Inflation is differential and restructuring (2021)

Nonsense. Sure, deflationary shocks can be calamitous, like the Great Depression or the GFC. But steady deflation over time is logically the natural and good outcome of improvement over time—as technology advances and we get better at producing things, they should get cheaper, on average.

Instead, our savings are buying us LESS over time, so that government can buy votes, fund wars, bail out defense contractors, pharma companies, financial institutions, and other cronies, etc. Inflation via the printing press, which is now just considered by many a normal phenomenon, is actually legalized wealth transfer from the savings of ordinary citizens into the coffers of giant government bureaucracies and the large corporations that feed off them.

I see what you are saying, but just because the cost of living goes up in the US, does that really mean that the value of the USD as a commodity in it's own right must go up/down?

Many countries have their own reserves for the USD, which they use for their own purposes, and may exchange their reserves with each other, in a way where the US isn't even involved at all.

So in the forex markets the USD is just another commodity, and not a direct representation of the cost of living in the USA.

Going the other direction though, if the value of the USD goes up or down, I can see how that would affect the cost of living _within_ the USA since it is the local currency there. But outside the USA, why would it affect the cost of living in another country where they use some other currency?

This isn't really my field though, I'm just throwing out my thoughts. If anything I've written is wrong, I'm happy to read an explanation as to why.

> I find it interesting that house prices are kept out of inflation.

> The reason, as I understand it, is that shelter costs are kinda funny in how they are added to this statistic.

Housing prices are not considered in the CPI ("cost of living") because houses are mostly an asset:

> House prices are an interesting case. Houses are considered capital investment by the [US] BLS. So, when the value of your home increases that's a good thing as you didn't consume the house. In other words, you don't need to replace the house. Consumption goods are different in that you need to replace the thing you bought. Inflation is very bad for consumption goods because it costs you more to replace that thing each time you need it (food, for instance).

* https://www.pragcap.com/forum/topic/assflation/#postid-2165

> The BLS views housing as a mostly “investment” item as opposed to a consumption item. So, for instance, when you consume a hot dog and have to replace it then the cost of replacement is a direct reflection on your well-being. A $1 hot dog that costs $2 one year later is a material change in living standards, all else equal, since the hot dog is an asset that you literally consume. A house is much more complex. […]

> Of course, anyone who owns a house knows that it’s not that simple. You do basically consume your house over time. For instance, my home has appreciated substantially since I purchased it just 5 years ago and underwent a hellish remodel. At that time the cost of replacement was roughly $300 per square foot. But in the ensuing years the cost of replacement has increased to $400 per square foot. As my physical home falls apart over the years I will need to replace it. But the key point is that, as I replace these components the housing market is likely to revalue the total home value to account for this investment. So even though I am consuming my house over time I am very likely to recoup those costs.

* https://www.pragcap.com/should-house-prices-be-in-the-cpi/

The "C" in CPI stands for consumer. Houses aren't in the CPI for the same reasons stocks and bonds are not: we don't consume them to live.

'Shelter' is considered in the CPI generally though:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc...

And in that you have mortgage payments: yes prices are up, but rates were going down recently, and are low by the standards of the last ~40 years.

> But if you are forced to rent forever due to unaffordable housing, in your later years you might be paying $3000/m rent instead of $0/m mortgage interest. But that fact is conveniently left out.

Rent is often cheaper than mortgage payments, and is very more often cheaper than mortgage payments plus the cost of maintaining a home. If you take the difference and investment you can have just as must equity in a few decades. Preet Banerjee goes over the math in this ten minute video:

* https://www.youtube.com/watch?v=KAMeI4uHAFE

He rents:

* https://www.speakers.ca/2013/10/preet-banerjee-sold-his-hous...

If you want to know when it makes financial sense, the "5% Rule" by Ben Felix is a decent place to start:

* https://www.youtube.com/watch?v=q9Golcxjpi8

* https://www.youtube.com/watch?v=Uwl3-jBNEd4

Until recently he was a renter, but purchased a house 1-2 years ago. Not exactly happy with the decision:

* https://www.youtube.com/shorts/L5SAF0SHD1w

Interesting: I think a key point about that is in the US your long term fixes allow you to really have a higher house price and lower interest rate and show it costs no more. In Europe etc. this isn’t the case so you can pay the boom price then get hit by interest rate rises.

It is always better to get the lower price higher interest combo though if you can afford to overpay as it reduces the term more effectively due to compounding.

Also the lowering interest rates are a one way street so the people getting in at the older higher interest rates get more equity for doing nothing as the lowering interest rates increase house prices. The latecomers just get more risk of negative equity.

Nimbyism and insufficient new building is another topic!

So you seem to be adding your voice in support for the article which, er, directly contradicts your views about money printing and current inflation.

Right now we know for a fact that current inflation is a genuine global shortage of actual stuff. Crude oil, cooking oil, wheat, Chinese products. Plus American government overspending, to be fair, but that's just a US phenomenon.

Of course that's inconvenient if you really desperately want to complain that you specifically are being cheated. After all if you have less, it must be because somebody else has more, right?

If we're all screwed, who do you blame? Putin and Xi are far away and broadly hated already, so there's no satisfaction to be had blaming anything on them.