211–220 of 316 posts
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Don’t forget the obvious ‘finger on the scale’ influence from the administration too.
Why can't we just water down the gasoline? /s
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2% is good, anything over 3% is not good, anything over 4% is bad, 5% and higher is really bad. Hope that clears things up for you.
Why those arbitrary thresholds?
Paradoxically, inflation has contributed to me taking a sabbatical. While I live in a LCOL area and made ~140k/year it just no longer felt worth it to work as I saw my retirement accounts start to match and exceed my salary in yearly gains. I do plan on going back to work in a part time manner, but inflation has killed any reason for me to work hard at a job for that level of salary. Furthermore, the feeling of "what…
This actually makes 0 sense. Like, do you even understand what you're saying? The value of your savings is decreasing at a faster rate than ever before, so its a good time to stop saving and spend it? The stock market increasing is not the same thing as inflation. What you're saying makes sense only if you are referring to stock market valuation... strictly retiring because inflation is high makes no sense.
It makes perfect sense if the decision to work is based on real, after-tax income. Change the comment to say "the tax rate keeps climbing so I quit working" and it would not occur to anyone to challenge it.
Once you have enough saved to generate income covering the very basics (probably somewhere around $30k/year in a LCOL area in the US) it becomes a question of whether selling a 40-hour block of your time on a weekly basis is worth it. For this individual, it is not.
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2% is good, anything over 3% is not good, anything over 4% is bad, 5% and higher is really bad. Hope that clears things up for you.
Why those arbitrary thresholds?
The broad idea is you want a number low enough that people don't price inflation expectations into day-to-day pricing but not so low that a hiccup causes deflation.
The empirical evidence around inflation persistence is a bit all over the place, but broadly suggests people start daily indexing between 2 and 5%. When that starts to happen, restraining inflation without causing a depression becomes incredibly hard, because people will actively countermand policy moves.
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Zooming out in what sense? Those rolling charts don’t mean much imo. Year over year change is a pretty good perspective and a tick up like this is not great.
Zooming out tells you this tick up to 4.2% is not nearly as bad as the post-covid inflation, and drastically better than the 70s. Not a good sign, but also not too far outside the historical mean and probably no need to panic in and of itself.
I don’t think know that inflation was worse in the 70s helps fixes the narrative that 4.2% inflation is not good.
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They're not necessarily "cooked," (but they certainly can be). Inflation is genuinely hard to calculate since it's different for everyone, goods and services purchased drift over time, and as you mentioned, that exact good also changes over time. CPI (and others) are more useful in a MoM or YoY context. At 10 years, it's better viewed as best guess cost of typical living rather than an economic indicator comparing ap…
No it's cooked. For high tech items, they assume that improved technology means you are getting more for your money even if the price goes up, so they discount it. It's true that you get more for your money, but it ignores threshold effects, like you just can't buy an equivalent phone for $10 even if todays phone's are 200x better. Then there's the "owner's equivalent rent" BS and this is 25% of CPI. It answers the q…
It's pricing the cost of shelter. Renting a home is buying shelther. Buying a home is buying shelter and buying a financial asset. OER is the way you separate the last two components. Otherwise, you'd have to only look at rents to determine housing prices, which would be rubbish in a country where most households live in homes they own.
Paradoxically, inflation has contributed to me taking a sabbatical. While I live in a LCOL area and made ~140k/year it just no longer felt worth it to work as I saw my retirement accounts start to match and exceed my salary in yearly gains. I do plan on going back to work in a part time manner, but inflation has killed any reason for me to work hard at a job for that level of salary. Furthermore, the feeling of "what…
This actually makes 0 sense. Like, do you even understand what you're saying? The value of your savings is decreasing at a faster rate than ever before, so its a good time to stop saving and spend it? The stock market increasing is not the same thing as inflation. What you're saying makes sense only if you are referring to stock market valuation... strictly retiring because inflation is high makes no sense.
Remember this next time you get your yearly review/raise. 4.2% is what you need to stay even, anything less is a pay cut.
If I make 100K and get a 3% increase, that's $3000 more.
But if I only spend 30K to live, and my living expenses go up 5%, that's only a $1500 increase to my living expenses while I earned $3000 more that year. So how is that a pay cut if I actually have even more money left over that basically just goes into my investment account then.
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I don't think that OP meant to say their wage income was low. I think OP means that once their investment returns starts exceeding their wage income, their motivation for continuing to work drops. Which, I kinda get. If you don't really like what you're doing, it's harder to stay motivated at continuing to work when your bag of money makes more money than you do. It sounds like OP is already planning on some amount o…
Y"eah, the same reason we're going to have a trillionaire soon is why even if someones making a great salary, their 401k is inflating faster than they need to earn a living in a low cost of living area. Absolutely absurd, but if you got the upswing between 2010-2020, you might be in an upper class while still living in lower class, meaning your 401k is all you need to survive on while the billionaires continue to pum…