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Warren Buffett is right, inflation is running rampant
- PaulBGD_ 5y agoThis article seems to imply that people purchasing more things, and especially willing to pay more than they're worth is causing inflation. If that follows, what would be the reasons for that? Being at home, stimulus checks, or something else?
- gtirloni 5y agoOnce you're used to a certain lifestyle, it's hard to go back. My guess is that people are just willing to pay more to maintain their lifestyles... but everything has a limit.
- BikiniPrince 5y agoSo it’s not due to the fed printing massive amounts of money? I feel they are conveniently forgetting how we just shrank the dollars value merely months ago. The toll comes due.
- plausibledeny 5y agoWe're been hearing that since 2008. "Hyperinflation is just around the corner trust me!"
- throwaway0a5e 5y agoThe broken clock is gonna be right eventually.
- mcguire 5y agoFirst, what does "willing to pay more than they're worth" mean? (If something can be sold for $X, then it's worth $X.) Stimulus checks is one option. Another is the end of pandemic-related uncertainty. A third is increased employment with the winding down of the pandemic. I haven't seen any numbers on any of those.
- tootie 5y agoFrom what I've read this is almost entirely attributable to supply chain disruptions caused by the pandemic. Meaning it will clear up on its own once vaccinations are rolled out and won't require any drastic changes in monetary policy.
- tylerjaywood 5y ago(Jerome Powell)
- Flatcircle 5y agoWhat’s the best way to protect your money and your young kids savings account from inflation?
- ihsw 5y agoPut it in index funds. If possible, put it in tax-advantaged accounts.
- SavantIdiot 5y agoThis is the only correct answer. The only strategy that works though tough times is diversification and holding. With low-cost ETFs and municipal funds that pay tax free dividends, there is enough to be safe and smart. People recommending bonds, gold, penny stocks, and now crypto are the same armchair investors I've been hearing squwak useless tips from the sidelines for almost four decade.
- omilu 5y agoSo selling stocks in order to have more cash in anticipation of a market correction is the wrong strategy??
- omalleyt 5y agoYou don’t want cash during inflation. You want hard assets. Precious metals and real estate.
- Jommi 5y agoWhen do you know that the market correction has happened?
- SavantIdiot 5y ago> in anticipation of a market correction is the wrong strategy You still don't quite get it: you're playing the market with this statement. Unless you're a "Big Swinging Dick" (the Salomon Brother's term in Liar's Poker for people that did a million or more a day, which is peanuts today) or on the NYSE trade-floor it ain't gonna happen. The vast majority of people I've known who believed this failed to anticipate and should have just held. But don't let me stop you, go right ahead and gamble away.
- deleted 5y ago[deleted]
- mgh2 5y agoHow do we know if it is inflation/devaluation or simply a temporary rise in prices due to a hike in demand due to the economy reopening?
- obventio56 5y agoI think this would be called inflation either way
- CarelessExpert 5y agoNo, it's a demand shock and it's a very different thing. Inflation has a specific meaning and that ain't it.
- H8crilA 5y agoSo much consensus out there on inflation, quite remarkable. Haven't seen this much consensus since the fear bottom in March 2020 when many of mine "long term index fund investor" friends told me they liquidated (some of) their holdings. Almost as if this was the (local) inflation top. As usual, time will tell. The CPI and PPI are indeed hot, the tbond and stock markets are still calm (both will be massively damaged if inflation really is to come, and frankly even gold and Bitcoin are likely to suffer, due to the resulting liquidity drain).
- omalleyt 5y agoInflation dynamics are not like stock-market dynamics. Widespread stock-market optimism is a self-denying belief. Investors reach peak optimism, fully invest, and then the market can only go down. Widespread inflation expectations is a self-fulfilling belief. People dump dollars for physical goods, increasing the price of those goods. This causes more inflation, leading to further dumping of the dollar, and further price increases. This is why runwaway inflation / hyperinflation occurs.
- H8crilA 5y agoYou're right but people aren't dumping their "dollars", vast majority of which aren't the base money that the Fed prints but are financial assets (it's like a 1:100 ratio[1]). Look at all asset classes, there's no selling going on. [1] yes it's not exactly 1:100, if you feel like correcting a stranger on the internet please go on and pull the data from Fed datasets; i only meant to be accurate up to the order of magnitude.
- jeffrogers 5y agoWell, housing prices are moving up faster than appraisers can keep track of in Silicon Valley. That’s for real.
- bigmattystyles 5y agoIs inflation bad if you have debt (assuming non-usury rates like those of credit cards) ? From a let's say personal pov, let's say I have a mortgage and student loans and those are my only debts and their interest rate is fixed. If inflation is indeed rampant but wages track inflation (I assume) - isn't this an effective debt reduction as long as you don't incur new debt? Or do the down sides of inflation outweigh any of the benefits I assumed above?
- briefcomment 5y agoIt's all relative, but if you have assets that are keeping up with inflation like land, real estate, crypto, or anything scarce really, you're better off. I think wages don't really keep up with rapid inflation in the short term.
- deleted 5y ago[deleted]
- ceh123 5y agoIf you consider debt in isolation (so assume your income increases with inflation or faster so your quality of life/buying power doesn't take a hit with inflation) then yes you are correct, inflation does away with debt. The concern comes in when your cash compensation doesn't keep pace with inflation and your effective buying power decreases. Also other general macro effects that may indirectly impact you, and I'm sure there's a whole lot more to it than that, but yeah simplistically: inflation make debt go bye bye.
- throwkeep 5y ago> isn't this an effective debt reduction as long as you don't incur new debt? That's right, debt gets inflated away.
- tylerjaywood 5y agoIn normal inflation that’s exactly what happens. The problem is that inflation, if unchecked, can increase to a point that there are meaningful month over month, or week over week, or in some historical cases, minute over minute changes in value of the currency. How quickly can wages realistically keep up? The biggest winners during high inflation periods are those holding the largest debts.
- SavantIdiot 5y agoThis article is about "mentions" of inflation, and not actual inflation. Isn't that like CPM vs actual visitors?
- h0l0cube 5y agoWhen I think inflation, I'm thinking wage inflation. It seems like stimulus checks have just temporarily increased demand, and supply chains have been disrupted by covid, so some manufacturers are struggling to keep up and have to raise prices. The offer a variety of anecdotes, but no solid indicators. How does one decide whether a market is inflated?
- rabidrat 5y agoWage inflation lags price inflation, sometimes by years.
- h0l0cube 5y agoThat might be, but extrapolating a few anecdotes about demand pressure (e.g., increased purchases of beds) all of which seem to be related to short term disruption caused by the pandemic, into a story about inflation seems a little sensational.
- JMGrange 5y agoI'd like to see some of the pandemic driven supply chain disruptions get worked out before I make a firm judgement on inflation.
- spekcular 5y agoThis is the second inflation story to make the HN front page in the last two days, yet I remain unimpressed by the "running rampant" claim. According to the latest CPI inflation data (https://www.bls.gov/cpi/ https://www.bls.gov/cpi/), inflation was 2.6 percent over the last 12 months (as of April 13). This aligns with the Fed's 12-month target of 2 percent average inflation if we check historical trends (which implies that sometimes it will be over 2 percent). The linked story looks like cherry-picked data. Of course if average prices rise 2.6% percent, some outliers will rise more. But this hardly seems like a reason to panic.
- omalleyt 5y agoMonth-on-month inflation was 0.6% last month, with much of the economy still closed (which should be deflationary). That’s a 7.5% annualized rate.
- spekcular 5y agoSure, I agree that if the trend continues for a year, then we should start being concerned. But inflation has been below 2% since December 2018, and interest rates are at zero (which gives the Fed considerable latitude for implementing inflation control). The panic here seems a bit premature to me.
- omalleyt 5y agoHere’s the personal savings rate: https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT And here’s the money velocity: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V When the economy actually reopens and people start spending again, prices will go boom.
- spekcular 5y agoTo clarify, the claim I object to is that inflation is currently, at the present moment, "running rampant." I agree that if the Fed does not handle things carefully then there may be problems in the future.
- dleslie 5y agoInflation has probably been double digits for a while now. StatsCan recently responded to complaints that its inflation metric _doesn't account for housing_ and attempted to meet critics half-way; even though the new metric still didn't account for the cost of housing, the adjustment to inflation was _so alarming_ that StatsCan took the rare step of _reverting_ its change. [0] And CNBC reported that the real inflation, using old accounting, is around 10%. [1] 0: https://www.theglobeandmail.com/business/article-statscan-revises-core-inflation-upward-backtracks-on-new-methods/ https://www.theglobeandmail.com/business/article-statscan-re... 1: https://www.cnbc.com/id/42551209 https://www.cnbc.com/id/42551209
- owenversteeg 5y agoYour CNBC article is from over a decade ago. The Statscan numbers (reverted or not) were all under 2%, which is certainly not anywhere near record levels.
- dleslie 5y agoDo you think the factors have improved in the last decade? And yes, StatsCan made a minor adjustment, and yet it was such a shock that they rolled back. Accounting for the true increased cost of housing, market and rental, would cause Canada's inflation metric to jump considerably.
- owenversteeg 5y agoIf you really think inflation has been double digits annually since the last recession, you have no idea what you are talking about, sorry. Let's take the most charitable interpretation of what you said and assume it was 10% since the last recession. (Do the math with something like 15% or 20% if you want to laugh.) 10% annually would be a price increase of about 3.5x since 2008, so if bananas cost $0.63/lb now they would cost $2.20/lb, or if an average home cost $205k it would now cost $718k. What actually happened was that time, basic goods generally got cheaper or stayed fairly similar to their 2008 prices. Bananas are actually around 10% cheaper. Bread is 1.19x its 2008 price. The median new home is $300k versus $205k, or 1.46x - one of the largest increases! That's around 3% annually. The median new car is 1.08x more expensive (and far superior to its 2008 competition.) No, sorry, there is absolutely no way whatsoever that inflation was double digits for the last decade.
- owenversteeg 5y agoThey gave three individual datapoints, which is a classic feature of all these "we're seeing record inflation" articles. Does anyone have any broad measures? Everyone always rallies against CPI in these threads but never provides an alternative, which is unfortunate - I imagine there must be some that support this narrative of record inflation.
- omalleyt 5y agohttps://fred.stlouisfed.org/series/PPIACO https://fred.stlouisfed.org/series/PPIACO Commodity index up 12% year-on-year
- owenversteeg 5y agoThe commodity index is only up 12% in the exact last 12mo because it fell sharply before that, and is up 3.99% total in the 6.76 years since July 2014. Do you really believe inflation since then has been a half a percent annually?
- bdevine 5y agoHe's citing year-over-year? Seems to me that for some reason the economy was in the toilet this time last year but it had reason to be an aberration. I don't know, it's a real mystery.
- RickJWagner 5y agoIt seems intuitive. The government has been printing massive amounts of money, there has been a direct-cash-to-taxpayers program, and material shortages have driven prices skyward for many materials. Couple all that with increases in minimum wages. So who gets hurt? - Poor people, who have little money to begin with. A few dollars will buy even less. - Older people and people on fixed incomes. Who doesn't get hurt? - People invested in equities, generally.