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

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

#281

Post by Helmut10001 »

galaxyLogic wrote: post #277

There's two causes for inflation I think everybody agrees, too little supply and too much demand. The demand-caused inflation would seem to be self-correcting problem: When things cost more, people buy less of them. Then suppliers will have to lower their prices or at least stop increasing them, if nobody buys their product because of too high prices. In other words if people having too much money causes inflation, p…

> How can we produce more cheaper and distribute the products to people cheaper?

Please replace cheaper with sustainable, otherwise the world will be flooded with even more plastic.

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

#282

Post by xapata »

zie wrote: post #156
compumike wrote: post #17

It may also help to see the cumulative inflation picture: https://totalrealreturns.com/s/USDOLLAR?normalize=end (disclosure: my side project) The 1974 and 1980 peaks from the article correspond to the steeper slope regions in those same years on my graph. (I'm plotting 1/[CPI-U price level], while the article is plotting d/dt [CPI-U price level]) On my y-axis is the purchasing power of a US dollar, relative to curren…

I haven't dug into everything you are doing, but the biggest flaw I see seems to be that you assume Cash returns 0% nominal, i.e. that there is no return for holding cash. That is only true if you hide it under your mattress(and no deflation happens). Most people do not hide money under their mattress anymore, especially if they have large amounts of it. They put it in a bank account or in a MMF or some other interes…

Yep, always need to pick your risk-free asset for comparison.

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

#283

Post by goldfish3 »

bob_theslob646 wrote: post #261
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 prio…

>But the thing most miss about the I bonds is you receive no interest until maturity/cashing it in. So no compound interest.

That's incorrect. I bonds compound semi-annually.

https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds...

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

#284

Post by xapata »

galaxyLogic wrote: post #277

There's two causes for inflation I think everybody agrees, too little supply and too much demand. The demand-caused inflation would seem to be self-correcting problem: When things cost more, people buy less of them. Then suppliers will have to lower their prices or at least stop increasing them, if nobody buys their product because of too high prices. In other words if people having too much money causes inflation, p…

> There's two causes for inflation I think everybody agrees, too little supply and too much demand.

Price increases aren't always inflation. As the Federal Reserve Bank of Cleveland published, "Strictly speaking, inflation refers only to a drop in the purchasing power of money that results when a central bank creates more money than its public wants to hold. Inflation manifests itself as a rise in all prices and wages—not just some subset of prices. ... relative-price changes—no matter how uncomfortable they are for consumers or producers—transmit vital information necessary for the efficient allocation of resources throughout any market economy. Inflation, by contrast, contributes no information useful to our consumption, production, or labor choices. If anything, inflation can temporarily distort vital relative-price signals ..."

https://www.clevelandfed.org/en/newsroom-and-events/publicat...

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

#285

Post by fomine3 »

lmm wrote: post #184
DoingIsLearning wrote: post #120

Earlier quoted context omitted.

>That does imply that you might consider some backup energy solutions for the winter. I'm a fan of kerosene lately. Less annoying to use than propane, and stores almost as well. By backup you mean for heating? Can you safely burn kerosene indoors? I thought you would have all sort of pollutants on top of monoxide?

"Safely" is relative, but here in Japan kerosene heaters are totally normal in older homes.

I realized that kerosene heater without exhaust that often used in cooler Japan area is really bad after I bought CO2 meter. CO2 easily go 10000ppm if ventilation is a bit poor (even poor insulation). Kerosene heater with exhaust pipe seems to fine, but now heat pump is generally better option. Still it seems to good backup for not to be death by freeze.

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

#286

Post by mrb »

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…

The 2022 Maverick has an engine literally twice more powerful than the 1962 F-100 (270 vs 135 hp). With your logic, picking on one tech detail of many, I could argue the 1962 model is "not really a pickup truck" with such a puny engine of weak towing abilities !

What this shows is that Ford merely decided to trade 18 inches of pickup box space for a second row of seat, a more powerful engine, and many other higher-end specs. Today Ford could definitely make a 1962-spec'd pickup with a weak 135 hp engine at less than $20k.

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

#287

Post by jjav »

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.

> There is no fixed rate loan.

Most loans in the US are fixed rate for the life of the loan.

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

#288

Post by mypalmike »

rolisz wrote: post #270
foobarian wrote: post #147

Earlier quoted context omitted.

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?

In deflation, prices are going down. So I know it will cost me less next week to fix that broken window than doing it today. So I wait a week. But the logic doesn't change - when next week comes, I'll wait another week to get a better price. Apply this across the board, and people mostly just buy what they need. Producers of goods stop producing. R&D disappears. Etc.

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

#289

Post by fulafel »

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...

Income transfers generally don't imply printing money, they can be funded by eg taxes from a higher income part of population.

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

#290

Post by Aunche »

ryanisnan wrote: post #62
foobarian wrote: post #20

Earlier quoted context omitted.

> History teaches us that inflation will continue as long as the government keeps printing fiat money. Of course, that is almost a tautology. The devil is in the details. No inflation is bad because the economy stops. High inflation is bad because of erosion of purchasing power and negative impact on nearly every participant in the economy. So what do you do to get that sweet spot of about 1-2% inflation? I'd say rai…

I'm not very versed in economics, but can you explain "No inflation is bad because the economy stops."?

Zero inflation is fine, but a small hiccup would cause it to spiral into deflation. Deflation sounds good in a micro-scale because money gets more valuable. However, this is actually a terrible thing because the only way this can happen is when money gets destroyed through defaults, which is why you only see deflation during a financial crisis.

When technology increases increases productivity and society has a fixed supply of paper money, you'd think you'd see deflation because there are more goods and the same amount of money. However, actually during those periods of times, banks lend out money, which increases the money supply. This is a good thing because they're enabling economic activity that otherwise wouldn't have happened like a loan to start a new business. However, this system is fragile because if depositors lose faith in the bank, everyone will try to withdrawal their money, which is called a bank run. The bank doesn't have enough money because they leant some of it out, so they default and depositors that aren't quick money lose their money. One of the purposes of central banks is to ensure that this doesn't happen.

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