Do You Expect High Inflation?

[haha]

Hmmm... that's got me thinking of buying some more with my stupid money.

Please, do me a favor and never mention stupid and ISM/OSM in the same sentence.

Ha

 

[Kwirk]

I can not see how the current government spending will not at some point create inflation. For those who do not see this please explain to me how the tremendous increase in national debt, the likely decrease in the value of the dollar, and the printing of large sums of cash will not create an inflationary climate.

I hope there WILL be some inflation as a result. It would mean that there has been some degree of success.

Vast amounts of wealth have been destroyed so I don't see that printing money is currently a problem. If printing persists into a recovery then that could be a problem. And, the way some of the financial deals are structured will actually let the government pull the dollars back out of the economy if there is recovery.

"The likely decrease in the value of the dollar" is the very definition of inflation so, I guess, if we presume that then there is no way around it and the question is not at all interesting. If you simply mean relative to other currencies then the price of French wine may go up but it may not greatly affect domestic prices and could help exports.

We have had stagflation in the past but that was powered by a history of inflationary expectations and that is not a current problem.

If anything I think we are still more in danger of deflation than inflation.

(And, to throw a little gasoline on the fire, I think we should be raising taxes on petrofuels now to raise prices before other countries can raise their prices and keep the increase for themselves.)

 

[FUEGO]

Please, do me a favor and never mention stupid and ISM/OSM in the same sentence.

Well, stupid in hindsight since I bought above $20. But maybe not so stupid at today's quoted price.

Maybe I can say I'll pick up some more ISM/OSM with my "fun money"!

 

[Koolau]

(And, to throw a little gasoline on the fire, I think we should be raising taxes on petrofuels now to raise prices before other countries can raise their prices and keep the increase for themselves.)

OK Kwirk, I'll light the first match. If I thought we had an actual energy policy in this country, I might go along with a tax on imported fuels as a part of that policy. I agree that it would be better to keep the money in house than send it to folks who don't much care for us.

Having said that, we DON'T have anything approaching an energy policy, and ANY other tax is just ANOTHER tax which gives the "ins" a better chance to stay "in" by buying votes. (As always, my disclaimer is that both sides do it so this is not a political statement - its a rant!)

At some point when there is NO other choice left but to approach energy policy in a rational way, we might just get an energy policy. THAT would go a long way toward stemming the inflation caused by energy prices at least. End of rant.

 

[James5v]

It seems to me that our problem in the past has been overspending by everyone and now as a solution we are dramatically increasing spending. If this does create a recovery (as I hope) I am concerned about the ramification of continuing these types of policies. How long can we increase money without increasing wealth?

 

[ejman]

While searching for something else, I ran into this ancient thread. It's interesting that back in March of 2009 85% of respondents thought that high inflation was right around the corner. Is this still the consensus? To me what we are having feels more and more like Japan's experience. i.e. Low interest rates, low inflation for a long time...

 

[audreyh1]

Wow - pretty small percentage voted no back then, and look where we are now!

According to: End Q3 Market.-based Rate Predictions

Anticipated inflation rates for the next:

5yrs: 2.16%. 10yrs: 2.42%. 30yrs: 2.40%

So, it's also probably not "just around the corner".

 

[NW-Bound]

I missed this thread, and found that I have not voted. I would have voted "Yes" though.

It's not 5 years yet since it started. And also, someone has said that the market always manages to make a fool out of the most people.

So, the consensus has been wrong (so far that is). What if we change our collective mind, then the market makes us regret that?

 

[HFWR]

The inflation hawks will get there wish someday, but for now they're tilting at the wrong windmill...

IMHO, of course...

 

[copyright1997reloaded]

Debt that isn't repaid is deflationary. If person a (or Govt a) doesn't pay person b (or Govt B), then person B can't spend as much (or Govt B) which affects person c (or Got C) and so on. Our system had a huge shock in 2008/09, and the deleveraging continues. Many governments (and their central banks) are trying to prevent shock of non-repaid debt by making money "easy", and now effectively printing money via QE like mechanisms.

To date, the majority of 'inflation' has been in goods we need, not in goods we want. This can be seen in things like oil and food, but not in the majority of consumer goods which are not essentials. In some sense, this is "cost-push" inflation. Because of the state of the economy, we do not have much "demand-pull" inflation where large demand causes prices to rise.

Eventually, the deleveraging will wash itself out, and businesses and consumers will sense opportunity ahead. They will hire people, and we will start to get demand generated inflation.

The FED is betting that they can reverse the amazing wash of money that they have created before the tiger (which they have by the tail) turns around and bites. That is, they believe they can reverse QE and draw down the money supply to offset velocity as velocity increases and thus stem inflation before it gets out of control. I have my doubts as to their ability to do this, partly because to do this will bring down asset prices and cause jobs to be lost (with political ramifications). I also think when it shifts, it will happen quickly.

Ask yourself this question. If you could lock-in prices on various goods and services, which ones would be your highest priority? I know for myself, if I could truly lock in prices on food and fuel, I would do so in a heartbeat.

 

[aaronc879]

I voted "no". Looks like I was finally right about something. Almost makes me feel better about getting almost completely out of equities when the Dow passed 12,000 because I didn't think there was much upside potential going forward at that time

 

[ejman]

Wow - pretty small percentage voted no back then, and look where we are now!

According to: End Q3 Market.-based Rate Predictions

So, it's also probably not "just around the corner".

Its amazing that the "market be the expert" forecast is so low so far out. The high inflation drumbeat has been going strong for a while. What is going on?

 

[NW-Bound]

So, I just voted "Yes".

But as I just discovered this thread today, my 5-year period starts from 2012, not 2009.

Cheating? Not fair?

Tough! Life is never fair.

 

[Khufu]

No inflation in the near future as Britain, Europe, China and Japan slide into recession. GDP in the US is slowing down and it's possible that the US will be in recession too. Unless the US govt launches an austerity program out of envy for the UK's current recession, I don't think it is likely.

The inflationistas have been consistently wrong for the last five years for two reasons: they subscribe to an overly simplistic monetary model of inflation and they are convinced of American exceptionalism to the point of ignoring Japan's experience as irrelevant.

 

[rbmrtn]

Fed money printing should generate inflation but it seems most of it is sitting in bank vaults to make their balance sheets look good. I think we'll have to see some large uptick in employment and the economy before inflation kicks in. The 70's was driven mostly by commodities and oil shortage/embargo.

 

[brewer12345]

I expect inflation in specific prices: fuel, food, ammunition, taxes (cost of gubmint). Generalized inflation I imagine will remain quiescent.

 

[NW-Bound]

My utility company proposed a 4.8% increase in electricity rate for next year. After the public protested, they revised it down to 3.9%. That's higher than the CPI, I think.

 

[MichaelB]

I think real growth stays at 1% and inflation rises to 3%, our economic growth is mostly inflation and real per capita GDP is flat. Low grade stagnation. Without real growth public revenues will not increase – as needed to reduce deficit and pay for the current financial rescue (well, hopefully a successful rescue). As gov’t income doesn’t increase we will need higher taxes, which reduces income available for personal consumption. To offset the loss in wealth over the past year the savings rate needs to increase, which also which reduces income available for personal consumption.

The US will be faced with a falling standard of living, which will keep the inflation rate low. The effects of inflation - a loss in purchasing power - will happen anyway.

Three years later, my views are pretty much unchanged. Low real growth, moderate inflation. The US continues to see an overall decline in standard of living. Perhaps by the second half of the decade things start to pick up.

 

[FIREd]

Yes, I suspect we will have higher inflation, though probably not hyperinflation. I also loaded up on TIPS in November (converted cash and GNMA to TIPS) and I am considering buying some i-bonds this year.

I was wrong on inflation, but right to load up on TIPS - made a killing. Funny how it worked out.

 

[traineeinvestor]

Defining "high" inflation as 4% or more.

Given that the Fed has promised to mainatin QE until unemployment reaches acceptable levels, the possibility of inflation picking up is very real. How high? How long? When? I have no idea but I expect it to be more likely than not that it will happen so I voted "yes".

That said, a few years of inflation at 4-5% pa at a time when unemployment is falling is not exactly a major problem (IMHO) for the economy as a whole but would be more of an issue for those relying on fixed pension or annuity incomes and/or who have portfolios that are mostly bonds and cash.

As an aside, many countries are already experiencing inflation at or above this threshold -especially where food gets a higher weighting in CPI calculations.

 

[Helen]

I wish I knew what inflation will be like in the next 6 years. I'm retiring in 2013, but won't receive a COLA on my pension until 2019.

 

[mathjak107]

short term i see more signs of deflation . seems to me more eyes and the media are on the printing of money and inflation.

the world is deleveraging and that by definition is deflating .

longer term i see moderate inflation , nothing to write home about.

with 70% of gdp coming from consumer spending and housing stalled which creates the most spending and jobs i see only slow growth for quite a while ahead.

all we are doing is taking what ever money we all have and giving more to sectors like food ,energy and healthcare at the expense of all the others.

in fact years ago when home ownership was part of the cpi it over stated inflation so they changed it to we all rent instead.

well now renting instead is over stating inflation and if the shiller home index is mixed in we are actually in deflation slightly right now.

what freaked me out is im a wholesaler of over 15,000 different items. i was updating pricing discs for some big accounts and i was blown away how many items fell so much in price over the last 2 years.

 

[timeasterday]

I don't expect big changes in inflation in the near future. But eventually this country has to deal with the debt somehow. We are going to start building some cash reserves and investments in my wife's home country since we will spend our retirement there. My biggest fear is having reached my number in USD but not being able to retire due to the exchange rate.

 

[eytonxav]

short term i see more signs of deflation . seems to me more eyes and the media are on the printing of money and inflation.

the world is deleveraging and that by definition is deflating .

longer term i see moderate inflation , nothing to write home about.

with 70% of gdp coming from consumer spending and housing stalled which creates the most spending and jobs i see only slow growth for quite a while ahead.

all we are doing is taking what ever money we all have and giving more to sectors like food ,energy and healthcare at the expense of all the others.

in fact years ago when home ownership was part of the cpi it over stated inflation so they changed it to we all rent instead.

+1

 

[audreyh1]

Too bad the poll [from 3.5 years ago!] wasn't closed, because it's already changed quite a bit. Originally, I think well over 80% were expecting high inflation, and only around 17% not.