4 ms·

The I-bond guarantees a return rate at inflation or higher. You're saying you expect negative inflation this year?

by SpaceL10n 4y ago

Blackstone4 4y ago
I think they are saying official inflation figures can be manipulated to be below real inflation
- midasuni 4y ago
  Last year internet experts were saying “real” inflation was high because lumber was up X% As of today, Lumber is down 30% year on year. Those same people seem to no longer talk about lumber as it doesn’t suit the narrative.
  - prepend 4y ago
    Well also because there are other factors that are high. Inflation is a basket of many goods. Just because lumber is up or down doesn’t mean inflation, overall, must be up or down. It’s not a conspiracy in this case or an official narrative. Inflation is high so reporters try to find examples. Instead of lumber, they now talk about groceries or whatever.
    - midasuni 4y ago
      We know inflation is high. The conspiracy theorists are the ones who say it’s higher (20,30% etc) because their commodity of choice is up that much. Last year that commodity was lumber. A couple of months ago it was oil. It’s quite possible, likely even, that your personal inflation doesn’t match the official inflation, because you don’t have the same basket of goods. By all means if you want to present an alternate inflation with different weighting that’s fine, preferably show what the same weighting’s were over the last 20 years though and be transparent about the weightings like official ones Or do a YouTube video showing different amounts of lumber and yell about how the lame stream media is lying to you.
roenxi 4y ago
I'm saying that he's lending money to the people who write & interpret the rules, and those people do not intend to pay their creditors back in real terms. Indeed, they have probably crossed a practical threshold where they cannot pay back the real amount. It doesn't matter what the rules say right now, his wealth is at risk. They can and do change the rules sometimes. They can change what the word "inflation" means. Maybe someone legislates that inflation is 1% now for paying back I-bonds, I dunno. This is risk, it could happen. Something is going to happen, the debt situation is unprecedented bad. Will that something affect these bonds? It is possible.
- deleted 4y ago
  [deleted]
- chii 4y ago
  The US gov't so far has enough credibility that they won't manipulate the inflation figures or change the law under you to cheat you of your money. Of course it _could_ happen - nothing prevents it. And if they did, they'd have destroyed the credibility that took over a hundred years to create, and it would remove any future possibility of people lending money to the US gov't. A rational actor would not undertake this action, unless there's some good reason (such as nuclear war).
  - unyttigfjelltol 4y ago
    One only needs to peer into the sausage factory that is the Bureau of Labor Statistics[1] to see that a measure of inflation is a form of opinion whose credibility is entirely wrapped up with that of the speaker. [1] https://www.bls.gov/cpi/additional-resources/historical-changes.htm https://www.bls.gov/cpi/additional-resources/historical-chan...
  - roenxi 4y ago
    > The US gov't so far has enough credibility that they won't manipulate the inflation figures or change the law under you to cheat you of your money. It isn't a matter of credibility at this point, it is one of political realities. There hasn't been a plausible outcome where the debt principle gets paid back since the 1970s, but that turned out to be OK because they can keep rolling that over with new debt. Alright. Well now we're approaching debt levels where even paying back market interest rates is coming under pressure and probably going to give. The risks here, much like the debt to GDP ratio, are starting to move off the charts. Lending the US government money can't possible be safe under these conditions. Someone here is obviously going to get screwed, some of these promises have to be broken. It could just as easily be these bonds as anything else.
skeptikal 4y ago
Even if we assume the measurers of inflation are honest, using honest metrics, inflation is hard to measure and the measurement has a natural skew downwards. We’ve all heard about shrink inflation by now. Theoretically that’s measurable by taking the Oz. into account. But how about the drop in quality of goods? Raisin Bran with few raisins, cars with thinner door panels, etc. This is impossible to measure, obviously happens, and is systematic in one direction resulting in a lower reported inflation rate.
nullc 4y ago
The i-bond with a fixed rate of 0% is guaranteed to return less than inflation: Even if you buy their inflation metric as faithful: The 'gains' are taxed. The tax is at income rates, not even LTCG rates. Moreover, what they're attempting to match isn't inflation, it's a specific government inflation metric which contains many corrections which make it obviously not match inflation for the purpose of preserving purchasing power. For example, when inflation goes up the metric assumes that purchasing will shift from high value goods (like steak) to lower value goods (like rice), which causes the metric to read lower. This is no good if your goal is preserving purchasing power: you put in enough to buy steak and the inflation metric is okay with what comes out being only enough to buy a meal of rice (not technically, since steak and rice aren't the only goods but you get my point).

The I-bond guarantees a return rate at inflation or higher. You're saying you expect negative inflation this year?

Blackstone4 4y ago

I think they are saying official inflation figures can be manipulated to be below real inflation

midasuni 4y ago
Last year internet experts were saying “real” inflation was high because lumber was up X% As of today, Lumber is down 30% year on year. Those same people seem to no longer talk about lumber as it doesn’t suit the narrative.
- prepend 4y ago
  Well also because there are other factors that are high. Inflation is a basket of many goods. Just because lumber is up or down doesn’t mean inflation, overall, must be up or down. It’s not a conspiracy in this case or an official narrative. Inflation is high so reporters try to find examples. Instead of lumber, they now talk about groceries or whatever.
  - midasuni 4y ago
    We know inflation is high. The conspiracy theorists are the ones who say it’s higher (20,30% etc) because their commodity of choice is up that much. Last year that commodity was lumber. A couple of months ago it was oil. It’s quite possible, likely even, that your personal inflation doesn’t match the official inflation, because you don’t have the same basket of goods. By all means if you want to present an alternate inflation with different weighting that’s fine, preferably show what the same weighting’s were over the last 20 years though and be transparent about the weightings like official ones Or do a YouTube video showing different amounts of lumber and yell about how the lame stream media is lying to you.

roenxi 4y ago

I'm saying that he's lending money to the people who write & interpret the rules, and those people do not intend to pay their creditors back in real terms. Indeed, they have probably crossed a practical threshold where they cannot pay back the real amount. It doesn't matter what the rules say right now, his wealth is at risk. They can and do change the rules sometimes. They can change what the word "inflation" means. Maybe someone legislates that inflation is 1% now for paying back I-bonds, I dunno. This is risk, it could happen. Something is going to happen, the debt situation is unprecedented bad. Will that something affect these bonds? It is possible.

deleted 4y ago
[deleted]
chii 4y ago
The US gov't so far has enough credibility that they won't manipulate the inflation figures or change the law under you to cheat you of your money. Of course it _could_ happen - nothing prevents it. And if they did, they'd have destroyed the credibility that took over a hundred years to create, and it would remove any future possibility of people lending money to the US gov't. A rational actor would not undertake this action, unless there's some good reason (such as nuclear war).
- unyttigfjelltol 4y ago
  One only needs to peer into the sausage factory that is the Bureau of Labor Statistics[1] to see that a measure of inflation is a form of opinion whose credibility is entirely wrapped up with that of the speaker. [1] https://www.bls.gov/cpi/additional-resources/historical-changes.htm https://www.bls.gov/cpi/additional-resources/historical-chan...
- roenxi 4y ago
  > The US gov't so far has enough credibility that they won't manipulate the inflation figures or change the law under you to cheat you of your money. It isn't a matter of credibility at this point, it is one of political realities. There hasn't been a plausible outcome where the debt principle gets paid back since the 1970s, but that turned out to be OK because they can keep rolling that over with new debt. Alright. Well now we're approaching debt levels where even paying back market interest rates is coming under pressure and probably going to give. The risks here, much like the debt to GDP ratio, are starting to move off the charts. Lending the US government money can't possible be safe under these conditions. Someone here is obviously going to get screwed, some of these promises have to be broken. It could just as easily be these bonds as anything else.

skeptikal 4y ago

Even if we assume the measurers of inflation are honest, using honest metrics, inflation is hard to measure and the measurement has a natural skew downwards. We’ve all heard about shrink inflation by now. Theoretically that’s measurable by taking the Oz. into account. But how about the drop in quality of goods? Raisin Bran with few raisins, cars with thinner door panels, etc. This is impossible to measure, obviously happens, and is systematic in one direction resulting in a lower reported inflation rate.

nullc 4y ago

The i-bond with a fixed rate of 0% is guaranteed to return less than inflation: Even if you buy their inflation metric as faithful: The 'gains' are taxed. The tax is at income rates, not even LTCG rates. Moreover, what they're attempting to match isn't inflation, it's a specific government inflation metric which contains many corrections which make it obviously not match inflation for the purpose of preserving purchasing power. For example, when inflation goes up the metric assumes that purchasing will shift from high value goods (like steak) to lower value goods (like rice), which causes the metric to read lower. This is no good if your goal is preserving purchasing power: you put in enough to buy steak and the inflation metric is okay with what comes out being only enough to buy a meal of rice (not technically, since steak and rice aren't the only goods but you get my point).