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Inflation is at a 40 year high. What can history teach us?

yarn.pranshum.com

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Re: Inflation is at a 40 year high. What can history teach us?

#201

Post by boole1854 »

WalterBright wrote: post #138
boole1854 wrote: post #111

Earlier quoted context omitted.

> History teaches us that inflation will continue as long as the government keeps printing fiat money with no backing. The government (to be correct we should say: the Federal Reserve) has not been "printing money" for around a year now. Monetary base has actually declined by ~12% in that time: https://fred.stlouisfed.org/graph/?g=UrKo

Issuing debt is the same thing.

Issuing governance debt is definitely different from increasing the money supply ("printing money"). Debt can be financed by borrowing from the domestic or foreign private sector or from foreign governments / central banks.

Re: Inflation is at a 40 year high. What can history teach us?

#202

Post by WalterBright »

zie wrote: post #182
WalterBright wrote: post #169

Earlier quoted context omitted.

> I know of at least one instance where your version was incorrect(2008/2009). One one hand, we have thousands of years of history with what causes inflation. On the other hand, we have one instance. I'd say one has to examine the one counterexample for something missed. (Your cite makes no mention of 2008/2009.) Extraordinary claims require extraordinary evidence. Recall my other post here about how making loans cre…

> (Your cite makes no mention of 2008/2009.) Incorrect: "One may look to politicians’ statements. Even in the Obama-era “stimulus” spending, the administration emphasized promises of eventual debt reduction. " And I have more to say on it later. My cite is from a world-class economist, not from some random person on the Internet. > One one hand, we have thousands of years of history with what causes inflation. > On t…

> There is no rigorous proof of what causes inflation.

There's no rigorous proof that smoking causes cancer, either. All we have is a lot of correlation.

The historical evidence of printing non-collateralized money corresponding with inflation is overwhelming. It corresponds with gold rushes, and silver rushes. It corresponds with debasing coins by mixing in cheap metals.

Me, I'm going where the evidence leads.

> I completely agree that the banks create money out of thin air when they decide to loan you $100k. But if you pay it back,

It is the inverse operation - destroying it. But of course, the bank creates it again for the next loan.

> more money is created as part of the interest payments on that $100k.

No, it does not. I wish I could create money to pay the interest on my loans, but I can't (at least not legally!). I use existing money to pay them.

Re: Inflation is at a 40 year high. What can history teach us?

#203

Post by bearjaws »

csomar wrote: post #196
mrep wrote: post #129

Earlier quoted context omitted.

Where are you at? I ask because I have 2 mortgages and a car loan in the US and 2 are fixed rate for the entire lifetime of the loan and 1 I have 10 years until the ARM starts applying so I'm laughing all the way to the bank. 90% of US mortgages are fixed for the entire loan.

There is no fixed rate loan. It's all variable. There is a trader (might be the bank) that is buying variable rate and selling you a fixed rate. If he goes bankrupt, somebody will be holding the bag. You might want to re-read your terms if the interest rates get much higher.

Proof?

Re: Inflation is at a 40 year high. What can history teach us?

#204

Post by [deleted] »

mrep wrote: post #158
Syonyk wrote: post #142

Earlier quoted context omitted.

I'm in the US. I certainly could do something like that. I just won't. I hope it works for you. That's a level of debt-based risk that neither myself nor my wife have any interest in. There have been a lot of people throughout history who thought similar arrangements were "sure things," and they were, up until they weren't and it all came down around their ankles. We live in a very modest ( manufactured, gasp! ) home…

2/3 of my debt payments are a sure thing as they are fixed and inflation is also a sure thing as deflation is catastrophic so governments won't allow it and deflation is trivially easy to fix with helicopter money. The only thing that isn't a sure thing are wages but they have over the long term gone up [0] and when they do go down it is usually only for a few years. The last one is a risk but I think it is well wort…

[deleted]

Re: Inflation is at a 40 year high. What can history teach us?

#205

Post by sidewndr46 »

Spooky23 wrote: post #192
Syonyk wrote: post #142

Earlier quoted context omitted.

I'm in the US. I certainly could do something like that. I just won't. I hope it works for you. That's a level of debt-based risk that neither myself nor my wife have any interest in. There have been a lot of people throughout history who thought similar arrangements were "sure things," and they were, up until they weren't and it all came down around their ankles. We live in a very modest ( manufactured, gasp! ) home…

You do you. But assets like real property are historically good investments. It doesn’t make sense to not buy the best house you can afford. I’m with you with cars… but even then the maintenance expense starts to catch up.

That's great advice, so long as you don't have to pay property tax.

Re: Inflation is at a 40 year high. What can history teach us?

#206

Post by scarecrowbob »

taftster wrote: post #198
zeckalpha wrote: post #185

Earlier quoted context omitted.

They also last much longer

Or we are forced to make them last longer.

That doesn't match my experiences; IME cars do last longer now.

I have owned and spent substantial time driving a 1978 Buick Regal and a 1968 Westphalia VW van.

I don't think that you're gonna see 200K miles out of either of those vehicles. The Buick had about 120K on it and was clearly on its last legs. It's likely been scrapped. The VW only runs because I sold it to a mechanical engineer who wanted to have a project to work on with his children, and it's now a "vintage" toy instead of my daily driver.

I am at about 180K on my 2014 Tacoma and I expect to get at least another 120k out of it before I sell it.

Re: Inflation is at a 40 year high. What can history teach us?

#207

Post by michaelcao »

Mark Twain once said that “History never repeats itself, but it does often rhyme. We should use the bottom up approach for investing stocks. I don't believe that macro prediction is useful. Nonetheless, we should prepare for the worst because the recession is looming.

Re: Inflation is at a 40 year high. What can history teach us?

#208

Post by Negitivefrags »

wins32767 wrote: post #78
beerdoggie wrote: post #54

In California, people fitting certain economic criteria are now being issued $1000 checks for inflation relief. This is beyond ludicrous. We have printed so much money, the only solution is to... print more? It's almost like it is all a sneaky backdoor to letting the government redistribute wealth without real oversight...

California doesn't print money, the Federal Reserve does. California is required to balance its budget by law, like every state but Vermont. Nearly every state has more money than normal right now (some of it from high tax revenues due to nearly full employment, some due to federal stimulus), so they're finding ways of getting rid of the money. This is a second order effect from the much too large stimulus in 2020/20…

You would think that there would be something more useful to do with the money, like fixing the infrastructure.

Re: Inflation is at a 40 year high. What can history teach us?

#209

Post by sidewndr46 »

dasil003 wrote: post #118
WalterBright wrote: post #101

Earlier quoted context omitted.

> There’s also a tipping point where inflation is self propelled because everyone is used to it so they just proactively raise prices on a regular basis. This is called cost-push inflation. Unfortunately, that theory doesn't explain where the extra dollars come from.

Why would you expect there to be some unifying theory of inflation? It's an emergent phenomenon resulting from the actions of many individual actors. I'm quite sure the people raising the prices every week had no idea how much cash was in circulation.

All you've done here is dress up the "it's really complicated, you wouldn't understand it" dismissal in nicer terms.

Re: Inflation is at a 40 year high. What can history teach us?

#210

Post by csomar »

bearjaws wrote: post #203
csomar wrote: post #196

Earlier quoted context omitted.

There is no fixed rate loan. It's all variable. There is a trader (might be the bank) that is buying variable rate and selling you a fixed rate. If he goes bankrupt, somebody will be holding the bag. You might want to re-read your terms if the interest rates get much higher.

Proof?

Banks get their liquidity from the Fed. Afaik, this liquidity is sold with variable interest rate (but I might be wrong or there might be some government program for that).
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