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If it is any consolation, we will probably experience massive inflation in the next 20-30 years. Those with primarily financial (and not physical) assets will b

If it is any consolation, we will probably experience massive inflation in the next 20-30 years. Those with primarily financial (and not physical) assets will be hardest hit. At some point the economic wizardry will hit the fan. But on a less depressing note, I suggest paying less attention to the areas where people are “getting rich.” Money isn’t the measure of true value and you will rarely find a correlation between wealth and wisdom.

JKCalhoun 5y ago
Agree. I am more jealous of those out on the Pacific Crest Trail than I am of someone driving a new Tesla.
pphysch 5y ago
5-10 years imo
- ceilingcorner 5y ago
  I originally wrote 5-10 but didn’t want to seem too ominous. But yeah, I’d bet on some serious issues in the latter end of the 2020s.
  - thebrowncat 5y ago
    I was banking on it happening in the next year or so. If it’s not going to happen until 5 or 10 years then it seems like not joining in with the fools now and investing in FAANG stock / bitcoin means you’ll miss out on massive gains in the interim...
    - raydalio0705 5y ago
      It is difficult to go wrong if you invest in businesses that are providing real value to people and trade at attractive valuations. It is unlikely to make you wealthy, but it is unlikely to make you poor either. The problem with 'joining in with the fools' is that it relies on the 'greater fool theory' to make superior returns. And you could well end up being the 'greater fool'.
riotney 5y ago
Worried about this. I hear that a loaf of bread will be 20 dollars and I see it happening. Is there anything I can do to prepare for this? Such as investing in more stocks, index funds,etc? I feel like my income isn't matching the rate of inflation.
- ceilingcorner 5y ago
  Personally I am trying to be more self-sufficient. Growing food, cooking common items from scratch (like bread), learning how to repair things, etc. And so I put money into items that are both durable and help further this goal of self-sufficiency. A safety razor and a 1,000 pack of blades is a recent purchase. Properly maintained, it will last forever, which will come in handy when Schick razors are $25 each. I’m not sure how that scales up to $50k or $100k but it’s a starting point. This subreddit is a good place to get ideas: https://www.reddit.com/r/BuyItForLife/ https://www.reddit.com/r/BuyItForLife/
- imtringued 5y ago
  I honestly don't understand what is hard to comprehend about this. No food -> famine -> hyperinflation of food prices as sellers take every dollar you have. The question is, how is that scenario supposed to happen and even if it did, why not just invest into farms? Is the government going to repossess all the land off the "white colonialists" and give it to native americans? If yes then the country didn't fall because of hyperinflation, hyperinflation was the symptom like every other country where the problems happened first and then the symptoms came.
rmah 5y ago
Two points... First, high inflation is good for holders of some financial assets (e.g. stocks) and bad for others (bonds). It's good for existing borrowers and bad for existing lenders. It's good for those in debt and bad for those who saved cash. Essentially, high inflation punishes financial frugality and rewards financial speculation. Second, massive inflation-caused economic collapse is highly unlikely in any developed nation today. The more likely path is either 1) reasonable economic growth with high inflation (say 5% to 10%) or 2) economic stagnation similar to what Japan has experienced for the last few decades. Be aware that the people predicting debt-fueled hyperinflation-style economic doom & gloom have been doing so for nearly half a century now. They have been saying it's a few years away for decades. Every recession they say "we were right, it'll just get worse!" They have been wrong every time for 40 years. Maybe they'll be right in the coming few decades... but I wouldn't bet my financial future on it.
- ceilingcorner 5y ago
  I’m not basing my prediction on the doomsayers, more on general decline of the Western world overall. There are too many issues piling up and to my mind, this will eventually cause some serious economic problems. But I’m not an economist, so I don’t take my word for it. My broader point is simply that the rich today are succeeding in a system which might not be stable in a few decades.
  - rmah 5y ago
    The western world is better off by almost all socio-economic metrics than a half century ago. And hugely better off than a century ago. You actually are basing your predictions on doomsayers. Oh, and debt levels are high because rates and inflation is low.
    - ceilingcorner 5y ago
      No, I’m basing my predictions on a thorough study of history and the phases of civilizations. There are several deep cultural and structural problems with both the US and the EU, and I find it difficult to not see this continuing. And as far as I know, millennials are economically worse off than their boomer parents.
deanmoriarty 5y ago
In your opinion large diversified equity index funds will be hit hard? Care to quantify your speculation? 50% drawdown? 90%? 100%?
giantg2 5y ago
"Those with primarily financial (and not physical) assets will be hardest hit." I'm not sure this is true.
imtringued 5y ago
It's not the rich getting richer, it's monopolists getting richer at the expense of non monopolists. When the strongest monopoly of all, money, ceases to be a monopoly through negative interest rates or inflation then the monopolists simply flee into the next best thing. There isn't just a debt cycle, there is also a land bubble cycle because land is the second most powerful monopoly. Monopolists not only includes the rich but also average home owners whose land is appreciating absurdly quickly. The problem isn't with negative interest rates or inflation because those merely break the monopoly power of money.
bryanlarsen 5y ago
Predicting high inflation while interest rates are low seems crazy to me. The Fed can and will raise interest rates, causing inflation to moderate. High interest rates will devastate parts of the economy, but that's a different and more well known problem.
- raydalio0705 5y ago
  Can the Fed raise interest rates significantly without bankrupting the Federal government? The Federal debt needs to be rolled over every now and then. At certain interest rates, the costs of servicing the debt become unacceptably high. Where is that 'breaking point'? If you see some serious analysis of this, please let me know. But there is a higher bound to which the Fed can feasibly raise interest rates. So it is possible that the Fed will be forced to choose between keeping rates low, keep buying Treasuries and destroy the dollar through runaway inflation, or raise interest rates and bankrupt the US government.
  - jfengel 5y ago
    The Fed doesn't set bond interest rates. Rates on bonds are set by an auction. If bond interest rates are low, it's because bond investors want bonds. Which is to say, they think the US government will have no trouble paying them back. So the government borrows cheaply, and investors believe they will be able to continue to. The Fed sets a different rate, one that banks use to lend money to each other. It forms kind of a floor for lending. They raise it to reduce lending, and thus slowing down the economy in general (and thus reducing inflation). They've kept the latter at nearly zero -- arguably for the not-great reason of propping up assets. If anything, raising that would make bonds more attractive relative to stocks, dropping the interest rate further. Instead, we've gotten inflation, but only in the asset markets, not consumer inflation. They actually wanted consumer inflation to be higher, so that consumers would be forced to put their money in asset markets rather than holding it in cash. They've finally gotten their wish, though it's likely that it is due more to pandemic-related shutdowns than to monetary-based demand.
    - raydalio0705 5y ago
fksadfji12 5y ago
You realize stock markets are at ATH because of the printing of money right?
mattm 5y ago
> we will probably experience massive inflation in the next 20-30 years Go back 40-50 years and you can find people that said the same thing then. Things looked a lot bleaker than today. Gas shortages in the 70s, interest rates of more than 15% in the 80s, cold war, etc.

JKCalhoun 5y ago

Agree. I am more jealous of those out on the Pacific Crest Trail than I am of someone driving a new Tesla.

pphysch 5y ago

5-10 years imo

ceilingcorner 5y ago
I originally wrote 5-10 but didn’t want to seem too ominous. But yeah, I’d bet on some serious issues in the latter end of the 2020s.
- thebrowncat 5y ago
  I was banking on it happening in the next year or so. If it’s not going to happen until 5 or 10 years then it seems like not joining in with the fools now and investing in FAANG stock / bitcoin means you’ll miss out on massive gains in the interim...
  - raydalio0705 5y ago
    It is difficult to go wrong if you invest in businesses that are providing real value to people and trade at attractive valuations. It is unlikely to make you wealthy, but it is unlikely to make you poor either. The problem with 'joining in with the fools' is that it relies on the 'greater fool theory' to make superior returns. And you could well end up being the 'greater fool'.

riotney 5y ago

Worried about this. I hear that a loaf of bread will be 20 dollars and I see it happening. Is there anything I can do to prepare for this? Such as investing in more stocks, index funds,etc? I feel like my income isn't matching the rate of inflation.

ceilingcorner 5y ago
Personally I am trying to be more self-sufficient. Growing food, cooking common items from scratch (like bread), learning how to repair things, etc. And so I put money into items that are both durable and help further this goal of self-sufficiency. A safety razor and a 1,000 pack of blades is a recent purchase. Properly maintained, it will last forever, which will come in handy when Schick razors are $25 each. I’m not sure how that scales up to $50k or $100k but it’s a starting point. This subreddit is a good place to get ideas: https://www.reddit.com/r/BuyItForLife/ https://www.reddit.com/r/BuyItForLife/
imtringued 5y ago
I honestly don't understand what is hard to comprehend about this. No food -> famine -> hyperinflation of food prices as sellers take every dollar you have. The question is, how is that scenario supposed to happen and even if it did, why not just invest into farms? Is the government going to repossess all the land off the "white colonialists" and give it to native americans? If yes then the country didn't fall because of hyperinflation, hyperinflation was the symptom like every other country where the problems happened first and then the symptoms came.

rmah 5y ago

Two points... First, high inflation is good for holders of some financial assets (e.g. stocks) and bad for others (bonds). It's good for existing borrowers and bad for existing lenders. It's good for those in debt and bad for those who saved cash. Essentially, high inflation punishes financial frugality and rewards financial speculation. Second, massive inflation-caused economic collapse is highly unlikely in any developed nation today. The more likely path is either 1) reasonable economic growth with high inflation (say 5% to 10%) or 2) economic stagnation similar to what Japan has experienced for the last few decades. Be aware that the people predicting debt-fueled hyperinflation-style economic doom & gloom have been doing so for nearly half a century now. They have been saying it's a few years away for decades. Every recession they say "we were right, it'll just get worse!" They have been wrong every time for 40 years. Maybe they'll be right in the coming few decades... but I wouldn't bet my financial future on it.

ceilingcorner 5y ago
I’m not basing my prediction on the doomsayers, more on general decline of the Western world overall. There are too many issues piling up and to my mind, this will eventually cause some serious economic problems. But I’m not an economist, so I don’t take my word for it. My broader point is simply that the rich today are succeeding in a system which might not be stable in a few decades.
- rmah 5y ago
  The western world is better off by almost all socio-economic metrics than a half century ago. And hugely better off than a century ago. You actually are basing your predictions on doomsayers. Oh, and debt levels are high because rates and inflation is low.
  - ceilingcorner 5y ago
    No, I’m basing my predictions on a thorough study of history and the phases of civilizations. There are several deep cultural and structural problems with both the US and the EU, and I find it difficult to not see this continuing. And as far as I know, millennials are economically worse off than their boomer parents.

deanmoriarty 5y ago

In your opinion large diversified equity index funds will be hit hard? Care to quantify your speculation? 50% drawdown? 90%? 100%?

giantg2 5y ago

"Those with primarily financial (and not physical) assets will be hardest hit." I'm not sure this is true.

imtringued 5y ago

It's not the rich getting richer, it's monopolists getting richer at the expense of non monopolists. When the strongest monopoly of all, money, ceases to be a monopoly through negative interest rates or inflation then the monopolists simply flee into the next best thing. There isn't just a debt cycle, there is also a land bubble cycle because land is the second most powerful monopoly. Monopolists not only includes the rich but also average home owners whose land is appreciating absurdly quickly. The problem isn't with negative interest rates or inflation because those merely break the monopoly power of money.

bryanlarsen 5y ago

Predicting high inflation while interest rates are low seems crazy to me. The Fed can and will raise interest rates, causing inflation to moderate. High interest rates will devastate parts of the economy, but that's a different and more well known problem.

raydalio0705 5y ago
Can the Fed raise interest rates significantly without bankrupting the Federal government? The Federal debt needs to be rolled over every now and then. At certain interest rates, the costs of servicing the debt become unacceptably high. Where is that 'breaking point'? If you see some serious analysis of this, please let me know. But there is a higher bound to which the Fed can feasibly raise interest rates. So it is possible that the Fed will be forced to choose between keeping rates low, keep buying Treasuries and destroy the dollar through runaway inflation, or raise interest rates and bankrupt the US government.
- jfengel 5y ago
  The Fed doesn't set bond interest rates. Rates on bonds are set by an auction. If bond interest rates are low, it's because bond investors want bonds. Which is to say, they think the US government will have no trouble paying them back. So the government borrows cheaply, and investors believe they will be able to continue to. The Fed sets a different rate, one that banks use to lend money to each other. It forms kind of a floor for lending. They raise it to reduce lending, and thus slowing down the economy in general (and thus reducing inflation). They've kept the latter at nearly zero -- arguably for the not-great reason of propping up assets. If anything, raising that would make bonds more attractive relative to stocks, dropping the interest rate further. Instead, we've gotten inflation, but only in the asset markets, not consumer inflation. They actually wanted consumer inflation to be higher, so that consumers would be forced to put their money in asset markets rather than holding it in cash. They've finally gotten their wish, though it's likely that it is due more to pandemic-related shutdowns than to monetary-based demand.
  - raydalio0705 5y ago

fksadfji12 5y ago

You realize stock markets are at ATH because of the printing of money right?

mattm 5y ago

> we will probably experience massive inflation in the next 20-30 years Go back 40-50 years and you can find people that said the same thing then. Things looked a lot bleaker than today. Gas shortages in the 70s, interest rates of more than 15% in the 80s, cold war, etc.