supply limitations can prove to be catalystsfor gold price appreciation and may result in the value of gold rising, in real terms, over time.

Deflationary case

Any major global financial shock that could plunge most of the world into a period ofdeflation might be compared with the example of Japan in the 1990s. Mr. Grubb suggests awave of sovereign defaults occurring in the peripheral eurozone countries could create

relatively large marginal losses for creditors and corresponding declines in asset values. Inter-linkages in the global financial sector and the prominence of the eurozone would implyinternational exposure to a financial disturbance on any scale.

Under this scenario the price of gold would receive a major initial boost due to the sharp risein financial stress. Combining the stress with a greater monetary loosening would intensifythe effect of a stronger dollar and real interest rate movements into positive territory due todeflation and the initial upward pressure on bond yields resulting from a reduction ingovernment creditworthiness. Meanwhile, as riskier asset classes particularly real estateand equities would underperform, cash and bonds should yield slightly positive returns.

A portfolio managers view

Furthercommentary on current and future gold prices was supported by Frank Holmes, theChief Executive Officer at US Global Investors (NASDAQ:GROW). Mr. Holmes explained,to simplify things for investors . . . there are two demands that are part of this gold equation.One of these is the fear trade, which captures most of the attention of the media of Europe and[North] America, but there is also this love trade. The love trade relates to 50 percent of theworlds population['s] belief in giving gold to the ones they love. Although most of theattribution goes to the fear trade, when you add this fear trade and this love trade, showingup at the same time in this window, we see all time highs in the price of gold.

Inflation, the loss of purchasing power over time, is a consuming subject in a time of global

recession because the level of inflation in an economy determines how far a paycheck will go.

The American Heritage dictionary defines inflation as the persistent increase in prices. Italso defines it as the persistent decline in the purchasing power of money. In other words,inflation is when your dollar can buy less and less every day.

In America, for example, in 1920, it cost an average of twenty-five cents to go to see a movieshow. Today, in 2009, a movie ticket costs an average of seven dollars. Thats inflation, andits eating away at our economy.


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The Causes Of Inflation

Numerous reasons exist for inflation, perhaps even too many to catalog. Generally, however,high interest rates, an increase in taxation, and a new scarcity of a popular product, likegasoline, for example, are considered predominant causative factors.

However, cyclical causes, too, can cause inflation. The cost of running a business causes theprice of its goods and services to increase. This cost, passed on to the consumer, means thatpaychecks dont go as far. Since the employee now asks for increased wages to meet the newprice of living, this again forces the cost of a business to go up. In essence, then, inflation is avicious cyclebecause it perpetuates itself.

Two types of inflation occur in any economy. One is natural inflation and the other is artificialinflation.

Natural inflation is a result of price increase due to a change in supply and demand.If demand outstrips supply, the price of the product will rise in price.

Artificial inflation is a result of a price increase due to an external force. In theUnited States, after the economic stimulus plan, billions of extra dollars were pumpedinto the economy causing even more inflation.

When the supply of money in an economy falls, simply printing more money can drop thevalue of money. The money printed and distributed by the federal bailout, extra money notrelated to demand or supply nor tied down by a gold standard, reduced the value of everydollar.

Germany after World War I is a classic example of how more money pumped into aneconomy reduces the value of money. After the first world war, Germany, faced with $33

billion in war reparations, simply could not produce the money from a dynamic exchange ofgoods and services, the usual way money is generated in an economy.

In desperation, the government printed the money, money that was not backed by a goldstandard. The result was disastrous. Something that cost one mark in 1919 cost 726 billionmarks in 1923. One U.S. cent was worth 42 billion marks!

Sometimes inflation can be a result of both natural and artificial causes. In America, the risingprice of gas is a result of the declining value of the dollar in relation to other nationalcurrencies especially true after we dumped the gold standard. It is also a result of demandfor gasoline exceeding available supply.

Variation In Inflation

Inflation can fluctuate. Prices can go up and down. For example, during summer more fruitsand vegetables can be grown, which results in price dropping, and in winter less fruits andvegetables can be grown, which results in price increasing. However, inflation is measured ona broad range of goods and services and the individual rise and fall of products due to marketforces is not sufficient to cause an alarm. In a mature economy, these fluctuates are usuallysteady over a long time.


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Difficulties In Measuring Inflation

Unfortunately, inflation is not always easy to understand. The result is that it is difficult tomake sound economic decisions. The causes of inflation are not clearly understood becausethere are so many market forces at work at the same timefor example, both the housingmarket and the educational industry show increasing prices despite fluctuating economic

conditions.

In the housing market, demand for houses exceeded the rate at which they were being built,and this caused the price of houses to go up. However, even when many new houses were

built, the price of houses still continued to go up.

In American universities, colleges, and trade schools, the price of tuition has been increasingannually for no discernible reason. The quality of education, the demand for education, andthe supply of learning institutions have been relatively modest in comparison to the big hikein student fees.

Inflation And Mass Human Psychology

Apart from natural inflation, artificial inflation, and everything in between, inflation is alsosubject to mass human psychology.

As perceptions about the value of things change, inflation is affected. Fluctuating humanpsychology can create waves of demand or loss of it in an economy. Sometimes speculatorspanic in the Stock Market and at other times mass hysteria follows a change in politicaldirection. Previously, these collective mood changes, were not as dramatic when currency was

based on the gold standard.

In those days, changes in perception could be tied to something concrete, like the price of

gold coins and the amount of gold available. Nowadays, a rumor, whether well-founded orfickle, is enough to create inflationary changes in an economy.

In addition, besides changes in the national perception about value, international perceptionscan affect inflation. One day, the American dollar can be equal to five francs, the next day itcan be worth three francs, the fluctuation due to policy and attitudinal changes between bothcountries.

Why Inflation Matters

When the rate of inflation is steady, as it has been in the United States over the past 30 years,this does not affect, in any appreciable way, the purchasing power of an employees paycheck.

However, when inflation rises faster than the rate of pay, people feel the crunch. This is mostnoticeable when the paycheck disappears entirely because the company can only stay in

business by hiring less people.

In the past three months of 2009, payroll job losses in America has averaged 135,000 amontha sign of hyperinflation. The value of a currency cannot continue to fall indefinitely.Unchecked inflation is a national crisis.


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This is why you should buy gold coins or even gold bullion. Regardless of how you get it,gold needs to be part of your portfolio. The dollar is doomed. The history of gold says toinvest in gold. You cant afford to wait.

Gold is neither a risk nor safe haven asset. Rather it is a currency hedge that rises or falls withconcern about the continued purchasing power of fiat currencies, specifically the most widely

held ones, the USD and EUR. That concern can vary regardless of whether were in a time ofglobal expansion or contraction.

A. Gold Can Rise Or Fall In Times Of Expansion

Gold can rise due to fears of inflation from too much money chasing too few goods.

Gold can fall if investors believe returns from risk assets will outpace inflation, and investorsabandon gold (which has no steady yield) in search of higher returns. In other words, loss of

purchasing power isnt a concern because risk assets appear to offer inflation beating returns.

B. Gold Can Rise Or Fall In Times Of Contraction

Gold can rise if the US or EU engages in stimulus actions that are perceived as moneyprinting and thus potentially inflationary, and both private and sovereign investors (likecentral banks) seek better stores of value than the USD or EUR. This has been the primarydriver of higher gold prices in recent years.

Gold can fall if the contraction brings very low inflation, deflation, or rising demand for cashas struggling investors need liquidity to cover margin calls from falling asset prices or tocover declines in income. This is the likely driver of the current downtrend in gold that beganin September 2011, and would be the primary driver of a continued move lower if we see asustained significant deterioration or economic collapse in the EU and/or China, Japan, or theUS.

Given the above, its amusing to hear the mass media alternate between referring to gold as arisk or safe haven asset, usually depending on nothing more than how it has behaved in recentdays or weeks. For example:

Throughout most of the Great Financial Crisis that began in earnest in late 2007, thepress would view golds accelerating rise while stocks and other risk assets fell, andrefer to gold as a safe haven asset. In fact gold was rising due to US stimulus policiesthat were believed to be inflationary.

During times of exceptional fear, like the downtrend in risk assets that began in

September 2011, most writers simply saw that gold fell along with other risk assetslike stocks, and so labeled gold a risk asset. In actuality, gold was falling due to acombination the need for liquidity as other asset prices fell, and no immediate signsinflation threats.

In both of the above cases, the press correctly saw a correlation between gold and risk assetsbut badly misread its cause.


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Disclosure/disclaimer:No positions. The above is for informational purposes only. All tradedecisions are solely the responsibility of the reader.

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