Value of USD

[audreyh1]

The inflation thing - people were very loud and sure for a long time that inflation would go up, maybe way up. Now with commodities dropping so much and oil so weak it seems likely it could stay low longer.

But who knows, 5 years from now......

 

[MichaelB]

The inflation thing - people were very loud and sure for a long time that inflation would go up, maybe way up. Now with commodities dropping so much and oil so weak it seems likely it could stay low longer.

But who knows, 5 years from now......

Yes, that inflation thing. Commodities prices almost tripled between '00 and '14 and US inflation has been minimal. Real sustained high inflation in the US is not likely without similar rates of growth in average wages or large increases in consumer credit.

 

[NW-Bound]

... Commodities prices almost tripled between '00 and '14 and US inflation has been minimal...

China's growth rate had a lot to do with that. But now that China economy growth has tapered, plus so many commodity producers have ramped up their output, commodity prices have cratered.

I think it is going to be more difficult to make money in the next few years. Pundits including Bogle have repeatedly warned investors to lower their expectation. And also, it explains why people pile into any sector that promises some growth, like biotech and high techs such as Google.

 

[audreyh1]

Yes, that inflation thing. Commodities prices almost tripled between '00 and '14 and US inflation has been minimal. Real sustained high inflation in the US is not likely without similar rates of growth in average wages or large increases in consumer credit.

It's pretty amazing that inflation was so low in spite of spiking commodity prices. And now that commodity prices have cratered, it seems it will stay low.

 

[VFK57]

In 1990 I purchased a new Toyota Tercel for $3,200 while similar new car 25 years later is about $15,500. A new town home in 1990 was $195K while same used home is currently $595K. Yet if you are looking 100 years back, the current USD has lost about 95 to 98% of it's purchasing power. Of course there were brief periods of deflation but the long trend is inflation.

 

[Koolau]

In 1990 I purchased a new Toyota Tercel for $3,200 while similar new car 25 years later is about $15,500. A new town home in 1990 was $195K while same used home is currently $595K. Yet if you are looking 100 years back, the current USD has lost about 95 to 98% of it's purchasing power. Of course there were brief periods of deflation but the long trend is inflation.

Are you certain about that date? I just ran across the window sticker for my '82 Tercel and IIRC it was a bit over $6K (only had AC and a cheap radio as options.)

I'm always surprised that we have relatively "low" (a very relative term) inflation since the late '70s/early '80s. We have most certainly "inflated" the currency. Why it hasn't translated into "run away" inflation always puzzles (but, so far pleases me.) YMMV

 

[VFK57]

Are you certain about that date? I just ran across the window sticker for my '82 Tercel and IIRC it was a bit over $6K (only had AC and a cheap radio as options.)

I'm always surprised that we have relatively "low" (a very relative term) inflation since the late '70s/early '80s. We have most certainly "inflated" the currency. Why it hasn't translated into "run away" inflation always puzzles (but, so far pleases me.) YMMV

The MSRP on my Tercel was at about $5,500 but thanks to my professional cars salesperson relative I was able to get it for $3,200.

 

[marko]

In 1990 I purchased a new Toyota Tercel for $3,200 while similar new car 25 years later is about $15,500. A new town home in 1990 was $195K while same used home is currently $595K. Yet if you are looking 100 years back, the current USD has lost about 95 to 98% of it's purchasing power. Of course there were brief periods of deflation but the long trend is inflation.

At the same time, I think we can all remember back to the 70's when $10K per year was considered "executive pay". Costs have gone up but so has income.

 

[Running_Man]

For that new Town home in 1990 with 10% down and prevailing 10% interest rates the PMI was $1,540, and you paid an average of 2.1 points or $3,680 to get the loan

In 2015 at $595,000 with 10% down and prevailing 3.75% interest rate your monthly payment is $1,673 points now average .6 or $3,213 to get the loan.

Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac

In my neighborhood homes were worth about $130,000 and property taxes $2,000 per year in 1990 and now the homes average value is about $185,000 and property taxes average $1,500 per year. Which means the PMI is now $771 down from $1,026, with the savings in property taxes home ownership here is $295 less expensive per month in 2015 than in 1990.

In 1990 new car loans were still typically for 3 years and at the prevailing 11.5% interest the monthly payment would be $197. A 4 year loan would have meant payments of $156.00.

Today a new car at $15,000 with 1% interest for 60 months would mean a payment of $256. A 3 year loan with interest rates as they were in 1990 would mean payments of $495 per month, and the house would have a payment of $4,700 at 10 percent mortgage rates.

 

[Gatordoc50]

For that new Town home in 1990 with 10% down and prevailing 10% interest rates the PMI was $1,540, and you paid an average of 2.1 points or $3,680 to get the loan

In 2015 at $595,000 with 10% down and prevailing 3.75% interest rate your monthly payment is $1,673 points now average .6 or $3,213 to get the loan.

Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac

In my neighborhood homes were worth about $130,000 and property taxes $2,000 per year in 1990 and now the homes average value is about $185,000 and property taxes average $1,500 per year. Which means the PMI is now $771 down from $1,026, with the savings in property taxes home ownership here is $295 less expensive per month in 2015 than in 1990.

In 1990 new car loans were still typically for 3 years and at the prevailing 11.5% interest the monthly payment would be $197. A 4 year loan would have meant payments of $156.00.

Today a new car at $15,000 with 1% interest for 60 months would mean a payment of $256. A 3 year loan with interest rates as they were in 1990 would mean payments of $495 per month, and the house would have a payment of $4,700 at 10 percent mortgage rates.

Where do we go from here, I wonder. Seems like we have boxed ourselves in pretty well.

 

[VFK57]

Are you certain about that date? I just ran across the window sticker for my '82 Tercel and IIRC it was a bit over $6K (only had AC and a cheap radio as options.)

I'm always surprised that we have relatively "low" (a very relative term) inflation since the late '70s/early '80s. We have most certainly "inflated" the currency. Why it hasn't translated into "run away" inflation always puzzles (but, so far pleases me.) YMMV

I apologize, my mistake, the purchase price was $5,200 while MSRP was $7,500.