5 ms·

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 a

by 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.
    - imtringued 5y ago
      There are a bunch of reasons but lets start with a big one. People get richer but they optimize their tax burden. Remember, debt creates money. There is always enough money in the economy to repay all debts. Interest merely circulates a few times between bank and debtor which may require some inflation but not hyperinflation. There might not be enough tax revenue when those with enough money stop paying them. This causes an excessive tax burden on the working upper class, the middle class and below while Gates and Jeff Bezos earn money off of the appreciation of land which has a much lower tax burden. People started measuring their wealth through the monopoly of land. Since land is in finite supply inefficient land use and speculation have become profitable because there is an underlying economic rent to be extorted out of people living on or near the land. Governments spend millions or billions on infrastructure only to see untaxed land values go up. Work piling. Either you get a job or not. The threat of unemployment causes desperation and extreme competition for low skilled jobs while employers start demanding degrees for all the "good jobs" which are locked behind other forms of monopolies like college education and medical licensing. If work was shared among people then we could have a shorter working week like all those economists talking about a 15 hour work week (ok it would be 30 hours or more but still). This is especially pronounced because low skill workers not only compete with other Americans, they also compete with every low skill worker around the world. You need an unfair moat to compete in such a world.
- imtringued 5y ago
  >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. It's the opposite. There half a dozen extremely serious economic problems at the root of the system that were papered over during the WW2 rebuilding of the economy (because growth is easy if you start from nothing) and all the things you worry about are merely their symptoms.
  - roland35 5y ago
    So the question to me boils down to - what to do about it? We could easily have another decade (or 2 or 3) of economic growth before the next crash. The hard part isn't predicting the crash, it is predicting when it will happen. The best plan as far as I can tell is to be diversified in investments. A home + mortgage protects against inflation, a reasonable mix of stocks and bonds are solid financial investments, enough cash for a good emergency fund, and holding a small % of hard assets and crypto is not a bad idea. In short, "nobody knows nothing" and we can just invest a little in everything and hope for the best :)
kingkongjaffa 5y ago
Maybe someone can explain, but to me it seems there's always been some kind of financial lever to pull to correct during a recession (quantitative easing), I have to wonder will there always be some other mechanism that can be invented(?) to fix things? When things like national debt far outstrips GDP and everything is hyperleveraged, it seems the way out so far has been to create more.

by rmah 5y ago

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.
  - imtringued 5y ago
    There are a bunch of reasons but lets start with a big one. People get richer but they optimize their tax burden. Remember, debt creates money. There is always enough money in the economy to repay all debts. Interest merely circulates a few times between bank and debtor which may require some inflation but not hyperinflation. There might not be enough tax revenue when those with enough money stop paying them. This causes an excessive tax burden on the working upper class, the middle class and below while Gates and Jeff Bezos earn money off of the appreciation of land which has a much lower tax burden. People started measuring their wealth through the monopoly of land. Since land is in finite supply inefficient land use and speculation have become profitable because there is an underlying economic rent to be extorted out of people living on or near the land. Governments spend millions or billions on infrastructure only to see untaxed land values go up. Work piling. Either you get a job or not. The threat of unemployment causes desperation and extreme competition for low skilled jobs while employers start demanding degrees for all the "good jobs" which are locked behind other forms of monopolies like college education and medical licensing. If work was shared among people then we could have a shorter working week like all those economists talking about a 15 hour work week (ok it would be 30 hours or more but still). This is especially pronounced because low skill workers not only compete with other Americans, they also compete with every low skill worker around the world. You need an unfair moat to compete in such a world.
imtringued 5y ago
>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. It's the opposite. There half a dozen extremely serious economic problems at the root of the system that were papered over during the WW2 rebuilding of the economy (because growth is easy if you start from nothing) and all the things you worry about are merely their symptoms.
- roland35 5y ago
  So the question to me boils down to - what to do about it? We could easily have another decade (or 2 or 3) of economic growth before the next crash. The hard part isn't predicting the crash, it is predicting when it will happen. The best plan as far as I can tell is to be diversified in investments. A home + mortgage protects against inflation, a reasonable mix of stocks and bonds are solid financial investments, enough cash for a good emergency fund, and holding a small % of hard assets and crypto is not a bad idea. In short, "nobody knows nothing" and we can just invest a little in everything and hope for the best :)

kingkongjaffa 5y ago

Maybe someone can explain, but to me it seems there's always been some kind of financial lever to pull to correct during a recession (quantitative easing), I have to wonder will there always be some other mechanism that can be invented(?) to fix things? When things like national debt far outstrips GDP and everything is hyperleveraged, it seems the way out so far has been to create more.