Are You Concerned About Inflation?

by Simon 30 Replies latest social current

  • adjusted knowledge
    adjusted knowledge

    I graduated high school in 1995 and worked in retail starting at $5.50 an hour. My manager was making $50,000 a year and I thought if I could get that income I would be set. If I work no overtime I make $67,000 a year as a cardiac RN. To have the same purchasing power for $50,000 in 1995 I need to make around $86,000. Therefore I have to work overtime/extra shifts to have that purchasing power.

    The reported inflation is just not true. Sure you can buy cheap TVs and other electronics but you don't consume those products daily or even monthly. What we consume has exploded in prices over the decades and wages have not kept in pace. Lastly, when I enter the work force decades ago I could if I wanted to put my money in safe investments paying 4-6% interest. Now you lucky if the banks give you 0.5%. You really have no choice but to invest in equities, precious metals, start a business, or invest in real estate.

    As far as minimum wage being increased to $15 an hour I'm not opposed but there will be negative consequences. In my hospital they pay their CNA or patient techs $16 an hour. Do you think a CNA will continue to work cleaning feces and urine off patients when they can make basically the same at a low skill job? Unless a "wage ripple" effect happens and raises all wages I don't see it being beneficial. Perhaps someone can point me to a study concerning this.

  • LoveUniHateExams
  • hoser
    hoser

    It seems to me that there is high demand for hard assets right now. Real estate, stocks, physical gold and silver, classic cars and even collectibles like hockey cards and digital art. People are trying to hedge against inflationary pressures.

    Am I afraid of inflation. No as it is a normal part of our economic system right now. Hyper inflation, yes. Be very afraid. If the central banks can’t keep a lid on inflationary pressures we are all screwed. Zimbabwe or Venezuela are examples of financial collapse. You can’t even leave because the government can’t afford to buy the paper to print passports.

  • Simon
    Simon
    It seems to me that there is high demand for hard assets right now. Real estate, stocks, physical gold and silver, classic cars and even collectibles like hockey cards and digital art. People are trying to hedge against inflationary pressures.

    Definitely this. One of the reasons for real-estate increases is that people are using them as investments to store wealth. Here in Canada they are thinking of imposing capital gains taxes on primary residences instead of limiting foreign ownership of property - note that they always chose the option that takes money out of your pocket instead of limiting the wealth producing opportunities of the elites.

    Any opinions about Bitcoin?

    The desire to have a store of value as a hedge against inflation is undoubtedly a part of this, combined with the "network effect" that digital platforms can offer and digital art / NFTs are one beneficiary of this.

    If you have $million of wealth, how do you ensure it has the same or more purchasing power in 10-20 years time or when you pass it on to your children? It's difficult, which is why the worlds rich don't stay rich and it's a revolving door. There are only so many rare hockey cards, paintings and expensive cars that rich people can own.

    It's not just wealthy individuals either. Companies want to keep the wealth they have earned and not see it devalued which forces them to take on more risk which can be destabilizing to the larger economy (when the risks fail). If true inflation is 10% then you can't accept an interest rate of 1-2% on your bank account or fixed-income bonds. You need to make that money grow at 10% just to stand still. The only way to do that involves increasing risk.

    CryptoCurrency now appears to be pretty stable as a new asset class so I'm not as bearish on it as I was previously. The chance of it going to zero now is probably zero as there are major institutions investing in it and building on it. Earlier this year it had reached a market cap of $1Tn and in just a few months that has doubled to $2Tn. That means it's now worth more than the entire US banking sector.

    Some see it consuming Gold next as the store of value ($12Tn) and then moving on to bonds.

    Fun fact: the earliest description of crypto / bitcoin was made by Henry Ford who imagined a currency based on energy as it was the one thing that couldn't be faked and would remove control of economies from politicians.

    Less fun fact: few currencies ever last 100 years. Most fail and spiral out of control because it's so easy to just "print more". We might imagine the US dollar and British Pound have been around for hundreds of years but they haven't, there have been different incarnations of them. The current US dollar started in the 70's when Nixon took the US off the gold standard.

    When a societies currency fails, bad things tend to happen to that society.

  • Simon
    Simon
    Well, if you want to slow down inflation, you raise interest rates

    I think you have that back-to-front. When inflation rises it causes interest rates to rise because investors demand greater returns in exchange for lending their money to offset the rate that it's devaluing. Interest rates are one measure of true inflation.

    If you lent me $100 and I was only going to pay you $80 back, would you lend it? Only if you were an eedjit.

    If inflation is 20% then that $100 is only going to be worth $80, so you need to get back $120 to make it worth your while (ignore the slightly inexact math for easier illustration).

    Don't imaging that bankers and politicians really control interest rates. They may set them and chose when to change them to some degree, but they are really passengers and if the interest rates diverge from reality too far then that causes different issues in the economy - no one will buy their bonds and they can't raise money.

    What do they do then? Well, they could print their own money to buy their own government debt. No way that can go wrong ... right?

  • GrreatTeacher
    GrreatTeacher

    Investors can demand it, but that doesn't mean they're going to get it. People lose money all the time, not the least of which are retired people living off of investments that weren't hedged against inflation.

    I agree with you that we are in an inflationary environment, however interest rates are lower than they've ever been in modern history.

    If the Fed raises the interbank lending rate, other interest rates rise, like you said, so the banks can make money.

    This slows demand for borrowing and takes the pressure off of the housing market, reducing the inflation of housing prices.

  • My Name is of No Consequence
    My Name is of No Consequence

    Since the Federal Reserve was created in 1913, the American dollar has lost at least 98% of its value. Coincidence?

  • Simon
    Simon
    Investors can demand it, but that doesn't mean they're going to get it.

    Investors can chose to invest elsewhere. The return on bonds needs to be worthwhile in order to sell them.

    I agree with you that we are in an inflationary environment, however interest rates are lower than they've ever been in modern history.

    Right, we're seeing short-term manipulation for political purposes. The point is that it cannot continue indefinitely.

    Incidentally, destroying a currency is one of the tactics of socialism to allow them to take over the system.

    If the Fed raises the interbank lending rate, other interest rates rise, like you said, so the banks can make money.

    They don't set the interbank rate, the banks do.

    This slows demand for borrowing and takes the pressure off of the housing market, reducing the inflation of housing prices.

    It does slow borrowing, but house-prices are subject to other factors such as demand, employment and the cost of building materials and labor.

    Since the Federal Reserve was created in 1913, the American dollar has lost at least 98% of its value. Coincidence?

    Exactly - this is the pattern of all fiat currencies (many don't last that long) and the challenge of storing wealth over extended periods (decades). People traditionally used gold for this.

    Fun fact: the US once outlawed gold and forced people to sell it to them at below market rates, then raised the prices once they had it. The government is not there to protect your wealth - they are there to protect their power over your wealth.


  • Brock Talon
    Brock Talon

    Simon, I read through this thread carefully and at risk of sounding like a total suck-up, it is frightening how much I agree with you on every single point you posted. And then some.

    To answer the question specifically, yes, I am very concerned about inflation But not just the normal kind, rather the runaway hyper kind that destroys the U.S. dollar and the economy of any country who relies on it, including the United States itself.

    I actually think this is the plan of the Lefty cabal. It is the only thing that makes sense to me when they continually propose one hair-brained socialist wet dream plan after another, completely ignoring the very current and real-world disaster of Venezuela, suggesting what they are proposing will somehow turn out differently.

    Fun fact: Currently, 1 U.S. dollar is worth 207,466,000,000 Venezuela Bolivars. 1934, the Bolivar exchange rate was fixed in terms of 1 U.S dollar for 3.914 Bolivar. This makes the Zimbabwe inflation look mild. Venezuela took their currency off the gold standard long before the U.S. did. It is a great modern example of fiscal insanity and a road map and model for every other fiat currency in play now - which is ALL of them.

    The Left loves to tax, regulate, demonize and punish the "evil 1 percent-ers" as well as any company the "greedy rich" control that actually produces wealth and provides income and employment for the country. That's the grand plan and approach for the Lefty Socialists now taking hold of our country. Lone wolves like Joe Manchin are the few Democrats who put any kind of brakes on this madness. But even he has a history of caving in easily only after putting up a weak fight.

    Oh, and when that still isn't enough money (because taking from the rich has its limits... after all, there is only so much you can confiscate/steal) then the Left will print 3 trillion here and 5 trillion there. Pretty soon you're talking real money. Unfortunately, that "money" won't be worth anything when they are done with it.

    Riddle: What is the difference between a roll of toilet paper and the Venezuela Bolivar?

    Answer: The toilet paper is preferred because you can wipe yourself with the toilet paper and it won't hurt.

  • slimboyfat

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