4 ms·

You sure inflation isn’t here? Houses are up massively, land, cars, stocks, crypto, etc. The inflation measurement is off. But the inflation is here.

throw0101a 6y ago
You list assets, which have generally always gone up in value over time. Inflation, i.e. CPI, is (roughly) about cost of living through a basket of goods: * https://awealthofcommonsense.com/2021/01/inflation-truthers/ https://awealthofcommonsense.com/2021/01/inflation-truthers/ * https://news.ycombinator.com/item?id=25644580 https://news.ycombinator.com/item?id=25644580 If you don't believe the government-published CPI you can confirm their work, as others have done: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project For your items: * Monthly carrying costs haven't changed much: prices up, but mortgage rates are down. Plus average square footage has gone up, so you're getting more. * Land depends on location, and urban prices have gone up because it's more cool to live in the city now than in the 1970s and 1980s. I live in Toronto, so I know all about land/housing prices over the last 10-15 years. * Modern cars have more power, while burning less fuel, and being safer, and on average lasting longer, for the same money. I own a 2003 Golf that I paid $30K for (in 2003). What's available for $30K is a lot better, and the equivalent dollars today is closer to $40K—which gets you some sweet things. * I was invested in 2008: I've seen stocks go up and down. * Crypto is a Ponzi scheme.
- gruez 6y ago
  Presumably he's talking about asset inflation.
  - throw0101a 6y ago
    Valuations go up until they go down. See 2008, and 2000 before that, and ... As someone with another couple of decades until retirement I'd love a crash about now so that I could "buy low".
- mxcrossb 6y ago
  I think your analysis is right, but if cars and houses are things that people buy with borrowed money, it does seem like interest rates being low would drive prices up. And it might increase the price of inflation proof assets like crypto. Is there a framework we should be describing this with besides the broad “inflation” term?
  - throw0101a 6y ago
    Cars are lasting longer, and how many cars can the average person own? There's also depreciation, so cars aren't 'quite' an asset, so trade-in is also limited if people want to rotate vehicles (unless one leases). > Is there a framework we should be describing this with besides the broad “inflation” term? If asset prices are higher than what they "should" be, then one generally calls that a bubble.
  - postingawayonhn 6y ago
    There's a practically unlimited supply of cars. If people start buying more manufacturers will produce more.
    - throw0101a 6y ago
      But they can only be produced at a finite rate, which may cause competition amongst buyers in the short term as they bid against each other for the finite number that are on the lot. Further, the resources needed as raw material are finite (unless we start asteroid mining), as is the energy needed in the process: we have only so many gigawatts we can produce at one time. More plants can be built, but those take resources as well: some of the very same resources that are needed to build the cars we're talking about.
- hanniabu 6y ago
  > Crypto is a Ponzi scheme. I've never heard anybody educated on the matter make this statement. It's always from someone that doesn't understand it and therefore thinks it's a scam.
  - orasis 6y ago
    There is no crypto economy. It doesn’t create value so it should not be considered an asset.
    - ajmadesc 6y ago
      Do contract lawyers add value?
      - imtringued 6y ago
        If everyone was honest then no. Unfortunately we don't live in such a world so we have to trust a third party.
  - throw0101a 6y ago
    What purpose, exactly, does crypto serve? What problem does it solve? It has failed as a payment system, as a currency, as a reserve currency, a remittance channel, a timestamping service, a settlement layer, a bank for the "unbanked", a cypherpunk liberator, a money laundering tool, a drugs-by-mail tool, a unit of accounting, a store of value, and as a "disruptive" fintech technology. What exactly is the value in holding Bitcoin (or whatever)? My only hope is having someone in future come along and take it off my hands at a higher value than I bough it. When I think of crypto/Bitcoin, I am reminded of Warren Buffett's view on gold: > Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. > Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? […] > A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. * https://www.berkshirehathaway.com/letters/2011ltr.pdf https://www.berkshirehathaway.com/letters/2011ltr.pdf
- op03 6y ago
  How many miles on that 2003 Golf?
  - throw0101a 6y ago
    Not a lot. I bought it when I graduated and my first job was in an office park with little transit. Since then I've mostly worked in more urban areas, so I've been able to take transit or pedal, and so mostly use the car on weekends.
- imtringued 6y ago
  >* Crypto is a Ponzi scheme. I agree but that doesn't explain why Bitcoin had multiple bubbles and survived all of them. Bitcoin is highly deflationary. Bitcoins are lost all the time. The supply is only growing very slowly. It's also an "immature" asset compared to gold so a large influx of a new class of investors can drive the price up.
  - throw0101a 6y ago
    > I agree but that doesn't explain why Bitcoin had multiple bubbles and survived all of them. For the same reason people still go to astrologers or think that during the playoffs the can't shave or their favourite team will lose: cognitive biases and wishful thinking. * https://en.wikipedia.org/wiki/List_of_cognitive_biases https://en.wikipedia.org/wiki/List_of_cognitive_biases The fact that the bubbles happen so often and and so drastically is another reason that I avoid it: volatility is generally a proxy measurement of risk, and what reward am I gaining by taking on this risk? Everyone is bullish on it at >US$ 40K, but people seem to have forgotten that it dropped by half in two days in March 2020: * https://www.cnbc.com/2020/03/13/bitcoin-loses-half-of-its-value-in-two-day-plunge.html https://www.cnbc.com/2020/03/13/bitcoin-loses-half-of-its-va... If someone wants to have it in their 'portfolio' at some small percentage as part of their "play money" that's one thing, but to make it a significant portion seems foolish to me. I do feel a bit of FOMO, and may eventually create a trading account with like 5% of my portfolio for playing around in WSB and Crypto and such, but right now I'm fully invested in index and bond funds (80/20), so don't really have spare cash available for any of these temptations.
jessaustin 6y ago
Presumably housing appreciation is somewhat offset by drops on commercial real estate: office space, video game storefronts, etc.
mrec 6y ago
Inflation is absolutely here. Assets are way up because "safe" stores of value - what money was supposed to be - haven't been keeping pace with inflation since 2008, so you have to either join the casino or watch your savings erode. A lot of younger people don't seem to realize that this is new. That you used to be able to put your money in a bank and not lose it. While rock-bottom interest rates are good in some ways, I don't see this as a positive trend overall, especially given how shark-filled the financial waters are for most people. I'm a big fan of the Vegas dictum - "there's a patsy at every table, and if you don't know who the patsy is, it's you". As a retail investor, you're pretty much always the patsy.
- Robotbeat 6y ago
  Money is not supposed to be a "safe" store of value. It's supposed to be a stable one. Too low of inflation is bad because it means less investment in the physical economy. The Fed prints money to try to keep people from just hoarding cash. They want some inflation (and definitely not deflation) because a deflationary spiral means more and more money gets stuffed into mattresses instead of physical investments. Unfortunately we're seeing land prices and stock prices and crypto (etc) bid up instead of, say, a massive build out of factories and solar farms and multistory houses. (EDIT: We are seeing lots of houses being built, actually. Lumber is near all-time highs.)
  - mrec 6y ago
    > Too low of inflation is bad because it means less investment in the physical economy But why did this apparently only become the case after 2008? Positive real returns without gambling were acceptable before that, and we still got a gigantic speculative bubble, so why does it suddenly become reasonable to encourage bubbles even more? Was it just a coordination problem? An initial panic reaction to slash to zero, and then no central bank being willing to go first and unwind it? As you say, the other major part of this problem is the inability or unwillingness to steer money toward productive investment rather than speculation. Here in the UK it's housing that's the killer; my suspicion is that governments have become addicted to the jam-today enabled by the money created for mortgage loans, which will then have to be paid off on some other poor sucker's watch.
imtringued 6y ago
No, there is no inflation. When the Fed talks about inflation it talks about CPI inflation. Why is the CPI inflation rate important? Because unlike stocks and houses and other assets CPI tracks the real economy. If unemployment or underemployment is high then CPI inflation is low which tells you that the economy is doing very poorly. Most economies had their highest growth during years with moderate inflation. Maybe 4-5%. What you are calling inflation is actually the opposite. It's deflation. When hoarding assets becomes more profitable than working, the real world economy starts dying and CPI reflects that very well. Workers benefit from inflation because inflation is generally followed by productive investments. Driving prices of consumer goods up makes it profitable to produce them which makes it profitable to employ people to produce them. Deflation makes it harder to run a profitable business but it also makes it easier to run a non profitable business (that also includes overvalued businesses that do not earn enough to justify their valuation).

throw0101a 6y ago

You list assets, which have generally always gone up in value over time. Inflation, i.e. CPI, is (roughly) about cost of living through a basket of goods: * https://awealthofcommonsense.com/2021/01/inflation-truthers/ https://awealthofcommonsense.com/2021/01/inflation-truthers/ * https://news.ycombinator.com/item?id=25644580 https://news.ycombinator.com/item?id=25644580 If you don't believe the government-published CPI you can confirm their work, as others have done: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project For your items: * Monthly carrying costs haven't changed much: prices up, but mortgage rates are down. Plus average square footage has gone up, so you're getting more. * Land depends on location, and urban prices have gone up because it's more cool to live in the city now than in the 1970s and 1980s. I live in Toronto, so I know all about land/housing prices over the last 10-15 years. * Modern cars have more power, while burning less fuel, and being safer, and on average lasting longer, for the same money. I own a 2003 Golf that I paid $30K for (in 2003). What's available for $30K is a lot better, and the equivalent dollars today is closer to $40K—which gets you some sweet things. * I was invested in 2008: I've seen stocks go up and down. * Crypto is a Ponzi scheme.

gruez 6y ago
Presumably he's talking about asset inflation.
- throw0101a 6y ago
  Valuations go up until they go down. See 2008, and 2000 before that, and ... As someone with another couple of decades until retirement I'd love a crash about now so that I could "buy low".
mxcrossb 6y ago
I think your analysis is right, but if cars and houses are things that people buy with borrowed money, it does seem like interest rates being low would drive prices up. And it might increase the price of inflation proof assets like crypto. Is there a framework we should be describing this with besides the broad “inflation” term?
- throw0101a 6y ago
  Cars are lasting longer, and how many cars can the average person own? There's also depreciation, so cars aren't 'quite' an asset, so trade-in is also limited if people want to rotate vehicles (unless one leases). > Is there a framework we should be describing this with besides the broad “inflation” term? If asset prices are higher than what they "should" be, then one generally calls that a bubble.
- postingawayonhn 6y ago
  There's a practically unlimited supply of cars. If people start buying more manufacturers will produce more.
  - throw0101a 6y ago
    But they can only be produced at a finite rate, which may cause competition amongst buyers in the short term as they bid against each other for the finite number that are on the lot. Further, the resources needed as raw material are finite (unless we start asteroid mining), as is the energy needed in the process: we have only so many gigawatts we can produce at one time. More plants can be built, but those take resources as well: some of the very same resources that are needed to build the cars we're talking about.
hanniabu 6y ago
> Crypto is a Ponzi scheme. I've never heard anybody educated on the matter make this statement. It's always from someone that doesn't understand it and therefore thinks it's a scam.
- orasis 6y ago
  There is no crypto economy. It doesn’t create value so it should not be considered an asset.
  - ajmadesc 6y ago
    Do contract lawyers add value?
    - imtringued 6y ago
      If everyone was honest then no. Unfortunately we don't live in such a world so we have to trust a third party.
- throw0101a 6y ago
  What purpose, exactly, does crypto serve? What problem does it solve? It has failed as a payment system, as a currency, as a reserve currency, a remittance channel, a timestamping service, a settlement layer, a bank for the "unbanked", a cypherpunk liberator, a money laundering tool, a drugs-by-mail tool, a unit of accounting, a store of value, and as a "disruptive" fintech technology. What exactly is the value in holding Bitcoin (or whatever)? My only hope is having someone in future come along and take it off my hands at a higher value than I bough it. When I think of crypto/Bitcoin, I am reminded of Warren Buffett's view on gold: > Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. > Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? […] > A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. * https://www.berkshirehathaway.com/letters/2011ltr.pdf https://www.berkshirehathaway.com/letters/2011ltr.pdf
op03 6y ago
How many miles on that 2003 Golf?
- throw0101a 6y ago
  Not a lot. I bought it when I graduated and my first job was in an office park with little transit. Since then I've mostly worked in more urban areas, so I've been able to take transit or pedal, and so mostly use the car on weekends.
imtringued 6y ago
>* Crypto is a Ponzi scheme. I agree but that doesn't explain why Bitcoin had multiple bubbles and survived all of them. Bitcoin is highly deflationary. Bitcoins are lost all the time. The supply is only growing very slowly. It's also an "immature" asset compared to gold so a large influx of a new class of investors can drive the price up.
- throw0101a 6y ago
  > I agree but that doesn't explain why Bitcoin had multiple bubbles and survived all of them. For the same reason people still go to astrologers or think that during the playoffs the can't shave or their favourite team will lose: cognitive biases and wishful thinking. * https://en.wikipedia.org/wiki/List_of_cognitive_biases https://en.wikipedia.org/wiki/List_of_cognitive_biases The fact that the bubbles happen so often and and so drastically is another reason that I avoid it: volatility is generally a proxy measurement of risk, and what reward am I gaining by taking on this risk? Everyone is bullish on it at >US$ 40K, but people seem to have forgotten that it dropped by half in two days in March 2020: * https://www.cnbc.com/2020/03/13/bitcoin-loses-half-of-its-value-in-two-day-plunge.html https://www.cnbc.com/2020/03/13/bitcoin-loses-half-of-its-va... If someone wants to have it in their 'portfolio' at some small percentage as part of their "play money" that's one thing, but to make it a significant portion seems foolish to me. I do feel a bit of FOMO, and may eventually create a trading account with like 5% of my portfolio for playing around in WSB and Crypto and such, but right now I'm fully invested in index and bond funds (80/20), so don't really have spare cash available for any of these temptations.

jessaustin 6y ago

Presumably housing appreciation is somewhat offset by drops on commercial real estate: office space, video game storefronts, etc.

mrec 6y ago

Inflation is absolutely here. Assets are way up because "safe" stores of value - what money was supposed to be - haven't been keeping pace with inflation since 2008, so you have to either join the casino or watch your savings erode. A lot of younger people don't seem to realize that this is new. That you used to be able to put your money in a bank and not lose it. While rock-bottom interest rates are good in some ways, I don't see this as a positive trend overall, especially given how shark-filled the financial waters are for most people. I'm a big fan of the Vegas dictum - "there's a patsy at every table, and if you don't know who the patsy is, it's you". As a retail investor, you're pretty much always the patsy.

Robotbeat 6y ago
Money is not supposed to be a "safe" store of value. It's supposed to be a stable one. Too low of inflation is bad because it means less investment in the physical economy. The Fed prints money to try to keep people from just hoarding cash. They want some inflation (and definitely not deflation) because a deflationary spiral means more and more money gets stuffed into mattresses instead of physical investments. Unfortunately we're seeing land prices and stock prices and crypto (etc) bid up instead of, say, a massive build out of factories and solar farms and multistory houses. (EDIT: We are seeing lots of houses being built, actually. Lumber is near all-time highs.)
- mrec 6y ago
  > Too low of inflation is bad because it means less investment in the physical economy But why did this apparently only become the case after 2008? Positive real returns without gambling were acceptable before that, and we still got a gigantic speculative bubble, so why does it suddenly become reasonable to encourage bubbles even more? Was it just a coordination problem? An initial panic reaction to slash to zero, and then no central bank being willing to go first and unwind it? As you say, the other major part of this problem is the inability or unwillingness to steer money toward productive investment rather than speculation. Here in the UK it's housing that's the killer; my suspicion is that governments have become addicted to the jam-today enabled by the money created for mortgage loans, which will then have to be paid off on some other poor sucker's watch.

imtringued 6y ago

No, there is no inflation. When the Fed talks about inflation it talks about CPI inflation. Why is the CPI inflation rate important? Because unlike stocks and houses and other assets CPI tracks the real economy. If unemployment or underemployment is high then CPI inflation is low which tells you that the economy is doing very poorly. Most economies had their highest growth during years with moderate inflation. Maybe 4-5%. What you are calling inflation is actually the opposite. It's deflation. When hoarding assets becomes more profitable than working, the real world economy starts dying and CPI reflects that very well. Workers benefit from inflation because inflation is generally followed by productive investments. Driving prices of consumer goods up makes it profitable to produce them which makes it profitable to employ people to produce them. Deflation makes it harder to run a profitable business but it also makes it easier to run a non profitable business (that also includes overvalued businesses that do not earn enough to justify their valuation).