Inflation

[smashdn]

This is an economics discussion, not a political one.  Please keep it that way to avoid it getting locked.

 

As a college grad in 2007 I never really imagined that one day I would be making the salary that I am now.  I figured then, if it ever did happen, it would be due to darn near running a company.  However, I have less responsibility in my current role than I have in the last seven years professionally.  Less direct reports and less of the "pie" for which I am trained to manage.

 

That being said, that salary still basically has the same buying power as it did in around 2009.  I have more retirement savings but with the losses I have experienced coupled with the lessened value of currency, I may have actually taken a several years set-back.

 

The housing market is stupid here.  Nice homes, what I would classify as 1/4mil homes, are selling for 1mil due to scarcity and inflation.  My wife is in construction and has been for about two years now.  Spec homes they were building and selling for ~159k (which I felt was high then for the square footage and finish, and largely driven by location) are now selling at 300k.  The actual profit on the building and sale is still near the same however, which is to say it is actually less due to inflation. 

 

I don't really know what my point was in all this but was maybe just to talk it through with you guys. 

[Dpavs]

I can't even begin talk about the current inflation without getting into politics so I guess I can't comment.

Wait... as I look over the market, there is one thing I can say...

 

Edited October 20, 2022 by Dpavs

[larrybud]

Speaking strictly of numbers: The numbers reported are BS. It's much higher. They have changed the formula over the years which make it look lower than it is.

 

Using the same formula as they did in 1980, we are around 16-17% YOY.

[NJBigFish22]

There really is no way to discuss inflation without bringing politics into the discussion. Because even a discussion about the supply chain, current labor market or energy, all leads back to politics.  I agree with Larrybud, they change the formulas to fit the narrative they want or not project the actual situation.

[vandyfan]

It is just my somewhat basic understanding that in order to truly kill inflation they will need to get the Fed funds rate at or near the current inflation number. That would mean you would need a heap more rate hikes to get there which is unlikely to result in a "soft landing" but I haven't heard the fed speak as much in those terms (lately). Seems like they are at least trying to signal that taming inflation is the main goal above all else. 

 

On the plus side, I did get into some iBonds 6 months ago which are doing quite well. Unfortunately you can only buy $10k per year so it isn't really an effective hedging strategy for those with even moderately sized portfolios. 

Edited October 20, 2022 by vandyfan

[DFS PFD]

Inflation is fundamentally a topic based in policy decision, which is....politics. May as well lock it up now because there's no meaningful discussion to be had ignoring the root cause of all of this. 

[smashdn]

14 minutes ago, DFS PFD said:

Inflation is fundamentally a topic based in policy decision, which is....politics. May as well lock it up now because there's no meaningful discussion to be had ignoring the root cause of all of this. 

 

How about we discuss the impacts and implications of inflation then and not the underlying causes?

 

Luckily, I have not seen an impact yet to my golf.  Admittedly, I live in an area where golf round prices have remained relatively flat and have always been suppressed compared to the rest of the country.  You could and can still find 18 hole rounds for around 30-35 bucks.  Everything else surround greens fees has ticked up though.  Cokes, balls, gloves, tees, etc. 

[golfwb]

It has really changed my value of the dollar.

I have needed a new truck for years. I can vividly remember saying, "I'm not paying $48,000 for a new pickup thats ridiculous"

Now I'm looking at the same trucks 5 years later with 50,000+ miles on them for $44,000 and thinking, "Well thats a pretty good deal"

My 2cents

[DFS PFD]

1 minute ago, smashdn said:

 

How about we discuss the impacts and implications of inflation then and not the underlying causes?

 

Luckily, I have not seen an impact yet to my golf.  Admittedly, I live in an area where golf round prices have remained relatively flat and have always been suppressed compared to the rest of the country.  You could and can still find 18 hole rounds for around 30-35 bucks.  Everything else surround greens fees has ticked up though.  Cokes, balls, gloves, tees, etc. 

New model year drivers will be north of $600 for some OEM's this year, iron set prices are the through the roof as well. The cost of rounds per golf hasn't gone up proportionally around me either admittedly, but all of the cost of goods and tangent expenses associated seem to pacing with inflation if not slightly ahead. 

[ChaosTheory]

For most of my life I’ve thought, “This has to implode.”  So far it hasn’t.  But it kinda has to.  The purpose of rate hikes is to force people to reduce borrowing and spending, which should stop the price and wage increases.  My advice is to think about what this will mean for your livelihood and finances and act accordingly.  Choppy waters ahead.

PS: My dad came of age during the Depression.  He said that if you wanted a new car but could wait, you waited until next model year because the price would be less than this year.  Deflation.  Hard to imagine.

 

[mshills]

Several references to “they” in this thread. Who are “they”?

 

Agree this is a difficult topic to discuss without politics. I will try. Even in a small economy, when you increase the quantity of currency available, prices will rise. Maybe not right away, but it will happen. For example, ease of borrowing for education has contributed to and could be the major cause of rising prices for higher ed. 

 

That consequence may or may not be better than the alternative, that depends. 

[Arafel]

Get rid of inflation....get rid of the federal reserve. The federal reserve is like the holy Roman empire......it was neither holy or roman.

[Jayjay_theweim_guy]

3 hours ago, larrybud said:

Speaking strictly of numbers: The numbers reported are BS. It's much higher. They have changed the formula over the years which make it look lower than it is.

 

Using the same formula as they did in 1980, we are around 16-17% YOY.

+1 Shadowstats.  (Although their methodology is likely wobbly too.)

 

Inflation is great for debtors, and our Federal Government is one of the biggest debtors going...QED.

 

I too, did not think I'd be making this money as basically a minion.

[Ghost of Snead]

Just paid $5 for a dozen eggs @ Publix in Georgia when they were less than $2 a couple of years ago. Not sure how anyone earning less than $15/hour can make ends meet, especially in states where gas in through the roof. Not even a week-to-week proposition anymore ...

[bscinstnct]

I remember when you could get a slice and a soda for 45 cents!

 

 

Now I payin like $40/lb for halibut 😳

[bscinstnct]

2 hours ago, Jayjay_theweim_guy said:

+1 Shadowstats.  (Although their methodology is likely wobbly too.)

 

Inflation is great for debtors, and our Federal Government is one of the biggest debtors going...QED.

 

I too, did not think I'd be making this money as basically a minion.

 

If you’ve borrowed at a fixed rate, yes inflation can benefit borrowers.

 

But as rates rise the government is still borrowing at the same exorbitant levels and now has to pay higher interest on the new debt it issues. 

[dan360]

I don't believe it's inflation in the politically driven economic sense.   I believe it's a seller's market for goods at the moment due to the massive supply chain disruption that is still ongoing due to how the global economy is dependent on a near perfect cycle, and any change in that cycle causes turmoil.   

 

Once marketers and analysts figure out the price point where demand softens ($100 plywood), they will pull back just a bit and consumers will be happy to pay the new 'cheaper price' ($55) without realizing the market could bear it back to what it was before ($28.50)

 

Capitalism.  

 

If people would stop buying stuff in panic modes, or 'FOMO', or every other stupid reason humans have become "consumers" then the market price will reflect that.  Until then, capitalism will capitalism until there isn't any capital left to ism over.

Edited October 21, 2022 by dan360

[smashdn]

My inflation barometer is Arby's roast beef sandwiches.  How many will $5 buy?  Once upon a time there was five for five and life was good.  Then it became four for five mix and match with the beef and cheddar sandwich.  It has since continued to decline.  I just checked and a classic roast beef at the location nearest my present location is $4.19 sans tax.

 

Sad times indeed.

[MtlJeff]

I'm very fortunate to not be affected by this , but i definitely see the challenges in Canada too for many. The suburb i grew up in which is 25 minutes from MTL is borderline unlivable right now if you are not in the top 2-3% of earners, and 3% is cutting it close. Almost any house went for over 1M since 2020 unless it needed like 200K of renos. 

 

A family of like 4, must spend 500-600 a week easy on groceries right now. some days i buy like a few things and i'm like "wait that's 70$?" LOL

 

You could easily be spending 5K a month on food and mortgage to live in a suburb half hour from the city. With our taxes that's a family income well over 100K before you get into school, clothes, sports, insurance, phone bills, electric bills....

 

Ummm....Not sure how so many people are supposed to do this. I don't know how they ARE doing this (i assume tremendous debt in many cases unfortunately)

 

I don't know enough about the mechanisms of everything to say why this is happening ( i mean i understand basic capitalism and supply and demand)....But it seems to be out of control and unsustainable, we have to be headed for some kind of terrible correction....which might then affect me....so i'd like to avoid that. 

 

Anyway, yup not great

[bekgolf]

...

Edited October 22, 2022 by bekgolf
tmi

[gsrjc]

So how long do folks think this will last?

[Kmagnuss]

13 hours ago, gsrjc said:

So how long do folks think this will last?

Until "the great default".  I just coined that phrase.  T shirts to come.  (JK)

[ThinkingPlus]

13 hours ago, gsrjc said:

So how long do folks think this will last?

Inflation? At least 2 more years.  This thread? Surprised it's still going right now.

[airjammer]

13 hours ago, gsrjc said:

So how long do folks think this will last?

In America will at minimum last as long as it takes for the “great reset” to come about. I don’t think everything that you read about the “great reset” will happen mainly just the rest of all the currencies. Reportedly, there is about 1 trillion dollars still in people’s bank accounts from the stimulus money sent out that they are trying to get you to spend one way or another. 
 

At this point all the people much much  smarter than me. say it’s impossible not to happen. There aren’t any more levers to pull to keep this train a rollin. “They” already got women into the workforce, which doubled the the amount of workers available and “they” already convinced everyone to spend every dime they make plus more thru financing. 
 

We have already printed enough money from future tax dollars that it can’t be serviced and since we are so heavily leveraged in every aspect of the economy any downturn could be really severe. 

[RobotDoctor]

Fiat currency, out of control congressional spending and an open printing press, not a good recipe to curb down inflation.

[TwistedSister]

14 hours ago, gsrjc said:

So how long do folks think this will last?

IMO until fossil fuels are being produced domestically to bring the supply/demand into better balance. And we all know when that is likely to occur?

[smashdn]

I have a family of five.  My grocery bill was naturally going to go up over time due to them little rug rats eating more.  BUT  I used to get out of the grocery store and got what was needed for the week more or less for $100.  Yesterday it was $148.  Sunday before when we did "normal" grocery shopping it was $178.  I will also stop in to a smaller grocery store on my way home if anything was forgotten or just needed for that night's dinner so sometimes that comes to $15-25 depending.  We aren't extravagant buyers either.  Normal fruits and vegetables are what is expensive relative to what you are getting.  I had always heard eating healthy was expensive compared to buying processed foods.

 

Good thing I hunt.  We are getting ready to have a big freezer purge in the coming weeks as we head into fall and winter.  Need to rotate stuff out and make room for fresh going in.

[bscinstnct]

19 hours ago, gsrjc said:

So how long do folks think this will last?

 

The indicators are already flashing the brakes have slammed on the economy 

 

The fed funds (now 3.25) long term target of 4% will be hit after the next raise but they said they were ramping it to 4.75 before they ease.

 

Could be the economic data gets so bad they need to signal a pause after the next .75 raise

 

So, inflation could be heading lower pretty quickly now

 

Flash PMI data show U.S. economic downturn ‘gathering significant momentum’ in October, says S&P Global

 

https://www.marketwatch.com/amp/story/flash-pmi-data-show-u-s-economic-downturn-gathering-significant-momentum-in-october-says-s-p-global-11666621050

 

 

Edited October 24, 2022 by bscinstnct

[vandyfan]

If I can be a (somewhat) positive light here, the US dollar is powerful at moment. It is receiving a boost from tightening monetary policy (obviously) but also the flight to (relative) strength in US assets as a result of what we can politely call "global unrest" elsewhere(s). Most analysts lean towards the dollar's value staying strong as long as pandemic and Russia fears/threats remain. 

 

I think the key number that policy makers are looking at (beyond inflation) is unemployment. Unemployment fell back to 3.5% which is around the post-pandemic low. Unemployment probably needs to be close to 4% before that signals positive changes (remember 3.5% is basically "full employment" by Moody's standards).

 

Likely there will be intense competition for deposits at the banks (already starting) which intensifies in 2023 as the money supply gets reduced (M2 for you nerds). Currently we are seeing rapid loan growth AND M2 decreases which is a tough capital ratios and liquidity situation for banks to be in. 

 

Also, just thinking out loud here, the speed of this run up in mortgage rates is....concerning:

 

Edited October 24, 2022 by vandyfan

[gsrjc]

At least we’re not the UK.