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Expected investment returns are already inflation-adjusted https://www.csun.edu/~vcovrig/Asset_Aloc.pdf https://www.csun.edu/~vcovrig/Asset_Aloc.pdf Edit: I t

Expected investment returns are already inflation-adjusted https://www.csun.edu/~vcovrig/Asset_Aloc.pdf https://www.csun.edu/~vcovrig/Asset_Aloc.pdf Edit: I think your point still stands though. In situations where inflation is out of control or where you don't have access to stable investments, then spending your income as soon as you get it could be more rational than saving it.

yellowstuff 5y ago
Good point. Related- stocks are traditionally considered a good inflation hedge. Even this article partially debunking that idea shows positive real returns in all inflation regimes, and suggests that inflation up to 5% doesn't hurt stock real returns. Long term inflation over 5% has happened and could happen again, but it would be very surprising to most economists. https://blogs.cfainstitute.org/investor/2021/07/19/myth-busting-equities-are-an-inflation-hedge/ https://blogs.cfainstitute.org/investor/2021/07/19/myth-bust...
- jnwatson 5y ago
  That's a great resource. I'd argue that inflation isn't "real" until it gets to around the 5% mark. High inflation attracts Fed interest rate increases which attracts bond investment over equity investment. In the US, we now have a triple whopper of post-pandemic supply chain adjustment, tight labor market due to early Boomer retirement, and now war-related energy cost increases. I don't think the economists have updated their model fast enough. I'm thinking we're going to have "real" inflation for a while now.
- WalterBright 5y ago
  > it would be very surprising to most economists. If the Progressives get their way with the budget, it will be inevitable. You can't have trillions in deficits without massive inflation.
  - WalterBright 5y ago
    For people who don't like what I wrote: believing deficit spending won't create inflation doesn't change the reality :-/
  - mikeyouse 5y ago
    The last 25+ years of American history prove this wrong.. and it’s not like the last administration was concerned with massive deficits, adding $7T during strong economic times. It seems a bit odd to blame progressives for this one…
    - WalterBright 5y ago
      > The last 25+ years of American history prove this wrong The bill always comes due. There's no free lunch.
  - dragonwriter 5y ago
    > You can't have trillions in deficits without massive inflation You empirically can, because the US has at times done so, but progressives (particularly MMT practitioners) not only recognize the relation between government spending balance, they hold up monetary effects like inflation as the only valid constraints on government spending balance, rejecting the idea that spending balance ought to be governed by the pretense of a fix purse that must be filled by tax or borrowing (the “fiscal” approach), while monetary concerns are controlled exclusively elsewhere on the system.
    - WalterBright 5y ago
      > the US has at times done so That assumes all the other variables remained the same. The 2008 banking collapse may have resulted in deflation without the big spending program, which just countered the deflation.
  - astrange 5y ago
    It's the opposite, our deficit is the way we run our worldwide financial empire that easily absorbs inflation. Your econ101 household analogies are for other little baby economies. https://twitter.com/quantian1/status/1260387202871287809 https://twitter.com/quantian1/status/1260387202871287809 Instead, inflation comes from energy shocks (70s) or supply chain shocks (now). And the current one is mostly because everyone started online shopping due to being stuck at home.
hinkley 5y ago
And in periods when investment returns are especially low, it can be better to invest some of that money in yourself, to improve future prospects. Anything from taking classes to going to conventions to paying down debt.
SilasX 5y ago
Then why do risk-free interest rates not compensate for inflation (let alone taxes), and haven't since like the 90s?

yellowstuff 5y ago

Good point. Related- stocks are traditionally considered a good inflation hedge. Even this article partially debunking that idea shows positive real returns in all inflation regimes, and suggests that inflation up to 5% doesn't hurt stock real returns. Long term inflation over 5% has happened and could happen again, but it would be very surprising to most economists. https://blogs.cfainstitute.org/investor/2021/07/19/myth-busting-equities-are-an-inflation-hedge/ https://blogs.cfainstitute.org/investor/2021/07/19/myth-bust...

jnwatson 5y ago
That's a great resource. I'd argue that inflation isn't "real" until it gets to around the 5% mark. High inflation attracts Fed interest rate increases which attracts bond investment over equity investment. In the US, we now have a triple whopper of post-pandemic supply chain adjustment, tight labor market due to early Boomer retirement, and now war-related energy cost increases. I don't think the economists have updated their model fast enough. I'm thinking we're going to have "real" inflation for a while now.
WalterBright 5y ago
> it would be very surprising to most economists. If the Progressives get their way with the budget, it will be inevitable. You can't have trillions in deficits without massive inflation.
- WalterBright 5y ago
  For people who don't like what I wrote: believing deficit spending won't create inflation doesn't change the reality :-/
- mikeyouse 5y ago
  The last 25+ years of American history prove this wrong.. and it’s not like the last administration was concerned with massive deficits, adding $7T during strong economic times. It seems a bit odd to blame progressives for this one…
  - WalterBright 5y ago
    > The last 25+ years of American history prove this wrong The bill always comes due. There's no free lunch.
- dragonwriter 5y ago
  > You can't have trillions in deficits without massive inflation You empirically can, because the US has at times done so, but progressives (particularly MMT practitioners) not only recognize the relation between government spending balance, they hold up monetary effects like inflation as the only valid constraints on government spending balance, rejecting the idea that spending balance ought to be governed by the pretense of a fix purse that must be filled by tax or borrowing (the “fiscal” approach), while monetary concerns are controlled exclusively elsewhere on the system.
  - WalterBright 5y ago
    > the US has at times done so That assumes all the other variables remained the same. The 2008 banking collapse may have resulted in deflation without the big spending program, which just countered the deflation.
- astrange 5y ago
  It's the opposite, our deficit is the way we run our worldwide financial empire that easily absorbs inflation. Your econ101 household analogies are for other little baby economies. https://twitter.com/quantian1/status/1260387202871287809 https://twitter.com/quantian1/status/1260387202871287809 Instead, inflation comes from energy shocks (70s) or supply chain shocks (now). And the current one is mostly because everyone started online shopping due to being stuck at home.

hinkley 5y ago

And in periods when investment returns are especially low, it can be better to invest some of that money in yourself, to improve future prospects. Anything from taking classes to going to conventions to paying down debt.

SilasX 5y ago

Then why do risk-free interest rates not compensate for inflation (let alone taxes), and haven't since like the 90s?