4 ms·

Treasuries and money markets basically return zero after inflation. So, at least more than zero.

by dmoy 7y ago

perl4ever 7y ago
I never understood how anything can return more than zero after inflation "in the long run". If it did, then over time people with that asset would have all the wealth. But if they did, then they would buy things with it, raising prices of everything else.
- dmoy 7y ago
  You may want to peruse some of the econ stuff from mit ocw: https://ocw.mit.edu/courses/economics/ https://ocw.mit.edu/courses/economics/ Things don't return a lot over zero in the long run. Maybe 5-7% in the absolute best case for long term returns. Enough that even a million dollars generates maybe less than $40k of reliable income. Most people need to expend so much of their income just to live that this mostly doesn't affect the average person. But yes, the rich get richer. They don't always buy things proportionally more, some of it just sits there.
  - perl4ever 7y ago
    I never know if "the rich get richer" means the people on the tail of the distribution now will be farther out in the future, or if it means the people on the tail of the distribution in the future will be farther out than the people on the tail now.
- throwing838383 7y ago
  That's actually a very good point. That's kinda why Housing will always return 0 (real return - not including all the costs, like property taxes, repairs, HOA, insurance, etc) in the long run. And if we're actually making progress on housing, it'll return negative returns. Now as for other stuff, returns can be greater than 0 because there's more stuff to buy, later on, hence greater than what there is today. There are two components to long term returns above 0: population growth and productivity growth. In the past century we've done quite well on both fronts. Productivity has expanded at 2% per year and populations have increased by a massive 1.6% per year, add to that the 4% dividend and 3.5% for inflation and that gives you the 10% return on equities everyone is quoting. but the future returns are expected to be much much lower. labor force size in the US is projected to grow 0.4% and per capita increase in productivity is now at about 1% for the last 20 years. and dividends are roughtly 1.8%. So, in the longer term, not including a contraction in PEs, we can see roughly 3% increase in equities on average/yearly

Treasuries and money markets basically return zero after inflation. So, at least more than zero.

by dmoy 7y ago

Treasuries and money markets basically return zero after inflation. So, at least more than zero.

I never understood how anything can return more than zero after inflation "in the long run". If it did, then over time people with that asset would have all the wealth. But if they did, then they would buy things with it, raising prices of everything else.

dmoy 7y ago
You may want to peruse some of the econ stuff from mit ocw: https://ocw.mit.edu/courses/economics/ https://ocw.mit.edu/courses/economics/ Things don't return a lot over zero in the long run. Maybe 5-7% in the absolute best case for long term returns. Enough that even a million dollars generates maybe less than $40k of reliable income. Most people need to expend so much of their income just to live that this mostly doesn't affect the average person. But yes, the rich get richer. They don't always buy things proportionally more, some of it just sits there.
- perl4ever 7y ago
  I never know if "the rich get richer" means the people on the tail of the distribution now will be farther out in the future, or if it means the people on the tail of the distribution in the future will be farther out than the people on the tail now.
throwing838383 7y ago
That's actually a very good point. That's kinda why Housing will always return 0 (real return - not including all the costs, like property taxes, repairs, HOA, insurance, etc) in the long run. And if we're actually making progress on housing, it'll return negative returns. Now as for other stuff, returns can be greater than 0 because there's more stuff to buy, later on, hence greater than what there is today. There are two components to long term returns above 0: population growth and productivity growth. In the past century we've done quite well on both fronts. Productivity has expanded at 2% per year and populations have increased by a massive 1.6% per year, add to that the 4% dividend and 3.5% for inflation and that gives you the 10% return on equities everyone is quoting. but the future returns are expected to be much much lower. labor force size in the US is projected to grow 0.4% and per capita increase in productivity is now at about 1% for the last 20 years. and dividends are roughtly 1.8%. So, in the longer term, not including a contraction in PEs, we can see roughly 3% increase in equities on average/yearly