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U.S. Inflation Accelerates to 40-Year High

wsj.com

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Re: U.S. Inflation Accelerates to 40-Year High

#31

Post by recursivedoubts »

sokoloff wrote: post #23
recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

NPV is discounted by a combination of risk-free interest rate and uncertainty. For most investment/capital allocation decisions, the uncertainty term has been dominant for decades already.

yep, obviously

but not much of one when the fed has backstopped everything that matters

another policy error, in my uniformed opinion

Re: U.S. Inflation Accelerates to 40-Year High

#32

Post by legitster »

marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

> Inflation is a good thing for people with a lot of debt but not a lot of money.

The counter to this is inflation is painful to people living on savings or fixed incomes. And the politics here are brutal - young people whom this benefits don't vote, older people whom this hurts do.

Re: U.S. Inflation Accelerates to 40-Year High

#33

Post by infamouscow »

marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

> Inflation is a good thing for people with a lot of debt but not a lot of money.

I think it's good for people that can hop from job to job demanding higher wages as inflation comes. But if you're not in a position to do that, how is inflation good?

Re: U.S. Inflation Accelerates to 40-Year High

#34

Post by lumost »

recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

Said another way, holding interest rates below inflation devalues assets relative to cash flows. If the gap is relatively small (e.g. 5-15%) then the economy can adapt to lower asset prices relative to cash. Workers get more margin, businesses invest in cash generating activities, speculative bets get hammered, asset returns are low.

If anything I'd say this exercise shows the limits of Federal Reserve power. Without the tight labor market of the pandemic, low interest rates simply raised asset prices. We should take the lesson that the fed should not be solely responsible for driving the economy.

Re: U.S. Inflation Accelerates to 40-Year High

#35

Post by InTheArena »

marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

Sucks for anyone retired - anyone who has saved over the years - anyone who wants to buy a house, or buy a TV.

And it has a historical track record of getting out of control, and wiping out nation states.

Not arguing that inflation doesn't have it's upsides. But it has some serious serious downsides.

Re: U.S. Inflation Accelerates to 40-Year High

#36

Post by iknowSFR »

adflux wrote: post #5

Cant imagine real estate not taking a hit when yields go up...

Depends on who is already financed. Likely this will be a lagging indicator and we’ll see further increases in institutional investment. Government at all levels will avoid being involved because citizens have grown used to the liquidity of their homes. The long term consequence to the retail market is going to be a tough pill to swallow. Builders adding to inventory are partnering with institutions already. All of this plays out in favor of expanding the SFR market share.

Re: U.S. Inflation Accelerates to 40-Year High

#37

Post by macinjosh »

marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

It’s a destruction of stored value. It’s never good even if people who took out unwise debts get their asses saved.

Re: U.S. Inflation Accelerates to 40-Year High

#38

Post by commandlinefan »

marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

It also works out _sort of_ well for homeowners - at this rate, my house payment is going to end up being a minor inconvenience instead of my largest fixed payment. Of course, I'll still have to pay property taxes and insurance on the newly inflated value of the house.

Re: U.S. Inflation Accelerates to 40-Year High

#39

Post by jquery »

dominotw wrote: post #26
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

sucks for people like me with no debts though.

Take out some debt. I’m serious. That “free” money is there for you to take risks and invest with.
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