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"buying less and less real assets" What is a real asset? If by "real" you mean "adjusted for inflation" then, again, you are double counting the inflation. If

"buying less and less real assets" What is a real asset? If by "real" you mean "adjusted for inflation" then, again, you are double counting the inflation. If by "real" you mean "an object with a clear category and a clear value" then I'm curious how you would derive the clear category and the clear value? If one person says "I hate that house, I would only pay $300k for it" and another person says of the same house "I love that house, I would pay $600k for it" then who is correct? If you want to have a sane conversation about this, I would suggest that you stop using the word "real." Use "inflation adjusted" if you mean that, and then use "actual" or "countable" when you mean those things. About this: "You keep confusing yourself by sometimes mushing the concepts inflation, asset price inflation, and consumer inflation and then getting upset when one doesn't fit neatly into the other." I am not upset with you, nor did I say anything to suggest that I was upset with you. I'm simply pointing out that you don't seem to understand the words that you are using. Also, I've avoided bringing politics into this, but it might be worth thinking of some of the notorious incidents of hyper-inflation, the political effects it had, and how such effects are simply not rational or possible or connected to increasing nominal prices for assets. I wrote about the late Soviet era hyper-inflation here: https://demodexio.substack.com/p/the-struggle-to-save-the-soviet-economy-167 https://demodexio.substack.com/p/the-struggle-to-save-the-so...

notch656a 5y ago
There are different classes of assets but when I refer to real asset inflation it refers to real assets. I use real assets here since we are talking about houses. So to your question: > If by "real" you mean "adjusted for inflation" then, again, you are double counting the inflation. If by "real" you mean "an object with a clear category and a clear value" then I'm curious how you would derive the clear category and the clear value? I don't precisely mean either in regards to "real assets", see below. >What is a real asset? "Real assets are physical or tangible assets, such as infrastructure, real estate, natural resources and precious metals, whose value is based on their physical properties or utility." [0][1][2] If I said "actual" or "countable" assets it would most definitely not have the same meaning. IOUs friend bill or a dollar bill are both actual and countable assets but not real assets. >I would suggest that you stop using the word "real." OK but to do so I'm going to need to see lkrubner's personal dictionary, since we are dispensing with the terms used in the financial industry. >I hate that house, I would only pay $300k for it" and another person says of the same house "I love that house, I would pay $600k for it" then who is correct? You can argue who is correct but when a house is for sale the title is generally transferred to the highest bidder, all else equal. It really doesn't mean dick if I walk up to a house for sale and tell the owner I think it's worth $1000 bucks, nor does it mean anything if I think it's worth $1M and never pony up the money. When on a macro level we see the executed transaction for similar houses trend towards a price, it's safe to say the market roughly values houses similar to that house near that price. >If by "real" you mean "adjusted for inflation" then, again, you are double counting the inflation. Today I own one drill press as a capital for my manufacturing business. Tomorrow the .gov prints 1 quadrillion dollars. Tomorrow drill presses aren't any harder to come by nor harder to make nor any more or less useful for industry or for me or anyone else. The price inflation still rises. You can single, double, or triple or even fractionally count your idea of inflation in whatever made-up definition soup you want to conjure up, but the price inflation from more magic dollars entering circulation will still be there. >https://demodexio.substack.com/p/the-struggle-to-save-the-so https://demodexio.substack.com/p/the-struggle-to-save-the-so... Interesting read. My take based on your writing is we should remove the money supply from the government, and instead decentralize as best we can to minimize the bad acts of a few actors. Widespread adoption of commodity money and privately issued notes (both fiat and asset backed) are a couple ways to reduce the influence of a single powerful government from having full control of the money supply. [0] https://en.wikipedia.org/wiki/Real_assets https://en.wikipedia.org/wiki/Real_assets [1] https://www.dws.com/en-us/strategies/asset-classes/real-assets/ https://www.dws.com/en-us/strategies/asset-classes/real-asse... [2] https://www.investopedia.com/terms/r/realasset.asp#:~:text=Real%20assets%20are%20physical%20assets,%2C%20equipment%2C%20and%20natural%20resources https://www.investopedia.com/terms/r/realasset.asp#:~:text=R....
- lkrubner 5y ago
  "Today I own one drill press as a capital for my manufacturing business. Tomorrow the .gov prints 1 quadrillion dollars. Tomorrow drill presses aren't any harder to come by nor harder to make nor any more or less useful for industry or for me or anyone else. The price inflation still rises." Future tense is compatible with a correct model, but present tense would be incorrect. No inflation has occurred even if the price goes from $100 to $100,000 for the exact same item. Again, as I've said several times elsewhere in this thread, when we are speaking jokingly or informally it is perfectly okay to say "asset price inflation" and everyone will informally understand what you mean. But I've been trying to explain how the government calculates inflation. If the price goes from $100 to $100,000 for the exact same capital good that you own, you've become wealthier in nominal terms. However, you will need to pass along this price increase to those further down the line, either another company or a final consumer of some product of which your product might be a part. Once the final consumer sees the price increase, then the government will declare it to be inflation. But the government does not regard it as inflation in the CPI till it reaches the final consumer. It might be a technical point, but it is worth keeping in mind: even those events that guarantee consumer inflation are not consumer inflation until they reach the final consumer. The distance in time might be weeks or years. Sometimes an event occurs and consumers feel the effect within a day -- gasoline prices are often like this, a terrorist attack in Saudi Arabia can see an uptick in prices within a day or two. Other times some event occurs and it takes years before consumers see the increase in prices; over fishing of the oceans is an event that almost guarantees consumer inflation, but typically takes several years to settle in, as the effect among the fish is multi-generational.
  - notch656a 5y ago
    >But the government does not regard it as inflation in the CPI till it reaches the final consumer. I think this really drills down into the crux of the problem that was posed. If you merely want to survive and not build up investments and capital for your later life and heirs, then consumer inflation gives you a good picture of how prices are raising around you and what your purchasing power looks like. If you actually care about having some security for the future, land or assets for your business, preserving wealth for general use in any asset class, or something to pass on for your family, or being a PART of the world rather than just a consumer, then the CPI looks like a poor indicator of your changes in purchasing power.

notch656a 5y ago

There are different classes of assets but when I refer to real asset inflation it refers to real assets. I use real assets here since we are talking about houses. So to your question: > If by "real" you mean "adjusted for inflation" then, again, you are double counting the inflation. If by "real" you mean "an object with a clear category and a clear value" then I'm curious how you would derive the clear category and the clear value? I don't precisely mean either in regards to "real assets", see below. >What is a real asset? "Real assets are physical or tangible assets, such as infrastructure, real estate, natural resources and precious metals, whose value is based on their physical properties or utility." [0][1][2] If I said "actual" or "countable" assets it would most definitely not have the same meaning. IOUs friend bill or a dollar bill are both actual and countable assets but not real assets. >I would suggest that you stop using the word "real." OK but to do so I'm going to need to see lkrubner's personal dictionary, since we are dispensing with the terms used in the financial industry. >I hate that house, I would only pay $300k for it" and another person says of the same house "I love that house, I would pay $600k for it" then who is correct? You can argue who is correct but when a house is for sale the title is generally transferred to the highest bidder, all else equal. It really doesn't mean dick if I walk up to a house for sale and tell the owner I think it's worth $1000 bucks, nor does it mean anything if I think it's worth $1M and never pony up the money. When on a macro level we see the executed transaction for similar houses trend towards a price, it's safe to say the market roughly values houses similar to that house near that price. >If by "real" you mean "adjusted for inflation" then, again, you are double counting the inflation. Today I own one drill press as a capital for my manufacturing business. Tomorrow the .gov prints 1 quadrillion dollars. Tomorrow drill presses aren't any harder to come by nor harder to make nor any more or less useful for industry or for me or anyone else. The price inflation still rises. You can single, double, or triple or even fractionally count your idea of inflation in whatever made-up definition soup you want to conjure up, but the price inflation from more magic dollars entering circulation will still be there. >https://demodexio.substack.com/p/the-struggle-to-save-the-so https://demodexio.substack.com/p/the-struggle-to-save-the-so... Interesting read. My take based on your writing is we should remove the money supply from the government, and instead decentralize as best we can to minimize the bad acts of a few actors. Widespread adoption of commodity money and privately issued notes (both fiat and asset backed) are a couple ways to reduce the influence of a single powerful government from having full control of the money supply. [0] https://en.wikipedia.org/wiki/Real_assets https://en.wikipedia.org/wiki/Real_assets [1] https://www.dws.com/en-us/strategies/asset-classes/real-assets/ https://www.dws.com/en-us/strategies/asset-classes/real-asse... [2] https://www.investopedia.com/terms/r/realasset.asp#:~:text=Real%20assets%20are%20physical%20assets,%2C%20equipment%2C%20and%20natural%20resources https://www.investopedia.com/terms/r/realasset.asp#:~:text=R....

lkrubner 5y ago
"Today I own one drill press as a capital for my manufacturing business. Tomorrow the .gov prints 1 quadrillion dollars. Tomorrow drill presses aren't any harder to come by nor harder to make nor any more or less useful for industry or for me or anyone else. The price inflation still rises." Future tense is compatible with a correct model, but present tense would be incorrect. No inflation has occurred even if the price goes from $100 to $100,000 for the exact same item. Again, as I've said several times elsewhere in this thread, when we are speaking jokingly or informally it is perfectly okay to say "asset price inflation" and everyone will informally understand what you mean. But I've been trying to explain how the government calculates inflation. If the price goes from $100 to $100,000 for the exact same capital good that you own, you've become wealthier in nominal terms. However, you will need to pass along this price increase to those further down the line, either another company or a final consumer of some product of which your product might be a part. Once the final consumer sees the price increase, then the government will declare it to be inflation. But the government does not regard it as inflation in the CPI till it reaches the final consumer. It might be a technical point, but it is worth keeping in mind: even those events that guarantee consumer inflation are not consumer inflation until they reach the final consumer. The distance in time might be weeks or years. Sometimes an event occurs and consumers feel the effect within a day -- gasoline prices are often like this, a terrorist attack in Saudi Arabia can see an uptick in prices within a day or two. Other times some event occurs and it takes years before consumers see the increase in prices; over fishing of the oceans is an event that almost guarantees consumer inflation, but typically takes several years to settle in, as the effect among the fish is multi-generational.
- notch656a 5y ago
  >But the government does not regard it as inflation in the CPI till it reaches the final consumer. I think this really drills down into the crux of the problem that was posed. If you merely want to survive and not build up investments and capital for your later life and heirs, then consumer inflation gives you a good picture of how prices are raising around you and what your purchasing power looks like. If you actually care about having some security for the future, land or assets for your business, preserving wealth for general use in any asset class, or something to pass on for your family, or being a PART of the world rather than just a consumer, then the CPI looks like a poor indicator of your changes in purchasing power.