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Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bond

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. This generally speaking can be defined as wealth transfers from retirees to a lower generation. Primarily Boomer -> Millennial. This will and is causing lots of animosity between the generations. The boomers quite obviously didnt save enough for retirement and thought they could indebt a lower generation? Hilarious failure.

PopAlongKid 5y ago
>Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. Only if your income goes up 8% a year due to inflation.
- incomingpain 5y ago
  >Only if your income goes up 8% a year due to inflation. Those inflation numbers are still rising. However, who will ultimately be able to find a new job and increase their $? Not retirees obviously.
- ilammy 5y ago
  Nominal value of the mortgaged property is likely going up at at least around 8%, give or take.
FooBarBizBazz 5y ago
Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could.
- incomingpain 5y ago
  >Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could. Lets say we climb to 15% inflation and subsequently interest rates. Who can afford to pay 150,000$/year on a million $ home? Literally nobody. The boomer selling the home suddenly cant sell their home for a million. It will have to drop in order to spend that $. That retirement fund is suddenly looking weaker. Generational wealth is a remarkable field that we don't know anything about. We do know inheritance taxes are absolutely destructive to economies, but 1 generation can't in debt another in order to retire. Soon as you retire, I saw that I will now only work for much much more than you can afford on your fixed income. The system is understanding this. There's a reason why real yields are negative. Hell Switzerland is -0.75% interest rates. Denmark -0.6%. Japan -0.1%. Most of the west is at 0% or recently increased.
  - mupuff1234 5y ago
    > We do know inheritance taxes are absolutely destructive to economies Is there any data to back that claim?
    - incomingpain 5y ago
      largely speaking as I said we don't know a significant amount about generational wealth. It's virtually impossible to account for all variables etc etc. You cant make conclusions. I guess before we go forward, why is it bad? You are taxing families, family taxes are literally the worst thing you can do. Hence why there are so many tax benefits if not literally $ like in baby bonuses being given to families. If you actually were to make it such that families with children under age 18 got basic income and individuals between age 18 and 65 who don't have children of any age pay for it. Tax for being childless would probably be painful and unpopular obviously not everyone can have kids etc... but theoretically this would be ideal for society. Society is made for families and should be hostile toward individuals. Kind of jumping to actual wealth tax, the important detail is that many countries have tried it. Denmark or more specifically Iceland is the one I researched/studied in depth. Iceland's weak economy and weak isk made it a great study point. Not only did they not actually generate much revenue, it came with waves of silver crime. It had significant wealth escape to britain. The actual wealth tax produced a negative tax revenue. Later, CCP hired an economist who measured the brain drain and what forced them to open up offices outside iceland. Denmark followed and within a year of cancelling it they had significant measurable improvements they didnt even expect. In fact, because of denmark's success quite a few countries nuked their wealth taxes. Which is remarkable because how many countries ever reduce taxes? It's pretty rare, you only ever see taxes increasing.
PopAlongKid 5y ago
>wealth transfers from retirees to a lower generation. Primarily Boomer -> Millennial. The millenials are the children of the boomers, so if inflation accelerates the transfer of wealth, it just means the inheritances will be worth less. Meanwhile, the Social Security/Medicare gravy train rolls along for now, transferring some wealth back in the other direction.
bushbaba 5y ago
Except boomers also own a large portion of housing and stocks. The boomer generation benefited the most from the Fed's money-printing.
- kmbfjr 5y ago
  You people are exhausting with this shit. When the market tanks as it inevitably will, you can enjoy the sweet salty boomer tears.
- incomingpain 5y ago
  Go check out the population pyramids. Boomers will inevitably have to sell assets to pay for increasingly costly goods and services. It will inevitably crash though yes, the boomers who are holding on these too-high-risk assets are inevitably going to hurt for it.
jeffbee 5y ago
How does this track? Are you saying that boomers aren't benefiting from mortgage interest rates? Boomers were still the dominant generation of mortgage purchasers as recently as 10 years ago.
- HWR_14 5y ago
  Plus, the mostly own houses, so they can pull money out with home equity credit lines
CameronNemo 5y ago
Lots of retirees are leveraged.
bezospen15 5y ago
You say failure but this is yet another successful grift. Most of them bought homes decades ago and are cashing out at 3-5x without putting any money into it. They're retiring very well off, hence the cost of retirement communities. We will get through housing painfully only to have to deal with retirement costs after that.
- kmbfjr 5y ago
  Please just stop with the thinking you are the only generation that has been or is being screwed. I can assure you, most boomers are not retiring “very well off”. $400,000, the average price of a home these days, is not a lot of money to live on when one or both might end up needing assisted living. My mother-in-law burned through half that in the last nine months of her life despite having incredible insurance and government pension. Now that is a screwing.
imtringued 5y ago
One could argue that inflation increases the value of future income streams, which is not a bad thing if your goal is to maintain civilization. What irritates me is that a lot of people seem to treat this "humanity project" like a paper towel that is meant to be thrown away the moment they die. You can't just put labor in the fridge and then take it out when you are 70. Time doesn't stand still. So old people are reliant on young people. Old people must find an arrangement that works for young people too. I don't think that is impossible. However, a lot of old people don't care, they just want the future generation to be their worker bee with zero say. Let's say you work and save 20 years of labor. For your money to maintain its value, a young person must work 20 years for you. There are obvious problems here. What if there aren't enough young people? What if they earn money at a slower rate than you did? What if you don't actually give them 20 years of work so they can work themselves out of that debt? The latter is particularly ironic. A young person has 20 years of debt and his old father has 20 years of savings. When the father dies he thinks he is leaving his son a fortune, yet the only benefit the young person sees is that he is out of debt. He doesn't gain something he didn't already have.
- JumpCrisscross 5y ago
  > could argue that inflation increases the value of future income streams No?
  - cuteboy19 5y ago
    They probably mean relatively, since there is no 'real' value for labor. we can only see a comparison between the price of labor today and the price of the same labor 20 years from now. Due to inflation, today's labor would be far less valuable in $ terms.
    - JumpCrisscross 5y ago
      > price of labor today and the price of the same labor 20 years from now Haircut today. Haircut in two decades. Which is more valuable to you now?
grogers 5y ago
Re: bonds - it's not that crazy to think that high inflation may be behind us, and things settle down soon. 8% YoY is the trailing number, we have no idea what the leading number will be. It's also not that crazy to think that rising rates causes a deflationary crash in the next year or two and causes the fed to drop interest rates back to zero (and thus, bond prices to go up). Honestly if the US 10yr treasury goes over 4% I would probably buy some, though it seems unlikely to happen.

PopAlongKid 5y ago

>Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. Only if your income goes up 8% a year due to inflation.

incomingpain 5y ago
>Only if your income goes up 8% a year due to inflation. Those inflation numbers are still rising. However, who will ultimately be able to find a new job and increase their $? Not retirees obviously.
ilammy 5y ago
Nominal value of the mortgaged property is likely going up at at least around 8%, give or take.

FooBarBizBazz 5y ago

Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could.

incomingpain 5y ago
>Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could. Lets say we climb to 15% inflation and subsequently interest rates. Who can afford to pay 150,000$/year on a million $ home? Literally nobody. The boomer selling the home suddenly cant sell their home for a million. It will have to drop in order to spend that $. That retirement fund is suddenly looking weaker. Generational wealth is a remarkable field that we don't know anything about. We do know inheritance taxes are absolutely destructive to economies, but 1 generation can't in debt another in order to retire. Soon as you retire, I saw that I will now only work for much much more than you can afford on your fixed income. The system is understanding this. There's a reason why real yields are negative. Hell Switzerland is -0.75% interest rates. Denmark -0.6%. Japan -0.1%. Most of the west is at 0% or recently increased.
- mupuff1234 5y ago
  > We do know inheritance taxes are absolutely destructive to economies Is there any data to back that claim?
  - incomingpain 5y ago
    largely speaking as I said we don't know a significant amount about generational wealth. It's virtually impossible to account for all variables etc etc. You cant make conclusions. I guess before we go forward, why is it bad? You are taxing families, family taxes are literally the worst thing you can do. Hence why there are so many tax benefits if not literally $ like in baby bonuses being given to families. If you actually were to make it such that families with children under age 18 got basic income and individuals between age 18 and 65 who don't have children of any age pay for it. Tax for being childless would probably be painful and unpopular obviously not everyone can have kids etc... but theoretically this would be ideal for society. Society is made for families and should be hostile toward individuals. Kind of jumping to actual wealth tax, the important detail is that many countries have tried it. Denmark or more specifically Iceland is the one I researched/studied in depth. Iceland's weak economy and weak isk made it a great study point. Not only did they not actually generate much revenue, it came with waves of silver crime. It had significant wealth escape to britain. The actual wealth tax produced a negative tax revenue. Later, CCP hired an economist who measured the brain drain and what forced them to open up offices outside iceland. Denmark followed and within a year of cancelling it they had significant measurable improvements they didnt even expect. In fact, because of denmark's success quite a few countries nuked their wealth taxes. Which is remarkable because how many countries ever reduce taxes? It's pretty rare, you only ever see taxes increasing.

PopAlongKid 5y ago

>wealth transfers from retirees to a lower generation. Primarily Boomer -> Millennial. The millenials are the children of the boomers, so if inflation accelerates the transfer of wealth, it just means the inheritances will be worth less. Meanwhile, the Social Security/Medicare gravy train rolls along for now, transferring some wealth back in the other direction.

bushbaba 5y ago

Except boomers also own a large portion of housing and stocks. The boomer generation benefited the most from the Fed's money-printing.

kmbfjr 5y ago
You people are exhausting with this shit. When the market tanks as it inevitably will, you can enjoy the sweet salty boomer tears.
incomingpain 5y ago
Go check out the population pyramids. Boomers will inevitably have to sell assets to pay for increasingly costly goods and services. It will inevitably crash though yes, the boomers who are holding on these too-high-risk assets are inevitably going to hurt for it.

jeffbee 5y ago

How does this track? Are you saying that boomers aren't benefiting from mortgage interest rates? Boomers were still the dominant generation of mortgage purchasers as recently as 10 years ago.

HWR_14 5y ago
Plus, the mostly own houses, so they can pull money out with home equity credit lines

CameronNemo 5y ago

Lots of retirees are leveraged.

bezospen15 5y ago

You say failure but this is yet another successful grift. Most of them bought homes decades ago and are cashing out at 3-5x without putting any money into it. They're retiring very well off, hence the cost of retirement communities. We will get through housing painfully only to have to deal with retirement costs after that.

kmbfjr 5y ago
Please just stop with the thinking you are the only generation that has been or is being screwed. I can assure you, most boomers are not retiring “very well off”. $400,000, the average price of a home these days, is not a lot of money to live on when one or both might end up needing assisted living. My mother-in-law burned through half that in the last nine months of her life despite having incredible insurance and government pension. Now that is a screwing.

imtringued 5y ago

One could argue that inflation increases the value of future income streams, which is not a bad thing if your goal is to maintain civilization. What irritates me is that a lot of people seem to treat this "humanity project" like a paper towel that is meant to be thrown away the moment they die. You can't just put labor in the fridge and then take it out when you are 70. Time doesn't stand still. So old people are reliant on young people. Old people must find an arrangement that works for young people too. I don't think that is impossible. However, a lot of old people don't care, they just want the future generation to be their worker bee with zero say. Let's say you work and save 20 years of labor. For your money to maintain its value, a young person must work 20 years for you. There are obvious problems here. What if there aren't enough young people? What if they earn money at a slower rate than you did? What if you don't actually give them 20 years of work so they can work themselves out of that debt? The latter is particularly ironic. A young person has 20 years of debt and his old father has 20 years of savings. When the father dies he thinks he is leaving his son a fortune, yet the only benefit the young person sees is that he is out of debt. He doesn't gain something he didn't already have.

JumpCrisscross 5y ago
> could argue that inflation increases the value of future income streams No?
- cuteboy19 5y ago
  They probably mean relatively, since there is no 'real' value for labor. we can only see a comparison between the price of labor today and the price of the same labor 20 years from now. Due to inflation, today's labor would be far less valuable in $ terms.
  - JumpCrisscross 5y ago
    > price of labor today and the price of the same labor 20 years from now Haircut today. Haircut in two decades. Which is more valuable to you now?

grogers 5y ago

Re: bonds - it's not that crazy to think that high inflation may be behind us, and things settle down soon. 8% YoY is the trailing number, we have no idea what the leading number will be. It's also not that crazy to think that rising rates causes a deflationary crash in the next year or two and causes the fed to drop interest rates back to zero (and thus, bond prices to go up). Honestly if the US 10yr treasury goes over 4% I would probably buy some, though it seems unlikely to happen.