Thoughts on inflation?

I hope you are right but that politico article scares me! I’m glad we are nowhere close to retirement!

I didn’t say we are fine :-). Kidding. We’ll be ok as well. This is mostly a 2023 problem.

I have a kid graduating in 2023. So I am about 5% concerned.

1 Like

Ours was 12%. We refinanced that home at least five times…lowering the rate and converting to a 15 year mortgage as well.

And our house wasn’t cheap either at the time.

But we also were getting 10% interest on certificates of deposit. I do not think we will ever see that again!

7 Likes

I love your enthusiasm. And I agree that belt tightening can be great. My glass half full side would be thinking other thoughts. But I’m going to add your positivity to the possible equation and outcome.

My kids are a long way from getting settled. But I don’t think salaries are anywhere close to where they were in the 90’s when we bought our first house ( 1997@7%). Not even adjusting for inflation in some cases. I’m more worried about the structural economic difficulties like high unemployment, lagging stock market etc. And my kids won’t have college debt, but our nephews have a ton. So I’m worried about them.

1 Like

Disagree. I personally think they went soft when they suggested 2% was a good goal. (My thinking is that a 2% goal is 3% actual.)

Not sure goals are meaningful. This assumes the Phillips curve is operative. It hasn’t been for at least 3 decades now, except post Covid. The Fed has little control on inflation in either direction. They can give a random number as a goal. Matters little

2 Likes

That was (partially) true at the start of the pandemic. (The other part is Ukraine+our political choice to wean off of fossil fuels.) But now that inflation is getting baked into wage increases, it’s a lot harder to get rid of.

Reading the tea leaves, it appears that Powell has finally recognized that a soft-landing is not happening. (And IMO, never was.)

3 Likes

I think 0.75 % this time was ok. 0.5% next time will be ok, too. My worry is they may keep raising 0.75%. That will be overdoing it and unnecessarily harm the economy. I like Powell but he seems to lag. He tightened too much back in 2018(?), kept policy too loose too long in 2020, now he might be acting too strictly. I hope I am wrong for economy’s sake. Inflation at 4% is more doable and we can live with it. I don’t understand sticking to 2% and raising rates to achieve that. That’s dumb.

Inflation at 4% is a transfer of wealth from the poor to the rich. More so than it is at 2%

2 Likes

What money do the poor have to transfer?
Inflation is a wealth transfer alright, but it’s from creditors to debtors.

1 Like

Didn’t the poor get the stimulus money to cover the 4% part?

Depends. I don’t know how much people got but food prices and energy prices have risen sharply. They often aren’t counted in the basket of goods so inflation can be higher for some than others.
I read that families are paying $460 more per month. Who knows what the source is and the formula. We’re paying a lot more than that.

3 Likes

My thoughts are it sucks and we asked for it. Nobody in office had the political courage to turn off the 24/7 money printing press. It was bound to happen. Agree with the idea that any growth we see going forward will at least not be a mirage.
Im generally not one to overreact to these things, and for sure I will be a buyer of equities at some point. But this is concerning.

#proppedupeconomies

6 Likes

Ask the poor which they prefer; putting up with 4% inflation and keep the job or 2% inflation in recession no job.

FED clinging to 2% looks out of touch to me.

1 Like

Inflation is absolutely killing people who live on a fixed income. I cant imagine what it’s like to be 80 years old, with no ability for gainful employment trying to get by in today’s economic environment.

The Fed has been been propping up the stock market with artificially low rates. Unfortunately, 80 year olds typically dont have as much equities as they tend to become more conservative as they age and now they are getting crushed on food, utilities, and everything else.

5 Likes

And don’t forget flooding the market with cash, i.e., Quantitative Easing, which worked in tandem with low rates. Unfortunately, the Fed was extremely slow to pull back on that too, so Quantitative Tightening just began in earnest (to the tune of $90b/mo pulled out of the system).

But note how loan forgiveness (free money into the system) conflicts directly with the Fed’s QT (taking money out of at the system). The WH’s claim that forgiveness is not inflationary only works when they assume much of student loans would not have been paid back anyway.

5 Likes

The 80 will be dying off, so they don’t have to worry about his vote, lol.

The poor can be easily manipulated.

They transfer their future income by being able to buy less stuff with the same notional amount of money. Within reason equity valuations, and holders of equities benefit through pricing power of corporates.

Just wait until the people who recently purchased overpriced real estate start to default on their mortgages when housing prices fall.

Then there will be a “housing crisis” that “demands” another bailout. Or in the alternative, the government will start to examine “predatory lending practices” because people have “lost money” on real estate.

2 Likes