14 ms·

Fiscal-Driven Inflation

73 points by exolymph 5y ago

OldGoodNewBad 5y ago
People who aren’t preparing for hyperinflation are going to be feeling the heat by the end of the year. We’re looking at a 4-6% per month rate now.
- yankeehue 5y ago
  Serious question: How to prepare for hyperinflation?
  - deleted 5y ago
    [deleted]
  - fumar 5y ago
    Second this question. I have yet to see any recommendations outside of real estate debt at low rates in growth areas.
    - OldGoodNewBad 5y ago
      Silver, gold, and art are classic assets.
      - fumar 5y ago
        I didn't think of art before. I guess that shows my class status.
        OldGoodNewBad 5y ago
        Your class is what you make of it. Rich people are often uncultured too.
  - 01100011 5y ago
    Own assets, especially cash producing assets with low capital overhead. You may already be too late for that party though.
  - fshbbdssbbgdd 5y ago
    Take out a fixed-rate mortgage on your house. Your debt paying itself off would be a nice silver lining to inflation.
    - triceratops 5y ago
      Only if your income increases to match inflation, right?
      - fshbbdssbbgdd 5y ago
        If housing costs increase as part of inflation, owning a home will leave you better off than renting (whether or not your income is keeping pace with inflation).
      - xyzzyz 5y ago
        Over 30 year term of mortgage, it eventually will, most likely sooner than later.
  - unlikelymordant 5y ago
    Exchange the hyperinflating currency for a currency that is more stable. Any germans in the 1920s that held US dollars were completely immune to inflation of german currency.
  - prestigious 5y ago
    Borrow lots of money at low interest rates?
  - vishnugupta 5y ago
    I could think of two options based on what I’ve read 1. Hold a more stable currency, maybe GBP or JPY. It also means you need earn your salary in those same currencies. Move your other assets like equity etc to the same currency. I don’t think anything can be done about the pension account, unfortunately. 2. Switch to other forms to store value, preferably liquid, such as gold. Assume the hyperinflation will last for 2-3 years and calculate the gold you need to buy. Though the chances of USD hyper inflation in our lifetime (next 40-50 years) are vanishingly low based on what I have read. USD is still by far the most powerful currency, to an extent that last March there was a global flight to the refuge of USD triggering insane scenarios like negative oil prices and equities tanking. The next generation, however will have to be prepared for a bipolar currency, USD and CNY.
  - SaintGhurka 5y ago
    There are some really easy ways to protect yourself. Most of these ideas are generally good for periods of high inflation. REAL hyperinflation is so disruptive that nothing is really safe. I-bonds for small-time investors in the US. They have some nice tax benefits for holders. TIPS for big-time investors. Global stock index funds. That saves you the trouble of buying and holding foreign currency and they pay dividends while you wait for the inflation apocalypse. Even domestic stocks have a good chance of coming out ahead. Others have mentioned gold and silver. Those can be bought like stocks with GLD and SLV. Likewise you can buy real estate investment trusts if you aren't in a position to buy actual real estate. Those usually pay nice dividends. If you're really worried about real hyperinflation, you should go find the best deal on bulk-purchases of every non-perishable thing you intend to use for the next year. You might be surprised at the investment return you get on buying a 5-year's supply of wine or t-shirts.
- Afforess 5y ago
  For those of us who are unconcerned and believe the Federal Reserve when they say inflation is transitory, what is the counter portfolio to profit off this misplaced fear?
  - fshbbdssbbgdd 5y ago
    This is the conventional position, so I don’t think there’s a great opportunity to be betting for it. Inflation-protected treasuries are trading with about a 2.5% premium in yield. So if you can buy bonds, and sell inflation-protected bonds, you can make money if the inflation rate is below that.
- cecilpl2 5y ago
  Where on earth are you seeing 4-6% per month?!
  - Analemma_ 5y ago
    I’m fairly confident the parent commenter is just an idiot and misunderstood the “4% YoY” inflation from the latest quarterly report as MoM and is adding a couple extra percentage points because that’s just what inflation truthers do. 5% MoM inflation is a doubling of prices in all categories every 14 months, which is obviously not happening.
  - sdfin 5y ago
    Maybe he's talking about Argentina.
- harryh 5y ago
  5% inflation per month would mean 80% inflation per year. Nominal GDP growth is about 3 or 4%. So your statement implies that a typical American family is losing over 40% of its purchasing power year over year. This is, quite obviously, not the case.
  - nostrademons 5y ago
    Unless you've been in the market for a house this year.
    - OldGoodNewBad 5y ago
      Or lumber or steel…
- anm89 5y ago
  4-6% per month is not hyperinflation by any definition of hyperinflation that I can find. You are talking about inflation, albeit maybe really severe inflation. Also you are off by an order of magnitude regarding where inflation figures are at. As another commenter mentioned, I think you might be misunderstanding that those figures are annualized
01100011 5y ago
There are some very intelligent folks making some very well reasoned arguments claiming we're about to see: - inflation returning to historical norms - transient inflation followed by moderate inflation - transient inflation followed by a return to deflation - hyper inflation, with or without a loss of reserve currency status for the USD I'm just sitting here with a balanced portfolio and no leverage hoping to preserve my modest wealth. It certainly will be interesting to watch it play out. What is certain is that somewhere between 75-100% of all the predictions will be totally wrong and yet we will continue to believe the people making the incorrect predictions, especially when they reinforce our worldview.
- throw0101a 5y ago
  > What is certain is that somewhere between 75-100% of all the predictions will be totally wrong and yet we will continue to believe the people making the incorrect predictions, especially when they reinforce our worldview. Case in point, written over ten years ago, in November 2010: > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht...
  - R0b0t1 5y ago
    A pretty empty statement, as noted QE did not really help employment and contributed to asset inflation. We haven't seen debasement yet, but we're 2/3 bad outcomes.
    - ivalm 5y ago
      That’s just really false. European austerity after ‘08 presents a nice counterfactual showing benefits of QE.
visualradio 5y ago
> Each normal five-to-ten year business cycle in modern US history has ended with higher debt as a percentage of GDP ... This is because at the end of a long-term debt cycle, debt levels get so large relative to the size of the economy that it becomes impossible to deleverage them nominally The problem is not simply the debt, its also with how we measure GDP. NIPA is broken and counts ground rent, late fees, and interest on loans created for speculation on intangible assets as output rather than overhead. Generally prior to recessions when real GDP appears to be going up its really already dropping due to malinvestment and over-financialization. For instance during 1980s asset bubble in Japan corporations previously only involved in manufacturing started opening divisions to speculate in real estate and stock market.
ganeshkrishnan 5y ago
The main issue with this post is that it talks about underlying "monetary inflation" which underpins the other types of inflation including consumer inflation. The consumer inflation we have currently is due to increase in prices of raw materials and not necessarily due to printing money but due to labor issues. Japan had QE with money printing for close to 40 years now and stagnation, not inflation is their problem. Major currencies, including USD, are no longer pegged to gold since the 80s so all studies prior to that are no longer relevant for inflation. And currencies like USD have virtually unlimited appetite. If the central bank prints out one trillion dollars it will be taken up by couple of Bezos & Zuckerbergs. if anything, the whole pandemic is a good case study for Universal Basic Income.
- anm89 5y ago
  >The consumer inflation we have currently due to increase in prices of raw materials and not necessarily due to printing money You seem to be implying that these are two unrelated phenomenon. I would say that claim goes against almost every school of economic thought I am aware of. The idea that printing money just moves prices up directly as if by magic is not a claim I've ever heard and that almost certainly is not what Lyn is claiming. Increasing prices of raw materials is one of the most base cases in terms of potential effects of printing a ton of money (increased demand chasing a fixed supply). So I would say the idea that inflation is either due to input price increases or printing money is a completely false dichotomy.
  - ganeshkrishnan 5y ago
    >You seem to be implying that these are two unrelated phenomenon. All I am saying is that printing USD has almost no effect on inflation especially since money nowadays inherently has no value after being de-coupled from gold. Maybe if everyone across the word suddenly got $1 million dollars, we could be seeing inflation. I believe that as long as people spend their money to buy goods without saving up (debt of a country)and economic outputs remains consistent, printing money does not necessarily cause inflation. I am interested to know if printing excessive money in a functioning economy ever caused inflation after the 70s, to be proven otherwise.
sabujp 5y ago
she's trying to pump her for pay stock research service

73 points by exolymph 5y ago

People who aren’t preparing for hyperinflation are going to be feeling the heat by the end of the year. We’re looking at a 4-6% per month rate now.

yankeehue 5y ago
Serious question: How to prepare for hyperinflation?
- deleted 5y ago
  [deleted]
- fumar 5y ago
  Second this question. I have yet to see any recommendations outside of real estate debt at low rates in growth areas.
  - OldGoodNewBad 5y ago
    Silver, gold, and art are classic assets.
    - fumar 5y ago
      I didn't think of art before. I guess that shows my class status.
      - OldGoodNewBad 5y ago
        Your class is what you make of it. Rich people are often uncultured too.
- 01100011 5y ago
  Own assets, especially cash producing assets with low capital overhead. You may already be too late for that party though.
- fshbbdssbbgdd 5y ago
  Take out a fixed-rate mortgage on your house. Your debt paying itself off would be a nice silver lining to inflation.
  - triceratops 5y ago
    Only if your income increases to match inflation, right?
    - fshbbdssbbgdd 5y ago
      If housing costs increase as part of inflation, owning a home will leave you better off than renting (whether or not your income is keeping pace with inflation).
    - xyzzyz 5y ago
      Over 30 year term of mortgage, it eventually will, most likely sooner than later.
- unlikelymordant 5y ago
  Exchange the hyperinflating currency for a currency that is more stable. Any germans in the 1920s that held US dollars were completely immune to inflation of german currency.
- prestigious 5y ago
  Borrow lots of money at low interest rates?
- vishnugupta 5y ago
  I could think of two options based on what I’ve read 1. Hold a more stable currency, maybe GBP or JPY. It also means you need earn your salary in those same currencies. Move your other assets like equity etc to the same currency. I don’t think anything can be done about the pension account, unfortunately. 2. Switch to other forms to store value, preferably liquid, such as gold. Assume the hyperinflation will last for 2-3 years and calculate the gold you need to buy. Though the chances of USD hyper inflation in our lifetime (next 40-50 years) are vanishingly low based on what I have read. USD is still by far the most powerful currency, to an extent that last March there was a global flight to the refuge of USD triggering insane scenarios like negative oil prices and equities tanking. The next generation, however will have to be prepared for a bipolar currency, USD and CNY.
- SaintGhurka 5y ago
  There are some really easy ways to protect yourself. Most of these ideas are generally good for periods of high inflation. REAL hyperinflation is so disruptive that nothing is really safe. I-bonds for small-time investors in the US. They have some nice tax benefits for holders. TIPS for big-time investors. Global stock index funds. That saves you the trouble of buying and holding foreign currency and they pay dividends while you wait for the inflation apocalypse. Even domestic stocks have a good chance of coming out ahead. Others have mentioned gold and silver. Those can be bought like stocks with GLD and SLV. Likewise you can buy real estate investment trusts if you aren't in a position to buy actual real estate. Those usually pay nice dividends. If you're really worried about real hyperinflation, you should go find the best deal on bulk-purchases of every non-perishable thing you intend to use for the next year. You might be surprised at the investment return you get on buying a 5-year's supply of wine or t-shirts.
Afforess 5y ago
For those of us who are unconcerned and believe the Federal Reserve when they say inflation is transitory, what is the counter portfolio to profit off this misplaced fear?
- fshbbdssbbgdd 5y ago
  This is the conventional position, so I don’t think there’s a great opportunity to be betting for it. Inflation-protected treasuries are trading with about a 2.5% premium in yield. So if you can buy bonds, and sell inflation-protected bonds, you can make money if the inflation rate is below that.
cecilpl2 5y ago
Where on earth are you seeing 4-6% per month?!
- Analemma_ 5y ago
  I’m fairly confident the parent commenter is just an idiot and misunderstood the “4% YoY” inflation from the latest quarterly report as MoM and is adding a couple extra percentage points because that’s just what inflation truthers do. 5% MoM inflation is a doubling of prices in all categories every 14 months, which is obviously not happening.
- sdfin 5y ago
  Maybe he's talking about Argentina.
harryh 5y ago
5% inflation per month would mean 80% inflation per year. Nominal GDP growth is about 3 or 4%. So your statement implies that a typical American family is losing over 40% of its purchasing power year over year. This is, quite obviously, not the case.
- nostrademons 5y ago
  Unless you've been in the market for a house this year.
  - OldGoodNewBad 5y ago
    Or lumber or steel…
anm89 5y ago
4-6% per month is not hyperinflation by any definition of hyperinflation that I can find. You are talking about inflation, albeit maybe really severe inflation. Also you are off by an order of magnitude regarding where inflation figures are at. As another commenter mentioned, I think you might be misunderstanding that those figures are annualized

01100011 5y ago

There are some very intelligent folks making some very well reasoned arguments claiming we're about to see: - inflation returning to historical norms - transient inflation followed by moderate inflation - transient inflation followed by a return to deflation - hyper inflation, with or without a loss of reserve currency status for the USD I'm just sitting here with a balanced portfolio and no leverage hoping to preserve my modest wealth. It certainly will be interesting to watch it play out. What is certain is that somewhere between 75-100% of all the predictions will be totally wrong and yet we will continue to believe the people making the incorrect predictions, especially when they reinforce our worldview.

throw0101a 5y ago
> What is certain is that somewhere between 75-100% of all the predictions will be totally wrong and yet we will continue to believe the people making the incorrect predictions, especially when they reinforce our worldview. Case in point, written over ten years ago, in November 2010: > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht...
- R0b0t1 5y ago
  A pretty empty statement, as noted QE did not really help employment and contributed to asset inflation. We haven't seen debasement yet, but we're 2/3 bad outcomes.
  - ivalm 5y ago
    That’s just really false. European austerity after ‘08 presents a nice counterfactual showing benefits of QE.

visualradio 5y ago

> Each normal five-to-ten year business cycle in modern US history has ended with higher debt as a percentage of GDP ... This is because at the end of a long-term debt cycle, debt levels get so large relative to the size of the economy that it becomes impossible to deleverage them nominally The problem is not simply the debt, its also with how we measure GDP. NIPA is broken and counts ground rent, late fees, and interest on loans created for speculation on intangible assets as output rather than overhead. Generally prior to recessions when real GDP appears to be going up its really already dropping due to malinvestment and over-financialization. For instance during 1980s asset bubble in Japan corporations previously only involved in manufacturing started opening divisions to speculate in real estate and stock market.

ganeshkrishnan 5y ago

The main issue with this post is that it talks about underlying "monetary inflation" which underpins the other types of inflation including consumer inflation. The consumer inflation we have currently is due to increase in prices of raw materials and not necessarily due to printing money but due to labor issues. Japan had QE with money printing for close to 40 years now and stagnation, not inflation is their problem. Major currencies, including USD, are no longer pegged to gold since the 80s so all studies prior to that are no longer relevant for inflation. And currencies like USD have virtually unlimited appetite. If the central bank prints out one trillion dollars it will be taken up by couple of Bezos & Zuckerbergs. if anything, the whole pandemic is a good case study for Universal Basic Income.

anm89 5y ago
>The consumer inflation we have currently due to increase in prices of raw materials and not necessarily due to printing money You seem to be implying that these are two unrelated phenomenon. I would say that claim goes against almost every school of economic thought I am aware of. The idea that printing money just moves prices up directly as if by magic is not a claim I've ever heard and that almost certainly is not what Lyn is claiming. Increasing prices of raw materials is one of the most base cases in terms of potential effects of printing a ton of money (increased demand chasing a fixed supply). So I would say the idea that inflation is either due to input price increases or printing money is a completely false dichotomy.
- ganeshkrishnan 5y ago
  >You seem to be implying that these are two unrelated phenomenon. All I am saying is that printing USD has almost no effect on inflation especially since money nowadays inherently has no value after being de-coupled from gold. Maybe if everyone across the word suddenly got $1 million dollars, we could be seeing inflation. I believe that as long as people spend their money to buy goods without saving up (debt of a country)and economic outputs remains consistent, printing money does not necessarily cause inflation. I am interested to know if printing excessive money in a functioning economy ever caused inflation after the 70s, to be proven otherwise.

sabujp 5y ago

she's trying to pump her for pay stock research service