6 ms·

> But if the main driver of inflation is the demand side, or inflation expectations, history indicates that a painful recession could be the only way to curb in

by Syonyk 4y ago

> But if the main driver of inflation is the demand side, or inflation expectations, history indicates that a painful recession could be the only way to curb inflation. That's certainly the expected path forward, at least in the circles I associate with. "When the tide goes out, you find out who's swimming naked" seems a reasonable guess as to what's going to happen. Both at larger bank/investment firm scale and at the individual level. At an individual level, just how much slack and flexibility do you have in your spending, your finances, your general way of living? If you're a high earner (there are certainly plenty here that would qualify), are you spending that on lots of monthly payments of assorted luxury and stretch items (house, cars, all the other crap you can get loans for)? You're probably going to be in a world of hurt - there's no income so high you can't outspend it, and it's really hard to adjust those payments when the value of money goes down and you need more for the living expenses. Also, those payments don't go away if your job is eliminated. If you're comfortably pulled back, with either a high savings rate or a high "optional spending" rate, then you should be in far better shape to adapt - and I'll suggest that using some of those resources to help others around you would be useful. Even just coordinating bulk buys of food and other resources is helpful. But the key here is that this allows for flexibility. It's good to be rich, and all that - so don't be stupid about it. I think, collectively, we're in for a world of hurt. Inflation is high, and energy costs seem to be staggering back up. Europe is going to be a frozen wasteland this winter if it's anything but a warm winter, and the energy costs are already eating businesses alive out there. That's before you get to a possibility this winter, in which money doesn't help, because there's simply no energy to deliver. If the natural gas pipeline to your place are empty, welp. Doesn't help to be able to afford the energy when there's none to buy. That does imply that you might consider some backup energy solutions for the winter. I'm a fan of kerosene lately. Less annoying to use than propane, and stores almost as well. The last couple years have broken a lot of things. And we're only just beginning to learn how much is broken, how badly.

DoingIsLearning 4y ago
>That does imply that you might consider some backup energy solutions for the winter. I'm a fan of kerosene lately. Less annoying to use than propane, and stores almost as well. By backup you mean for heating? Can you safely burn kerosene indoors? I thought you would have all sort of pollutants on top of monoxide?
- Syonyk 4y ago
  Heating and light, yes. You can, and people have throughout the last century and a half, both for heat and light. In terms of winter, the fact that kerosene lanterns provide "a bit of light and a lot of heat" is useful - though the light coming off a good cold blast lantern is just wonderful, year round. A nice continuous spectrum, cooler than candles, but still a very nice yellow-orange, with more than enough to read by. I've been experimenting with them for a while now, and as far as I can tell, a properly burning kerosene lantern doesn't put any measurable particulate in the air, at least as far as PM2.5 or PM10. Run them too high, they'll certainly smoke, but run properly, I can't measure any real difference with the meters I have. They should be burning cleanly. The same goes for the wick type kerosene heaters - either convection or radiant. They should be burning clean, and if you get any smoke off them, you've got a problem that needs fixing (the good news is that it's almost always either just burning them dry to remove tars from the wick, or at worst replacing the wick). You shouldn't be getting any carbon monoxide off them either. That's from incomplete combustion, which, again, shouldn't be happening. A properly designed and operating lantern or heater will be feeding a strong draft into the burner. A window slightly open should provide enough venting for a typical unit burning - though I'd have a CO meter around any combustion heat as a normal habit anymore. If you're burning 1K, you'll get some kerosene odor on startup and shutdown, but it shouldn't be much during operation. However, if you're in the US (perhaps other places too), you can get Klean Heat, which is a kerosene substitute that's somewhat more expensive (~$15/gal vs about $10 for 1K out here), but burns significantly cleaner. It behaves the same, so can burn in the same lanterns, but just burns cleaner all around - less odor, less wick fouling (though that's not usually a big issue with 1K, just the red dyed stuff), etc. But, yes, I very much do refer to kerosene as a backup for heating. I prefer it over propane - it smells better (propane has a bit of a metallic tang, kerosene is a far warmer smell), and I don't have a pressurized bottle of flammable gas in the house. Kerosene is combustible - not flammable. The flash point of the stuff you should be using is around 140F, which means below that temperature, it doesn't emit enough vapor to ignite in regular air. Gasoline's flash point is -40, give or take, so it will happily generate vapors in regular air looking for a thing to light them of. Especially in the winter, at 40-50F, kerosene is quite safe compared to other heating solutions. Anyway, it's something to look into. Our energy systems are not in good shape globally, and being able to stay warm with the power grid down and the natural gas empty seems like the sort of thing one might want to consider more lately.
WaxProlix 4y ago
On the other hand, you've locked in presumably low rates for your debt (close to 0% hasn't been uncommon for years now) and purchased items at pre-inflation levels! So maybe you can parlay some of that leverage off with minimal losses and enjoy the free rate arbitrage for a bit.
- Syonyk 4y ago
  Perhaps. I'm pretty well opposed to debt, as I've seen how it can bite people over the years, so I simply don't play those games. I'm far more likely to buy something used and pay a lot less anyway, or, ideally, something with a couple problems that I know how to fix for even less, and then fix it and use it. The problem I have with debt is that you then have to be able to service it. There are plenty of folks in the FIRE forums who go back and forth on the topic - "To pay off your mortgage or not?" is a holy wars topic. The argument for not paying it off (and arguably taking more on) is that your investments in the market will outperform your cost of the loan, so it's free money. And it works well, for at least some time - but the FIRE movement is largely a post-2008 movement, when all the money sloshing around meant investments go up. Regardless of anything else, investments go up, so put money in them, and while few people suggested going strongly leveraged, the sentiment certainly lurked around the edges. We'll see how that holds up if the market is cratering around the time one is unemployed. Meanwhile, "Don't have debt, have savings, and live well below your means" has been tested through an awful lot more years of human history than "Put it all in index funds." I'm certain I've "left money on the table" with my approach, but I also keep my downside risks limited, and should I have reason to really clamp down monthly expenses, I can do so very well.
mrep 4y ago
Where are you at? I ask because I have 2 mortgages and a car loan in the US and 2 are fixed rate for the entire lifetime of the loan and 1 I have 10 years until the ARM starts applying so I'm laughing all the way to the bank. 90% of US mortgages are fixed for the entire loan.
- Syonyk 4y ago
  I'm in the US. I certainly could do something like that. I just won't. I hope it works for you. That's a level of debt-based risk that neither myself nor my wife have any interest in. There have been a lot of people throughout history who thought similar arrangements were "sure things," and they were, up until they weren't and it all came down around their ankles. We live in a very modest (manufactured, gasp!) home for our income, our "new" car is a decade old, with other vehicles ranging far older (the tractor is about 80), but still maintained in perfectly good condition and they all do exactly what we ask of them. Mostly. One of the Urals got demanding lately. It's low stress and high slack/flexibility. Those seem useful to us.
  - mrep 4y ago
    2/3 of my debt payments are a sure thing as they are fixed and inflation is also a sure thing as deflation is catastrophic so governments won't allow it and deflation is trivially easy to fix with helicopter money. The only thing that isn't a sure thing are wages but they have over the long term gone up [0] and when they do go down it is usually only for a few years. The last one is a risk but I think it is well worth the risk. [0]: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N
    - deleted 4y ago
      [deleted]
    - junofan 4y ago
      I mean the bank took on the risk instead of you, and the bank owns your house. So… sure thing?
  - 4y ago
bcrosby95 4y ago
I went into college during the dotcom bust. Everyone told me I would be making peanuts. I'm pretty happy where I am. I've lived my life trying to minimize the financial downsides. I want money for security, not to live the high life. I like my job, and don't feel the need to retire early - I would love to do it until I'm 6 feet under. I make a decent enough income, although not the level of many here. I bought a modest house (700k - hey, it's California) compared to what lenders wanted to lend me (1.3mil). We could afford our expenses on two minimum wage jobs if need be. And that's with 3 kids.
- wahnfrieden 4y ago
  I experienced the same and I’ve probably enjoyed similar extremely cushy tech career experiences that also aren’t that relevant to a macro discussion but it’s nice to hear individual anecdotes
- deathanatos 4y ago
  > We could afford our expenses on two minimum wage jobs if need be. And that's with 3 kids. Let's assume a $15 minimum wage. The housing one can afford on two such wages is $1,560/mo. On a $700k home, assuming 20% down, to repay the principal alone is $1,556/mo. A mortgage calculator says $3,800/mo once you have interest in there — or 73% of your gross income. And that ignores insurance & taxes. And those 3 kids.
  - thebradbain 4y ago
    I imagine that the OP probably has savings to fall back on (since they stress financial security), and more equity in the home than just the downpayment— not to mention that if they bought it not so recently (5-10 years back), the home value appreciation has likely been insane to still come out well ahead in even an 2008-esque crash, plus they could have refinanced at 2% fixed 30year rates in 2020-2021 drastically lowing their monthly payments even further, depending on how much equity they had. Also, California just passed a law requiring minimum wage be $22 in some industries/companies of a certain size (and the next step will likely be rolling that out to all industries and companies, as they did with the $15 minimum wage between 2016-2020)
anon291 4y ago
> if it's anything but a warm winter, I guess they should hope that their green technologies didn't work enough to curb global warming or something. What a messed up situation.

by Syonyk 4y ago

DoingIsLearning 4y ago

>That does imply that you might consider some backup energy solutions for the winter. I'm a fan of kerosene lately. Less annoying to use than propane, and stores almost as well. By backup you mean for heating? Can you safely burn kerosene indoors? I thought you would have all sort of pollutants on top of monoxide?

Syonyk 4y ago
Heating and light, yes. You can, and people have throughout the last century and a half, both for heat and light. In terms of winter, the fact that kerosene lanterns provide "a bit of light and a lot of heat" is useful - though the light coming off a good cold blast lantern is just wonderful, year round. A nice continuous spectrum, cooler than candles, but still a very nice yellow-orange, with more than enough to read by. I've been experimenting with them for a while now, and as far as I can tell, a properly burning kerosene lantern doesn't put any measurable particulate in the air, at least as far as PM2.5 or PM10. Run them too high, they'll certainly smoke, but run properly, I can't measure any real difference with the meters I have. They should be burning cleanly. The same goes for the wick type kerosene heaters - either convection or radiant. They should be burning clean, and if you get any smoke off them, you've got a problem that needs fixing (the good news is that it's almost always either just burning them dry to remove tars from the wick, or at worst replacing the wick). You shouldn't be getting any carbon monoxide off them either. That's from incomplete combustion, which, again, shouldn't be happening. A properly designed and operating lantern or heater will be feeding a strong draft into the burner. A window slightly open should provide enough venting for a typical unit burning - though I'd have a CO meter around any combustion heat as a normal habit anymore. If you're burning 1K, you'll get some kerosene odor on startup and shutdown, but it shouldn't be much during operation. However, if you're in the US (perhaps other places too), you can get Klean Heat, which is a kerosene substitute that's somewhat more expensive (~$15/gal vs about $10 for 1K out here), but burns significantly cleaner. It behaves the same, so can burn in the same lanterns, but just burns cleaner all around - less odor, less wick fouling (though that's not usually a big issue with 1K, just the red dyed stuff), etc. But, yes, I very much do refer to kerosene as a backup for heating. I prefer it over propane - it smells better (propane has a bit of a metallic tang, kerosene is a far warmer smell), and I don't have a pressurized bottle of flammable gas in the house. Kerosene is combustible - not flammable. The flash point of the stuff you should be using is around 140F, which means below that temperature, it doesn't emit enough vapor to ignite in regular air. Gasoline's flash point is -40, give or take, so it will happily generate vapors in regular air looking for a thing to light them of. Especially in the winter, at 40-50F, kerosene is quite safe compared to other heating solutions. Anyway, it's something to look into. Our energy systems are not in good shape globally, and being able to stay warm with the power grid down and the natural gas empty seems like the sort of thing one might want to consider more lately.

WaxProlix 4y ago

On the other hand, you've locked in presumably low rates for your debt (close to 0% hasn't been uncommon for years now) and purchased items at pre-inflation levels! So maybe you can parlay some of that leverage off with minimal losses and enjoy the free rate arbitrage for a bit.

Syonyk 4y ago
Perhaps. I'm pretty well opposed to debt, as I've seen how it can bite people over the years, so I simply don't play those games. I'm far more likely to buy something used and pay a lot less anyway, or, ideally, something with a couple problems that I know how to fix for even less, and then fix it and use it. The problem I have with debt is that you then have to be able to service it. There are plenty of folks in the FIRE forums who go back and forth on the topic - "To pay off your mortgage or not?" is a holy wars topic. The argument for not paying it off (and arguably taking more on) is that your investments in the market will outperform your cost of the loan, so it's free money. And it works well, for at least some time - but the FIRE movement is largely a post-2008 movement, when all the money sloshing around meant investments go up. Regardless of anything else, investments go up, so put money in them, and while few people suggested going strongly leveraged, the sentiment certainly lurked around the edges. We'll see how that holds up if the market is cratering around the time one is unemployed. Meanwhile, "Don't have debt, have savings, and live well below your means" has been tested through an awful lot more years of human history than "Put it all in index funds." I'm certain I've "left money on the table" with my approach, but I also keep my downside risks limited, and should I have reason to really clamp down monthly expenses, I can do so very well.

mrep 4y ago

Where are you at? I ask because I have 2 mortgages and a car loan in the US and 2 are fixed rate for the entire lifetime of the loan and 1 I have 10 years until the ARM starts applying so I'm laughing all the way to the bank. 90% of US mortgages are fixed for the entire loan.

Syonyk 4y ago
I'm in the US. I certainly could do something like that. I just won't. I hope it works for you. That's a level of debt-based risk that neither myself nor my wife have any interest in. There have been a lot of people throughout history who thought similar arrangements were "sure things," and they were, up until they weren't and it all came down around their ankles. We live in a very modest (manufactured, gasp!) home for our income, our "new" car is a decade old, with other vehicles ranging far older (the tractor is about 80), but still maintained in perfectly good condition and they all do exactly what we ask of them. Mostly. One of the Urals got demanding lately. It's low stress and high slack/flexibility. Those seem useful to us.
- mrep 4y ago
  2/3 of my debt payments are a sure thing as they are fixed and inflation is also a sure thing as deflation is catastrophic so governments won't allow it and deflation is trivially easy to fix with helicopter money. The only thing that isn't a sure thing are wages but they have over the long term gone up [0] and when they do go down it is usually only for a few years. The last one is a risk but I think it is well worth the risk. [0]: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N
  - deleted 4y ago
    [deleted]
  - junofan 4y ago
    I mean the bank took on the risk instead of you, and the bank owns your house. So… sure thing?
- 4y ago

bcrosby95 4y ago

I went into college during the dotcom bust. Everyone told me I would be making peanuts. I'm pretty happy where I am. I've lived my life trying to minimize the financial downsides. I want money for security, not to live the high life. I like my job, and don't feel the need to retire early - I would love to do it until I'm 6 feet under. I make a decent enough income, although not the level of many here. I bought a modest house (700k - hey, it's California) compared to what lenders wanted to lend me (1.3mil). We could afford our expenses on two minimum wage jobs if need be. And that's with 3 kids.

wahnfrieden 4y ago
I experienced the same and I’ve probably enjoyed similar extremely cushy tech career experiences that also aren’t that relevant to a macro discussion but it’s nice to hear individual anecdotes
deathanatos 4y ago
> We could afford our expenses on two minimum wage jobs if need be. And that's with 3 kids. Let's assume a $15 minimum wage. The housing one can afford on two such wages is $1,560/mo. On a $700k home, assuming 20% down, to repay the principal alone is $1,556/mo. A mortgage calculator says $3,800/mo once you have interest in there — or 73% of your gross income. And that ignores insurance & taxes. And those 3 kids.
- thebradbain 4y ago
  I imagine that the OP probably has savings to fall back on (since they stress financial security), and more equity in the home than just the downpayment— not to mention that if they bought it not so recently (5-10 years back), the home value appreciation has likely been insane to still come out well ahead in even an 2008-esque crash, plus they could have refinanced at 2% fixed 30year rates in 2020-2021 drastically lowing their monthly payments even further, depending on how much equity they had. Also, California just passed a law requiring minimum wage be $22 in some industries/companies of a certain size (and the next step will likely be rolling that out to all industries and companies, as they did with the $15 minimum wage between 2016-2020)

anon291 4y ago

> if it's anything but a warm winter, I guess they should hope that their green technologies didn't work enough to curb global warming or something. What a messed up situation.