Puzzling over inflation in the next 30 yrs.

[NW-Bound]

Grass-fed beef is a healthier meat than corn-fed, but not as fatty and tender. And indeed corn is not a natural food for cows, though we force them to eat it.

Pigs and chicken on the other hand need carb from grain. The conversion from corn to chicken meat is nothing short of amazing. It takes less than 2 lbs of corn to get 1 lb of chicken meat. If humans were so efficient with our food, we would all weigh 1000 lbs.

Cattle are raised by letting them graze free range, so they do grow up on grass. It is only in the last few months of their life that they are fed corn in feed lots, in order to fatten them up. This is not a common practice in other countries.

[gcgang]

Owning the great companies of the world has been a very good way to protect and even enhance your purchasing power over the long term. If you're worried about inflation, own equities that can increase the price of their products/services.

[YVRRocketSurgery]

While price inflation is a concern that's on my radar in terms the purchasing power my nest egg will be able to produce, I do have faith that the BoC (and the Fed) will continue to have a policy to target inflation at 2%. Not blind faith though as there are issues with methodology and such. The BoC also reviews this policy every 5 years and can make various changes.

Interesting, even though certain things have gotten notably more expensive (property taxes, utilities, etc) our core spend isn't increasing at a similar rate. I likely need to review our spend in more detail to identify how we're compensating.

Also, one thing that kind of puzzles me is that I read a lot articles of how QE and loose monetary policy was eventually going to lead to significant inflation issues. That hasn't really happened (knock on wood) but I love to understand how that money got absorbed and what the corresponding impacts are.

[Senator]

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Originally Posted by MRG A few years of raising children for eggs and meat.

I did not know you could get eggs from them, but the meat idea is a great one.

[Senator]

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Originally Posted by razztazz Originally Posted by Senator SS will go up Will it?

Yes. It may be means or assets based, but you can be assured that if there is enough voters receiving it, it will go up at least as much as inflation.

[mrfeh]

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Originally Posted by LRDave I am sure I am missing something obvious...... TIA for your comments.

If this is a serious concern of yours, buy TIPS.

[VFK57]

There are many pundits who try to scare people by very high inflation and "only them, who knows how to invest in order to survive". Many of them are simply trying to sell their services by scaring people. Yet as most of us I am also worried of prospects of higher than "normal" inflation. Diversifying probably may help if it comes to higher inflation. Socks, real estate, land ?

[Totoro]

Putting money in socks won't help much with inflation.

[Hamlet]

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Originally Posted by NW-Bound Don't know about cows, but pigs and chickens should thrive on quinoa. It may even make the meat better. The problem is quinoa is too expensive to feed them.

If you think it is expensive now, imagine when people are trying to use it instead of corn or soy.

Our whole food supply revolves around dirt cheap corn and soy. That could be changed in a crisis, but probably not in time to avoid famine.

[Hamlet]

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Originally Posted by Running_Man I note there is zero concern for the far bigger danger to any retiree - continued and persistent deflation.

I have large concerns in that area. I just didn't express them because the original question was about inflation fears.

Deflation is truly terrifying.

[MRG]

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Originally Posted by Senator I did not know you could get eggs from them, but the meat idea is a great one.

Damn autocorrect.

[MRG]

Quote:

Originally Posted by NW-Bound Grass-fed beef is a healthier meat than corn-fed, but not as fatty and tender. And indeed corn is not a natural food for cows, though we force them to eat it. Pigs and chicken on the other hand need carb from grain. The conversion from corn to chicken meat is nothing short of amazing. It takes less than 2 lbs of corn to get 1 lb of chicken meat. If humans were so efficient with our food, we would all weigh 1000 lbs. Cattle are raised by letting them graze free range, so they do grow up on grass. It is only in the last few months of their life that they are fed corn in feed lots, in order to fatten them up. This is not a common practice in other countries.

+1

The average chicken goes from hatch to slaughter in 6 weeks! Partly the breed (Cornish cross), but also the feed. If these chickens are allowed to grow much bigger they're legs are likely to break.

[samclem]

Quote:

Originally Posted by Hamlet Our whole food supply revolves around dirt cheap corn and soy. That could be changed in a crisis, but probably not in time to avoid famine.

"Famine" might be a bit of an overstatement. Meat production in the US is an inefficient way to make protein, and the US diet already includes much more protein than we need for optimum health. Even in the event of a widespread failure of corn or soy crops, the farmland we have will produce enough calories to keep everyone afloat, and pigs, hens, etc will eat a lot of different things and produce enough protein for adequate health. The only problem would be US purchases of meat from poorer countries overseas when prices go up--we're adequately wealthy to do it, and those populations might be deprived of adequate protein unless trade restrictions are put into place.

[razztazz]

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Originally Posted by Senator Yes. It may be means or assets based, but you can be assured that if there is enough voters receiving it, it will go up at least as much as inflation.

Well this is very encouraging as you seem very sure of it.

[Hamlet]

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Originally Posted by samclem "Famine" might be a bit of an overstatement. Meat production in the US is an inefficient way to make protein, and the US diet already includes much more protein than we need for optimum health. Even in the event of a widespread failure of corn or soy crops, the farmland we have will produce enough calories to keep everyone afloat, and pigs, hens, etc will eat a lot of different things and produce enough protein for adequate health. The only problem would be US purchases of meat from poorer countries overseas when prices go up--we're adequately wealthy to do it, and those populations might be deprived of adequate protein unless trade restrictions are put into place.

How long would a switch take to implement though? Say the corn and soy crops fail throughout the Midwest some autumn. Our farmland may be able to produce something else by next fall, but I think it would make for a pretty ugly year. Also, if the failure was caused by drought, there is no guarantee that something else could be grown in quantity the next year.

Note also that everything in our country is set up to maximize production based on corn and soy. Suddenly switching all those millions of acres to something else is going to be hard to do with the equipment and people who haven't grown anything else in large quantities for 40 years. Think of all the food on the shelves at stores that require large quantities of corn/soy. What is going to happen to the economy when those products either can't be made or are massively more expensive?

The inflation of food costs could be extraordinary, and our production of many, many products would be impacted.

I was originally talking about something today that could cause stagflation like the oil embargo did. This is the first thing that came to mind.

[samclem]

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Originally Posted by Hamlet How long would a switch take to implement though? Say the corn and soy crops fail throughout the Midwest some autumn. Our farmland may be able to produce something else by next fall, but I think it would make for a pretty ugly year. Also, if the failure was caused by drought, there is no guarantee that something else could be grown in quantity the next year.

I just don;t think it's nearly the risk for the US as for some other countries, and that there are other more likely causes for big US inflation than an agriculture crisis.
1) Food doesn't make up much of the average US consumer's spending--about 10%, and that includes eating out (so, the actual food portion of the bill is only a fraction of that). Overall, it's probably about 7% of the average consumer's spending, so even if food prices doubled (which would take a heck of a root cause) it wouldn't be a huge issue for most families.
2) Agriculture doesn't make up a huge part of the US economy--less than 6% of GDP.
3) The US is big enough and has enough geographic diversity in our agricultural areas that a drought widespread enough to reduce corn or soy production by 50% nationally would be very unlikely. (I'd guess that, given the current prevalence of monocultural plantings that a surprise epiphytotic event is more likely--but still not likely).

Anyway, who knows. I hope I'm right and that we never have a huge crop failure, as it would be a bad thing (more for the rest of the world than for the US, though). We'd probably buy our way out of it, but somebody would go hungry.

[ESRwannabe]

High inflation is extremely unlikely. My base case is stagnation, worst case is outright depression. I base this on demographic data and upcoming technological advancements.

[Koolau]

11 years into my 30 year plan, I worry less about "high" inflation (like we saw in the late 70's early 80's) but worry more about "hyper" inflation (20%, 50%, 100%). Gummint has some control over inflation, but I think we may have set ourselves up for worse inflation than we can handle. The debt increase has been staggering (anyone ever divide 330 million people into $20 trillion?) If interest rates have to rise, service on the debt could force us to print more, causing more interest rate hikes, etc. etc. Eventually, wheelbarrow economics could rule. I think the chance of this in my life time is relatively low - but not out of the question. Right now, a strong economy (which can lead to moderate inflation) would seem the only thing that could (temporarily) permanently stave off BIG inflation. YMMV

[Hamlet]

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Originally Posted by samclem I just don;t think it's nearly the risk for the US as for some other countries, and that there are other more likely causes for big US inflation than an agriculture crisis.

I was specifically talking about big inflation without big economic growth, which is reasonably rare in history for countries that don't have debts denominated in foreign currencies.

It usually takes some sort of supply-side shock. This was the only obvious one that came to mind. I can't think of anything vital to production that we are likely to experience a massive shortage of.

What other potential causes of stagflation come to mind?

[Hamlet]

Quote:

Originally Posted by Koolau 11 years into my 30 year plan, I worry less about "high" inflation (like we saw in the late 70's early 80's) but worry more about "hyper" inflation (20%, 50%, 100%). Gummint has some control over inflation, but I think we may have set ourselves up for worse inflation than we can handle. The debt increase has been staggering (anyone ever divide 330 million people into $20 trillion?) If interest rates have to rise, service on the debt could force us to print more, causing more interest rate hikes, etc. etc. Eventually, wheelbarrow economics could rule. I think the chance of this in my life time is relatively low - but not out of the question. Right now, a strong economy (which can lead to moderate inflation) would seem the only thing that could (temporarily) permanently stave off BIG inflation. YMMV

I can't think of an example of that ever happening when the debt owed is in the currency of the country itself, though. Is there an historical example of this? All of the hyper-inflation scenarios that I can think of involved countries that owed debts that were not in their own currency.

The things that make interest rates rise also almost always involve things that increase the ability of the government to generate tax revenue, ie full employment and rapidly rising wages.

I think a supply-side shock is needed to generate the stagflation scenario.