Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Low Inflation = Social Security projected to have no COLA's for next 3 years
Old 04-02-2009, 07:41 AM   #1
Recycles dryer sheets
shotgunner's Avatar
 
Join Date: Jun 2008
Posts: 454
Low Inflation = Social Security projected to have no COLA's for next 3 years

I thought we had hyperinflation coming?

http://finance.yahoo.com/focus-retir...vingretirement
__________________

__________________
Never surrender what you really want for what you want right now.
shotgunner is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-02-2009, 08:57 AM   #2
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
All of the money being printed will eventually be inflationary.

But until that money has "velocity," it won't be inflationary.

The example I've used in the past is this: I could have a "magic printing press" which could produce $100 bills which are undistinguishable from real currency and which would pass in commerce as real. I could print $3 trillion in these bills, effectively adding $3 trillion to the "money supply."

Is this inflationary?

Not if I stash it in my (theoretical huge) closet or bury it in the back yard. The money has no velocity, it doesn't enter commerce, and it doesn't stoke inflation at all.

If, on the other hand, I inject it into the economy and it starts exchanging hands in economic activity -- if the $3 trillion has "velocity" -- then yes, it WILL be inflationary.

In the current environment, money is having little velocity -- consumers, businesses and banks are hoarding cash. People aren't borrowing or spending much and banks aren't lending much. As long as these entities hoard cash, it's like burying the money until they start spending it again. But until these entities start unleashing some of the hoarded cash, the extra printed money isn't going to be inflationary.

So it may take a while before confidence returns and these entities are ready to start considerably reducing their stash of hoarded cash. And when that happens, when money starts serioiusly regaining velocity in commerce -- be it a few months, a year or two, whatever -- THAT is when all this printed and borrowed money will probably turn inflationary.
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 04-02-2009, 12:47 PM   #3
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 332
I don't understand this comment from the article linked:

"The Congressional Budget Office says in its latest budget estimates that inflation will dip so low that Social Security recipients will not qualify for annual increases in 2010, or for two years after that."

Is there threshhold under which the CPI-W will not trigger a cola increase? I thought as long as there was ANY inflation the the COLA would be equal to it.
__________________
cashflo2u2 is offline   Reply With Quote
Old 04-02-2009, 12:57 PM   #4
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
As I understand things, SS sets the next years increase based on the cumulative year-over year CPI change in the summer. So since last summer was marked by massive increases in fuel and commodity prices the increase for the year was relatively high. Since those price increases from last summer have now backed off, some estimate that the relative measurements of inflation won't exceed last summers numbers for a few (one, or three) years. Therefore some are now predicting flat increases in SS for a few years.

They try to measure a large "basket of goods" and keep track of relative price increases in that basket. SS increases are based on that basket. The basket was up last summer, now it is down somewhat. It will be (perhaps) a few years before the basket catches up with what they gave you.

It's all an artifact of the way they do their measurements and their SS increases.

Anyway that is my understanding. The article didn't give the background.
__________________
MasterBlaster is offline   Reply With Quote
Old 04-02-2009, 02:50 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
hmmmmmm

Quote:
Originally Posted by ziggy29 View Post
All of the money being printed will eventually be inflationary.
the CBO doesnt seem to think so for the next decade
Quote:
The Congressional Budget Office says in its latest budget estimates that inflation will dip so low that Social Security recipients will not qualify for annual increases in 2010, or for two years after that. In 2013 through 2019 -- when projections are less reliable -- CBO estimates annual increases of 2 percent each year, which would be among the lowest.
and when it comes to
Quote:
Originally Posted by MasterBlaster View Post
Since those price increases from last summer have now backed off, some estimate that the relative measurements of inflation won't exceed last summers numbers for a few (one, or three) years...

The basket was up last summer, now it is down somewhat. It will be (perhaps) a few years before the basket catches up with what they gave you.
for each year's increase the CPI just has to be higher than the previous year (and it is calculated for the fed gov's FY which runs oct to sep). so granted this years CPI number at the end of sep may be lower then last years sep number but for there to be no increase in 2011 the sep 2010 CPI number would have to be less than the sep 2009 CPI number, not the 2008 CPI number. and so on.
__________________
jdw_fire is offline   Reply With Quote
Old 04-02-2009, 03:14 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,884
Without checking carefully, I just started another thread on this same subject. My apologies to all.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Old 04-02-2009, 03:16 PM   #7
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by mickeyd View Post
Without checking carefully, I just started another thread on this same subject. My apologies to all.
No problem. I'll lock that thread and direct discussion to here.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 04-02-2009, 04:14 PM   #8
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,322
Quote:
Originally Posted by jdw_fire View Post
for each year's increase the CPI just has to be higher than the previous year (and it is calculated for the fed gov's FY which runs oct to sep). so granted this years CPI number at the end of sep may be lower then last years sep number but for there to be no increase in 2011 the sep 2010 CPI number would have to be less than the sep 2009 CPI number, not the 2008 CPI number. and so on.
Actually, the SS COLA adjustment is calculated from the average of the third quarter (Jul, Aug, Sep) 2008 CPI-W to the same quarter's average for 2009, and so on. However, as you point out, since the COLA is never negative, each year is a new ballgame. My guess is there will be positive inflation from the third quarter of this year to the third quarter of 2010, and that SS recipients will see their monthly checks increase in Jan 2011.

Oh, and BTW, if there is no COLA increase to SS next year, the Medicare part B premium can't be increased (except for those whose part B premiums are means-tested).
__________________

__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Social Security COLA's FIRE'd@51 FIRE and Money 10 03-14-2009 03:15 PM
Social Security if you coast last few years Rich_by_the_Bay FIRE and Money 21 02-25-2007 01:29 AM
Social security? cute fuzzy bunny FIRECalc support 12 09-11-2006 01:47 PM
Social Security Trust Fund is now projected to run out earlier! Cut-Throat FIRE and Money 2 05-01-2006 06:06 PM
Bill Gtross Predicts Low Inflation haha FIRE and Money 3 05-24-2005 11:49 PM

 

 
All times are GMT -6. The time now is 02:52 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.