Concerns About Inflation?

[calmloki]

In our old Quicken's "retirement planner" I figure 4% inflation, 2.5% return on investment, about double what we historically spend for an annual budget and a good long life for the gal. We still manage to have some excess funding at EOL, but it is little enough to keep me satisfied. Too much bothers me, so the figgers get jiggered.

 

[ownyourfuture]

It's barely alive and has been so since 2008. It's all white wash, smoke & mirrors, Johnny Carson breaking into a tap dance while the band played Tea for Two. And stop talking about it or people will notice. A few years ago someone here on this forum, when referring to the economy, stated (paraphrasing): The patient didn't recover, he's just been on life support since 2008. I am not an economist so perhaps it's not quite that bad but it can't be good. Don't let the numbers confuse you. Hence the inability/unwillingness to declare normalcy after half a generation.

I concur.
Thanks for the reply.

 

[ownyourfuture]

It all boils down to value of dollar. US debt is now close to $30T.

Even 2% interest on this amount will cost around $600B per year. That will tell anyone (who wants to look rationally) that rationality no longer exists in US financial system.

All is fine and dandy as long as poor schmucks in China, Bangladesh & Vietnam & (commodity producers).. keep sending us the output of their hard labor .. for these funny dollars (zero labor to produce these dollars). There would come a time when those nations will wake up and realize that they have been fooled.

Until then, its Party ON!

Thanks for the reply.

If U count 'other unfunded liabilities' isn't real debt closer to 100 trillion ?

 

[Montecfo]

It all boils down to value of dollar. US debt is now close to $30T.

Even 2% interest on this amount will cost around $600B per year. That will tell anyone (who wants to look rationally) that rationality no longer exists in US financial system.

All is fine and dandy as long as poor schmucks in China, Bangladesh & Vietnam & (commodity producers).. keep sending us the output of their hard labor .. for these funny dollars (zero labor to produce these dollars). There would come a time when those nations will wake up and realize that they have been fooled.

Until then, its Party ON!

I do not disagree that politicians are going to spend us into oblivion. There is just little data to support a different conclusion.

The game plan to bring things into balance is to grow your way out of it, with low rates and reduced spending.

But since there seems to be no current penalty for profigate spending, the current attitude seems to be to grow the economy fast and spending faster.

I do not expect it to end well unless voters demand a change. I do not expect that to happen.

But again, when will the crisis occur? Very hard to say, and I am not sure this is actionable even with knowledge of timing but it is worth considering.

 

[marko]

I've opined on this forum before that over my lifetime I've been warned about Communists, nuclear war, over population, running out of oil, running out of food, nuclear power plants, global cooling, acid rain, the Japanese buying up all of the US, the Saudis buying up all the US, Y2K and global financial collapse among just a few "end of the world as we know it" apocalypses. (oh! and the end of SS)

I just can't get worked up about this stuff anymore. I'm living the same life, doing the same things and going to the same places that I have for my entire 69 years. Not much has changed in my day-to-day as far as I can see.

If I took my money out of the stock market every time some 'expert' said I should, I'd still be working and wouldn't be on this FI forum!

I do believe that thanks to considerably better financial policy we avoided a 'great depression' in 2008 and 2020; I read somewhere that thanks to better controls a 1929 level collapse is practically not possible.

If that is not so, wringing my hands about it isn't going to help and I'll buy the dip.

But some context: My great grandmother died on October 29 1929 when grandpa came home and announced that the backs were closed...dropped dead right there in the hallway.

 

[Theophrastus Bombastus]

As I stated earlier:

"Actually, I do not have a solution, nor do I profess to. My plans would not necessarily apply to anyone else. I want to know what other retiree's asset allocation and planned annual withdrawal rate has been or would be in an economic meltdown. As it is, my lifestyle has been supported by an AWR under 3% for nearly a decade."

I am also debt free. As such, if I had to in an economic collapse, I could conceivably reduce AWR to 1% to maintain my LBYM lifestyle in order to minimize portfolio depletion.

I have a risk avoidant, hands off, multi-legged portfolio on autopilot with assets allocated in roughly equal amounts to equities, bonds, CD's, cash equivalents and real estate along with very small exposure to commodities and natural resources.

Over the years, portfolio appreciation has usually exceeded annual withdrawals.

I, too, was a buyer during the market hysteria last year.

Lastly, I avoid financial porn propagated by all forms of media, though I sometimes enjoy testing my 'BS indicator' by attending 'investment forums' where so-called financial planners, experts, pundits and gurus aim to entice the gullible with empty and deceitfully false statements. These are nothing more than high stakes, modern day equivalents of the old shell game.

 

[Aerides]

As I stated earlier:
<snip>

if you mean to reply to a specific post, it's helpful to use the Quote button and then snip the original if needed, so it's clear to all readers to whom you are referring.

Also, a reminder:

We appreciate new members introducing themselves over here in this forum:

Hi, I am...

Telling us something about yourself makes discussions much more fruitful.

 

[Markola]

I've opined on this forum before that over my lifetime I've been warned about Communists, nuclear war, over population, running out of oil, running out of food, nuclear power plants, global cooling, acid rain, the Japanese buying up all of the US, the Saudis buying up all the US, Y2K and global financial collapse among just a few "end of the world as we know it" apocalypses. (oh! and the end of SS)

I just can't get worked up about this stuff anymore. I'm living the same life, doing the same things and going to the same places that I have for my entire 69 years. Not much has changed in my day-to-day as far as I can see.

If I took my money out of the stock market every time some 'expert' said I should, I'd still be working and wouldn't be on this FI forum!

I do believe that thanks to considerably better financial policy we avoided a 'great depression' in 2008 and 2020; I read somewhere that thanks to better controls a 1929 level collapse is practically not possible.

If that is not so, wringing my hands about it isn't going to help and I'll buy the dip.

But some context: My great grandmother died on October 29 1929 when grandpa came home and announced that the backs were closed...dropped dead right there in the hallway.

100%. It’s always in someone’s interest to keep us on edge. Except for climate, in my understanding, most metrics of every global malady are improving. As for the mounting US debt, most advanced countries are in far worse shape, proportionally. Still, I have a globally-diversified portfolio to hedge our domestic issues.

 

[Chuckanut]

As I stated earlier:

"Actually, I do not have a solution, nor do I profess to. My plans would not necessarily apply to anyone else. I want to know what other retiree's asset allocation and planned annual withdrawal rate has been or would be in an economic meltdown. As it is, my lifestyle has been supported by an AWR under 3% for nearly a decade."

I am also debt free. As such, if I had to in an economic collapse, I could conceivably reduce AWR to 1% to maintain my LBYM lifestyle in order to minimize portfolio depletion.

I have a risk avoidant, hands off, multi-legged portfolio on autopilot with assets allocated in roughly equal amounts to equities, bonds, CD's, cash equivalents and real estate along with very small exposure to commodities and natural resources.

Over the years, portfolio appreciation has usually exceeded annual withdrawals.

I, too, was a buyer during the market hysteria last year.

Lastly, I avoid financial porn propagated by all forms of media, though I sometimes enjoy testing my 'BS indicator' by attending 'investment forums' where so-called financial planners, experts, pundits and gurus aim to entice the gullible with empty and deceitfully false statements. These are nothing more than high stakes, modern day equivalents of the old shell game.

You seem to be doing quite well. Short of acquiring a crystal ball, learning how to read minds, or inventing a time machine, it's hard to see what else you can do to insulate yourself from future uncertainties.

 

[Amethyst]

China has not been fooled, I assure you. Their culture values long-term planning.

Their leadership unquestionably has plans A, B, C and D to take advantage of any foolishness on the part of any rival, especially the U.S.

(I hope this was not too political a statement...wasn't meant to be).

I

All is fine and dandy as long as poor schmucks in China, Bangladesh & Vietnam & (commodity producers).. keep sending us the output of their hard labor .. for these funny dollars (zero labor to produce these dollars). There would come a time when those nations will wake up and realize that they have been fooled.

 

[yhoomajor]

China has not been fooled, I assure you. Their culture values long-term planning.

Their leadership unquestionably has plans A, B, C and D to take advantage of any foolishness on the part of any rival, especially the U.S.

Right.. everyone is genius in their own mind (including Chinese politicians). Just because they have plan A,B, C..and so on.. doesn't mean US & Nato will let them succeed on those plans... (including economic plans). I already see coordinated attempts by US, Nato to sanction chinese companies that pose a serious threat to American global companies (like Huawei et al)

But back to topic of inflation and value of dollar. countries like Bangladesh, Vietnam, China and so on.. have been fed the kool-aid that more foreign currency reserves you hoard, better it is for them. Most of this propaganda started in 80s, 90s and early 2000s by IMF and WB. So while US just clicks couple of keystrokes on a keyboard to generate Trillions of dollars, people of these countries do hard labor. day in day out..and then exchange worth of their hard labor for these fiat dollars.

Now don't get me wrong. I know China has been copying and stealing the US tech all along.. so they did make out ok in the end. But apart from China, there are hundreds of poor countries.. that are still exchanging the output of their hard labor for these fiat dollars... with exchange rates that are easily controlled and manipulated by mega wall street banks (ones US Gov bails out on pretext of national security).

Also... it doesn't have to get to the point of hyper inflation for inflation to bite us. Even a sustained 5-6% real inflation will keep millions of working class Americans and kids that don't own homes.. in poverty. Generation after generation.

 

[mpeirce]

Except for climate, in my understanding, most metrics of every global malady are improving.

Even climate, if you look at deaths. I’ve seen figures that cold is responsible for almost 10 deaths for every death from heat.

There’s a reason Florida and Arizona are growing faster than Alaska...

 

[Montecfo]

Right.. everyone is genius in their own mind (including Chinese politicians). Just because they have plan A,B, C..and so on.. doesn't mean US & Nato will let them succeed on those plans... (including economic plans). I already see coordinated attempts by US, Nato to sanction chinese companies that pose a serious threat to American global companies (like Huawei et al)

But back to topic of inflation and value of dollar. countries like Bangladesh, Vietnam, China and so on.. have been fed the kool-aid that more foreign currency reserves you hoard, better it is for them. Most of this propaganda started in 80s, 90s and early 2000s by IMF and WB. So while US just clicks couple of keystrokes on a keyboard to generate Trillions of dollars, people of these countries do hard labor. day in day out..and then exchange worth of their hard labor for these fiat dollars.

Now don't get me wrong. I know China has been copying and stealing the US tech all along.. so they did make out ok in the end. But apart from China, there are hundreds of poor countries.. that are still exchanging the output of their hard labor for these fiat dollars... with exchange rates that are easily controlled and manipulated by mega wall street banks (ones US Gov bails out on pretext of national security).

Also... it doesn't have to get to the point of hyper inflation for inflation to bite us. Even a sustained 5-6% real inflation will keep millions of working class Americans and kids that don't own homes.. in poverty. Generation after generation.

I don't disagree. And there are structural changes which will move inflation higher. For example, globalization is frequently cited as reducing inflation. But now re-shoring is becoming more popular to secure supply chains. Good reasons for this, but costs will tend to rise.

Also, attempts to regulate/eliminate inexpensive fossil fuel energy sources, such as coal and nat gas, will drive costs higher in manufacturing oriented economies.

So I do expect higher inflation over time, though the current spike is not the new normal in my opinion.

 

[ExFlyBoy5]

I've opined on this forum before that over my lifetime I've been warned about Communists, nuclear war, over population, running out of oil, running out of food, nuclear power plants, global cooling, acid rain, the Japanese buying up all of the US, the Saudis buying up all the US, Y2K and global financial collapse among just a few "end of the world as we know it" apocalypses. (oh! and the end of SS)

I just can't get worked up about this stuff anymore. I'm living the same life, doing the same things and going to the same places that I have for my entire 69 years. Not much has changed in my day-to-day as far as I can see.

If I took my money out of the stock market every time some 'expert' said I should, I'd still be working and wouldn't be on this FI forum!

I do believe that thanks to considerably better financial policy we avoided a 'great depression' in 2008 and 2020; I read somewhere that thanks to better controls a 1929 level collapse is practically not possible.

If that is not so, wringing my hands about it isn't going to help and I'll buy the dip.

But some context: My great grandmother died on October 29 1929 when grandpa came home and announced that the backs were closed...dropped dead right there in the hallway.

Bolded/underlined bears repeating!

 

[yhoomajor]

So I do expect higher inflation over time, though the current spike is not the new normal in my opinion.

Lets hope so. Otherwise income inequality will only increase.

 

[Chuckanut]

China does not scare me that much. I keep thinking if I was the next Elon Musk where would I want to develop my game changing idea? China? I don't think so. Even most European countries have too many issues. So far only the USA lets a young guy from South Africa shake up things up enough to scare the Good Old Boys and Girls.

 

[Markola]

China does not scare me that much. I keep thinking if I was the next Elon Musk where would I want to develop my game changing idea? China? I don't think so. Even most European countries have too many issues. So far only the USA lets a young guy from South Africa shake up things up enough to scare the Good Old Boys and Girls.

Yes, and, to boot, Tesla is the most-American-made of all cars. https://www.foxnews.com/auto/tesla-model-3-most-american-made-car

 

[corn18]

Well, PPI is out and I think CPI is going to go up, a lot. Either that or the producers are going to have to eat the increased production costs. I guess the good news is the CPI does go down if PPI goes down, but I think we will be paying even higher prices in the foreseeable future. Producers won't eat those costs for long and Wall Street won't like the reduced earnings.

Notice how PPI is skyrocketing.

A closer look at the last 20 years:

 

[mpeirce]

Otherwise income inequality will only increase.

What does income inequality have to do with inflation?

And frankly, I never understood the fixation on income inequality. I really don’t care if the folks down the street make more than I do. Good for them!

Though I guess there is a reason envy is one of the big seven.

 

[razztazz]

What does income inequality have to do with inflation?

And frankly, I never understood the fixation on income inequality. I really don’t care if the folks down the street make more than I do. Good for them!

Though I guess there is a reason envy is one of the big seven.

Who says it's envy? I know, some people like the sound for it. Sounds like defensiveness most of the time it's invoked. Noticing something and maybe deducing some possible reasons for it and the effects it might be having doesn't indicate envy even tho, yeah, those people are always there. Like the pay no attention to the man behind the curtain people are always there.

 

[razztazz]

Lets hope so. Otherwise income inequality will only increase.

Hey here's one. The top .1% (or pick the designated demographic) are actually saving us from inflation. As GDP grows (out the chimney for 50 years) and people get less of it (generally flat wages for 50 years) and fewer get more and more of it, and off-shore it because they never trickle it down proportionately, (even the Rich can only buy so much stuff, if they did they wouldn't be getting richer), that leaves less money available for everybody else in the economy. The opposite of inflation. Yes, being humorous but it does seem to be how the econo-math works out. And I doubt they're inclined to cause death and destruction by suddenly unleashing all that money to be used.

 

[Montecfo]

Hey here's one. The top .1% (or pick the designated demographic) are actually saving us from inflation. As GDP grows (out the chimney for 50 years) and people get less of it (generally flat wages for 50 years) and fewer get more and more of it, and off-shore it because they never trickle it down proportionately, (even the Rich can only buy so much stuff, if they did they wouldn't be getting richer), that leaves less money available for everybody else in the economy. The opposite of inflation. Yes, being humorous but it does seem to be how the econo-math works out. And I doubt they're inclined to cause death and destruction but suddenly unleashing all that money to be used.

There is something to that.

Here is another: efforts to combat climate change will raise costs of virtually everything, making it harder for people to pull their way out of poverty and improve their lot.

 

[corn18]

There is something to that.

Here is another: efforts to combat climate change will raise costs of virtually everything, making it harder for people to pull their way out of poverty and improve their lot.

A similar wealth divide happened in the gilded age of the roaring 20's. That seemed to fix itself. Post WWII evened things out nicely as well and there was no wealth gap until the Reagan era and then the gap started to widen. I don't think it's anyone's fault, but it will be fixed one way or another and probably not by policy or law. The economy is kindof like Mother Nature. We can abuse the crap out of them but they will always win. Hopefully we survive. I can assure you the earth will still be here a million or even a billion years from now.

 

[daylatedollarshort]

I don't really worry about general inflation because I can't control that. It is what it is. We've already positioned our assets for the possibility of high inflation. We can make some tweaks, but there isn't a lot more to do there. What I can control going forward is control our personal inflation and there's tons of stuff I can do about that. If every year we can live better for less and our personal inflation rate is negative, yet our SS, pension, TIPS and home value go up due to high CPI type inflation, then we should come out ahead.

 

[Dtail]

I don't really worry about general inflation because I can't control that. It is what it is. We've already positioned our assets for the possibility of high inflation. We can make some tweaks, but there isn't a lot more to do there. What I can control going forward is control our personal inflation and there's tons of stuff I can do about that. If every year we can live better for less and our personal inflation rate is negative, yet our SS, pension, TIPS and home value go up due to high CPI type inflation, then we should come out ahead.

Agree. Personal inflation rate is what matters more, although there are certain expenses overall which can't be totally controlled.