Inflation is at a 40 year high. What can history teach us? • Hacker News Board

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

#261

Post by bob_theslob646 » Wed, Oct 05, 2022, 4:29 AM UTC

sometimeshuman wrote: post #98

Unfortunately I leaned on history to make investment decisions during this period of rising inflation. Gold, stocks, and real estate were historically good hedges against inflation and cash holdings should be minimized. But that conventional wisdom has been a bad strategy this time. As a reminder one ~sure bet is iBonds (the i is for inflation). Last I checked the yield is little shy of 10% and your money only needs…

Here are a few things about i-bonds that the average joe may not know.

Series I bonds with issue dates prior to February 2003 became eligible for redemption six months from the issue date. Bonds with issue dates of February 2003 and later are eligible for redemption one year from the issue date.

However, if a bond is cashed within the first five years after its issue date, interest earned during the three months prior to cashing will be forfeited. Once a Series I bond is five years old, there is no interest penalty for redemption.

Another problem, you will owe federal tax on the I bond interest when you cash it in.

In general interest on treasury bonds is not taxable at the state level. I am not sure about local taxes, which have all sorts of one off rules. But the thing most miss about the I bonds is you receive no interest until maturity/cashing it in. So no compound interest.

Hope that helps!

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

#262

Post by Aunche » Wed, Oct 05, 2022, 4:37 AM UTC

mikewarot wrote: post #245

mrb wrote: post #230

Earlier quoted context omitted.

When I go to ford.com and look at their basic truck, the 2023 Maverick, I see "starting at $22,195". So if a 1962 truck truly sold for $2000, the inflation seems to account for entirely the price increase. And I'm pretty sure everyone will agree a 2023 Maverick is superior to a 1962 F-100 in every conceivable aspect. Housing and healthcare are better examples of goods or services whose prices have increased faster th…

The F-150 is the lowest cost full size pickup truck Ford makes. If you can't put full sheets of plywood and 2x4s in it, it's not really a pickup truck. How Much Does the Ford F-150 Cost? The 2022 Ford F-150 starts at $29,990, which is the lowest base price in the full-size pickup truck segment. However, that's for the three-seat Regular Cab, so if you're looking for more room, take note of the Super Cab's $34,075 bas…

A 1962 Ford truck would only have a single row. Without the Maverick's second row, you'd probably get a full-sized bed.

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

#263

Post by bruce511 » Wed, Oct 05, 2022, 4:37 AM UTC

jollybean wrote: post #91

IncRnd wrote: post #73

A good working definition of inflation is a general increase in prices and a fall in the purchasing value of money. There will generally be inflation when there are fewer goods to purchase or when the money supply increases. History teaches us that the government, often through good intentions, decreases the supply of available goods. There are many reasons this happens. Recently, people were told to stay at home, an…

I'm wary that this is a problematic articulation. The government rarely if ever controls markets to the point where it causes material price increase for things. The US government has not taken measures to materially affect the cost of goods imported from China, or gas, for example. Yes, the Central Bank sometimes creates more liquidity than is required for a given economic cycle, but in most cases, this is due to ec…

I'm not sure for what reason you are being down-voted, but I disagree with your comment on China.

Tarrifs on imported goods are specifically designed to make the cost of goods locally higher.

If a foreign product costs $100 landed, and a locally produced one $120,then adding 20% to the foreign one makes them both the higher price.

This is good news for those in local manufacturing, less-good news for the consumer.

Ultimately a tariff is paid by the consumer[1], and received by the local govt, it is thus really just a consumption tax of sorts, although one that is self imposed by the consumer. The alternative is to "not pay the tax" but instead spend the same money supporting local industry.

The US has had a policy over the last 6 years of adding new tariffs. (if they've been revoked in the last 2, I'm not aware.) This drives up local prices, which is a factor in (not the sole cause of) inflation.

[1] politically this was spun as "China pays the tariff" but this is obviously untrue. There is no incentive for them to do so, and even if they did, it would negate the point of the tariff in the first place, which is to raise local prices to make local businesses more compeditive.

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

#264

Post by tastyfreeze » Wed, Oct 05, 2022, 4:38 AM UTC

scarecrowbob wrote: post #206

taftster wrote: post #198

Earlier quoted context omitted.

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 projec…

Shout out to Toyota making 200k miles the new 100k. The Toyotas I have owned have been over 150k with very little issue.

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

#265

Post by michaelcao » Wed, Oct 05, 2022, 4:40 AM UTC

lowercased wrote: post #212

michaelcao wrote: post #207

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.

I'm not sure Mark Twain actually said all that... :)

I mean Mark Twain said “History never repeats itself, but it does often rhyme".

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

#266

Post by legulere » Wed, Oct 05, 2022, 4:42 AM UTC

IncRnd wrote: post #73

A good working definition of inflation is a general increase in prices and a fall in the purchasing value of money. There will generally be inflation when there are fewer goods to purchase or when the money supply increases. History teaches us that the government, often through good intentions, decreases the supply of available goods. There are many reasons this happens. Recently, people were told to stay at home, an…

Money supply increases don’t necessarily lead to inflation. They only do when there’s more consumer spending on products.

In the recent low interest rate period, that didn’t really happen. Money instead went into an asset price bubble.

What we need to do to curb inflation is to lower consumption. The best point where to do that is the rich with their excessive consumption.

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

#267

Post by bruce511 » Wed, Oct 05, 2022, 4:50 AM UTC

major505 wrote: post #136

As a brazilian, history teaches that inflation is a pain in the ass. I lived in hyperinflation when I was a kid. I rememore that my parents would receive and run to the market in the same day, and buy everything in bulk, because next day, their money would be worth half. Markets would tag products once or twice a day. I remember buying an X-men comic that was worth something like 1000 BRC. Monthly inflation would be…

It's something of a pity that hyper-inflation, and inflation, share more-or-less the same name.

Hyper-inflation is bad, and ultimately makes local-money such a poor store of value as to make it useless. People will revert to non-money approaches to trade, or use a different currency for money.

So yeah hyper-inflation is really bad, and (I suspect) what most Americans think of when the word "inflation" is used.

By contrast regular inflation, say in the 3% to 6% band has significant upsides. It promotes exports, leverages borrowings, and so on.

Equally it devalues income for those on a fixed-value pension (probably an excellent lesson to current generations of the value of inflation-linked investments and income) and that sucks. The solution though is not 0% inflation for ever, the solution is better pension plans.

Yes, inflation is "high" at the moment, but it's several orders of magnitude away from hyper-inflation. And the counter to inflation, higher interest rates, is starting to happen.

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

#268

Post by vkou » Wed, Oct 05, 2022, 4:52 AM UTC

WalterBright wrote: post #15

History teaches us that inflation will continue as long as the government keeps printing fiat money with no backing. For a historical example, the Confederacy had high inflation. The printing press was in Richmond. When Richmond was threatened with a siege, the Confederacy hustled the printing press out to get it to a new, safer location. Confederate inflation paused during the move. The reason is pretty simple - the…

Inflation will continue as long as the economy grows. If you want to experience deflation, all you need to do is start shrinking the real economy over the long term, and make everyone else aware of it.

You'll also shut down lending, strangle spending, and remove all incentive to invest, but fortunately, the dragon hoard of cash that one has hoarded will start increasing in real value year over year.

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

#269

Post by lottin » Wed, Oct 05, 2022, 4:59 AM UTC

WalterBright wrote: post #133

dasil003 wrote: post #118

Earlier quoted context omitted.

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.

Fiat money (or anything that increases the supply of money, like gold rushes) is the common factor with all instances of inflation. There are thousands of years of examples of this. You're right on one point, the Law of Supply & Demand. It is an emergent property of many individual actions, though each might be completely ignorant of the big picture.

Another common factor in all cases of inflation was the moon orbiting the Earth, so clearly the moon is causing inflation.

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

#270

Post by rolisz » Wed, Oct 05, 2022, 4:59 AM UTC

foobarian wrote: post #147

IncRnd wrote: post #110

Earlier quoted context omitted.

But, the economy doesn't stop when there is no inflation or deflation. Well, I suppose that depends on your meaning of the word economy.

Certainly I was wrong if you take those words literally. You got me. At the end of the day hopefully you got positive insight out of it. :-)

No, I didn't get it either. People will still need food, electricity, gas, clothing. Buildings will need maintenance. Are you saying people will decide to not eat because deflation? Or not fix their broken windows?