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Old 02-06-2018, 03:02 PM   #21
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Originally Posted by Amethyst View Post
Actually RAE, we both got "annuity adjustment" notices for February. They didn't look "right", especially since I was expecting a lower number because the new (higher) FEHB and dental deductions always show up in Feb (not Jan). So I went online and compared with January's annuity numbers. Definitely more than $200 additional for each of us.

If it had been a tiny difference, I would not have noticed.
Yes, I meant to say February, not January. I checked my Feb. statement again, and there is no change in federal withholding at all from what I had in there for 2017. I'm pretty sure OPM is not supposed to make any changes to that kind of thing (for federal pensioners) unless you request it. Strange that they just decided to decrease your withholding for some reason.
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Old 02-06-2018, 05:49 PM   #22
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... Can someone explain the connection between inflation and the national debt? I don't see it, but that doesn't mean there isn't one. ...
I don't think this question got answered.

There are a couple of things, one IMO kind of cosmetic and one fairly important:

First, the debt as a % of GDP will go down because the debt is a fixed dollar amount and inflation increases apparent GDP. A country's debt is usually evaluated as % of GDP so this makes us look better. The flip side of this, though, is that the wastrels in Washington might look at a declining debt/GDP ratio as an opportunity to take on more debt.

More importantly, inflation lets us pay debt off with depreciated dollars -- essentially a discount for us and a significant one at that. This may also permit other countries who have borrowed in dollars to also pay their debts at a discount, though it's subject to the question of how their own currency exchange rates change relative to the dollar.

So the short answer to your question is: Yes, the two are connected in a way that makes inflation good.
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Old 02-06-2018, 05:54 PM   #23
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I don't think this question got answered.

There are a couple of things, one IMO kind of cosmetic and one fairly important:

First, the debt as a % of GDP will go down because the debt is a fixed dollar amount and inflation increases apparent GDP. A country's debt is usually evaluated as % of GDP so this makes us look better. The flip side of this, though, is that the wastrels in Washington might look at a declining debt/GDP ratio as an opportunity to take on more debt.

More importantly, inflation lets us pay debt off with depreciated dollars -- essentially a discount for us and a significant one at that. This may also permit other countries who have borrowed in dollars to also pay their debts at a discount, though it's subject to the question of how their own currency exchange rates change relative to the dollar.

So the short answer to your question is: Yes, the two are connected in a way that makes inflation good.
Except that higher inflation pushes interest rates up, which makes the debt more expensive. Trying to inflate our way out of debt can backfire.
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Old 02-06-2018, 06:06 PM   #24
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Except that higher inflation pushes interest rates up, which makes the debt more expensive. Trying to inflate our way out of debt can backfire.
Everything is connected, of course. But I think this effect exists only for new debt and existing TIPS, not for the bulk of the (fixed rate) debt already out there. So as we roll over debt, our inflation history will affect the rates buyers will demand and they will of course go up. I was fortunate enough to get a lock-in week of education on international finance from a couple of Harvard professors (thank you megacorp) and their feeling was that inflating our way out of the debt would be effective.
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Old 02-06-2018, 07:05 PM   #25
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Yes, inflation will make paying old debts a piece of cake. However, if you still need to borrow money and the new debts now have that higher interest rate, how do you unwind it?

Of course, one can stop getting new debts, but what is the chance of that? If you were able to not borrow money, you would not have problems in the first place.
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Old 02-06-2018, 08:21 PM   #26
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Yes, inflation will make paying old debts a piece of cake. However, if you still need to borrow money and the new debts now have that higher interest rate, how do you unwind it?

Of course, one can stop getting new debts, but what is the chance of that? If you were able to not borrow money, you would not have problems in the first place.
To keep interest rates low for the Fed, I have heard that GS is paid to purchase treasuries from the Fed at the Auction at a low interest rate. From there, the Federal Reserve buys the debt back.

If it was to go to a full auction, the debt interest may be quite a bit higher.

So, the interest on the National Debt can be manipulated.

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Not to derail my own thread, but this struck a small nerve...OPM took it upon themselves to "increase" our pension checks by a total of more than $400 a month, by reducing the Federal withholding. Yet every online calculator says the Amethysts will not see any tax savings at all, and may even pay a bit more.
Are you paying more taxes due to the SALT limit? I believe you have a $10K max deduction, whether you are married or single. I can see a divorce strategy that could be used and would help some tax situations.
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Old 02-06-2018, 09:23 PM   #27
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Can someone explain the connection between inflation and the national debt? I don't see it, but that doesn't mean there isn't one.

I do know that when there's more money floating around that could lead to inflation...everyone getting a bonus etc.
There is really no direct connection between inflation and the national debt. There is a theoretical link that when the Federal Government borrows money, it crowds out private borrowing, and increases rates. Simple supply and demand.

Since the Fed can basically print money with borrowing tactics, there really is no crowding out. Printing money dilutes the currency base, but that also does not directly translate to inflation.
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Old 02-07-2018, 06:47 AM   #28
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Yes, I meant to say February, not January. I checked my Feb. statement again, and there is no change in federal withholding at all from what I had in there for 2017. I'm pretty sure OPM is not supposed to make any changes to that kind of thing (for federal pensioners) unless you request it. Strange that they just decided to decrease your withholding for some reason.


I noticed my w/h did not change for Jan or Feb so I dug deeper and see that payers have till end of Feb to implement the new formula for withholding.
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