Tag: Terry Coxon

A Monetary Master Explains Inflation

Posted on by The INO.com Team

By Terry Coxon, Senior Economist

[Ed. note: One of the best things about being a partner in a research firm employing about 40 analysts is that I have unfettered access to really smart people. While we have a great team with expertise across the spectrum, when it comes to monetary matters, my go-to guy is Terry Coxon, a senior editor for our flagship publication, The Casey Report.

Terry cut his teeth working side by side for years with the late Harry Browne, the economist and prolific author of a number of groundbreaking books, including the 1970 classic, How You Can Profit from the Coming Devaluation. The timing of Harry's book should catch your eye, because his analysis that the dollar was headed for a big fall was spot on. Anyone paying attention made a lot of money. Continue reading "A Monetary Master Explains Inflation" →

Myths and Realities of Returning to a Gold Standard

Posted on by The INO.com Team

By Terry Coxon, Casey Research

The gold standard, under which any holder of paper dollars could redeem them for gold at the US Treasury, is now within the living memory of just a few million Americans, nearly all of whom would be dangerous behind the wheel. But thanks to the money printing and the federal deficits that have grown to astounding scales since 2008, and thanks also to the clashing pronouncements of Ron Paul and Ben Bernanke, the idea of a gold standard has resurfaced in the public's consciousness. Continue reading "Myths and Realities of Returning to a Gold Standard" →

How Far to the Wall?

Posted on by The INO.com Team

By Terry Coxon, Casey Research

Decades of manipulation by the Federal Reserve (through its creation of paper money) and by Congress (through its taxing and spending) have pushed the US economy into a circumstance that can't be sustained but from which there is no graceful exit.

With few exceptions, all of the noble souls who chose a career in "public service" and who've advanced to be voting members of Congress are committed to chronic deficits, though they deny it. For political purposes, deficits work. The people whose wishes come true through the spending side of the deficit are happy and vote to reelect. The people on the borrowing side of the deficit aren't complaining, since they willingly buy the Treasury bonds and Treasury bills that fund the deficit. And taxpayers generally tolerate deficits as a lesser evil than a tax hike.

Deficits are politically convenient for a second reason. They can take a little of the sting out of a recession. That effect is transient, and it's not strong – more like weak tea than Red Bull. But it can be enough to help a struggling politician get past the next election.

Yes, sometimes there's a big turnover in the personnel, such as with the 2010 election, when a platoon of self-styled anti-deficit commandoes parachuted into Congress. As soon as they had taken their seats, they began offering proposals to deal with the government's trillion-dollar revenue shortfall. But none of the proposals were serious. They were merely tokens intended to make politicians wearing anti-deficit uniforms look less ridiculous. Cut a ginormous $2 billion out of this program and a great big $500 million out of that program. Reduce spending by half a trillion dollars... over ten years. Balance the budget to the penny, but later. No one proposed anything close to dealing with the deficit now.

So stay up as late as you like on election night to see who wins, but the deficits aren't going to stop anytime soon. The debt mountain will keep growing. The part of it the government acknowledges is now approaching $16 trillion, which is more than the country's gross domestic product for a year. Obviously, the debt can't keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things. Continue reading "How Far to the Wall?" →

Doing the Roth Arithmetic

Posted on by The INO.com Team

By Terry Coxon, Casey Research

It's clear to me, even though it may not be clear to you, that unless there is something very unusual about your situation, if you have a traditional IRA, you should pay the tax now and convert it to a Roth IRA. Not just maybe, but definitely. Not just for a small advantage but for a big one. If you don't convert today, you'll ultimately surrender much more to the tax collector. You'll be throwing money away. And you'll keep throwing it away. It's a result neither of us wants.

Your IRA is an object in motion, with money going in and out of it and investments turning over inside of it. It lives not just on your brokerage statement but across the years of your calendar as well. That's why the Roth conversion question can seem so tangled. Because of the time dimension, deciding whether to convert isn't as simple as deciding whether to replace one stock with another. But there is, as I'll try to show, a way to look at the question that cuts through the complexity.

Comparisons

With a traditional IRA, you are allowed to contribute $5,000 per year of employment income (or $6,000 if you are 51 or older), and, if your income isn't too high, you receive a tax deduction for the contribution. Earnings inside the IRA accumulate and compound free of current tax. Later, when you withdraw the money, it comes to you as taxable income (except to the extent of any contributions that weren't tax deductible when made, which come out tax free).

With a Roth IRA, if your income isn't too high, you may contribute up to the same $5,000 or $6,000 per year, but none of it is tax deductible. Just as with a traditional IRA, earnings inside the Roth accumulate and compound free of current tax. When the money comes out, assuming you are at least 59.5 years old and the IRA is at least five years old, the money goes tax free straight to your pocket.

Whether traditional or Roth, any IRA's power to make you richer comes from tax-deferred compounding. Consider a simple example that compares an ordinary, taxable savings account with a traditional IRA. Assume, for the sake of simplicity, that: Continue reading "Doing the Roth Arithmetic" →