4 ms·

It's a weird choice to (1) pick 1965 as the starting date and (2) not discuss at all the fact that peak inflation followed the oil price shock of 1973.

readthenotes1 4y ago
1965 is when inflation started kicking in (we have a recording of a family dinner from around that time and the mother was complaining about inflation). It looks like there were three peaks in overall inflation mountain range, and only one of them was from the oil price shock. I believe the author might have been using the article she linked as a major source: https://www.federalreservehistory.org/essays/great-inflation https://www.federalreservehistory.org/essays/great-inflation
foobiekr 4y ago
1965 is a commonly picked start date because it is the worst time in the last 100+ years to retire with a self-funded portfolio. It’s commonly used in the FIRE community to check withdrawal plans.
- paulpauper 4y ago
  It depends on your individual consumption preferences. Just because the CPI is 7%/year does not mean you are losing 7%. If you have $1 million in cash and your expenses are $40k/year and CPI goes up 10%, then all you need is to invest the $960,000 in fixed income to negate the increase of $4k due to inflation, which is easily doable. If you are taking that $1 million and buying only energy or only food with it, then you would lose a lot of potential purchasing power but most people do not do that. Food and energy are only a small % of one's wealth beyond a certain amount.
  - terminalcommand 4y ago
    Another perspective, we have 83.45 %/year CPI inflation in Turkey. This is the official number an independent research group of academics claim it is nearing 200%. The official interest rate is 10.5%/year. You get maximum 20-25%/year interest on savings accounts. Real estate market and rents go up 220%/year (by the official numbers). Before doing FIRE purchase your own home or sign a really long term lease with upfront payment and no increases, inflation caused by corruption (as in my country's case) wreaks havoc on savings. It is simply not possible to invest in anything that can keep up with the inflation, you get poorer by the day.
    - reducesuffering 4y ago
      Yes, it is underappreciated in urban circles how much owning physical assets (land, reliable fuel-efficient vehicles, fruit trees, tools, wood for construction & heat) help weather rough times. They're very frequent in history, but a scant memory for many in the west. Digital IOU assets will not completely cut it.
      - bombcar 4y ago
        It’s a scenario that has happened many times in many countries, which means it can be studied and investigated. John T Reed wrote a book on it which has decent amount of research and ideas - https://johntreed.com/collections/john-t-reed-s-book-on-hyperinflation-and-depression/products/how-to-protect-your-life-savings-from-hyperinflation-and-depression https://johntreed.com/collections/john-t-reed-s-book-on-hype...
    - Rufbdbskrufb473 4y ago
      > It is simply not possible to invest in anything that can keep up with the inflation Why not just invest in diversified real estate rather than betting on a single property and its local market? In expectation, the returns should be similar on average but with lower volatility. I'd rather rent and put capital in a real estate investment fund. I guess something could be said for buying a property if you're very certain that you'll live there for the rest of your life, but if you would ever like to move, you'd be highly exposed to fluctuations in the value of a single asset, your home.
      - terminalcommand 4y ago
        That's a good idea, real estate investment funds accepting investment from retail investors don't really exist in my country. There are real estate investment companies which I can buy shares in. I am afraid of buying stocks, but I may consider that. Principally speaking you are right to think that real estate investment funds should bring on par profit with real estate increases but during times of very high inflation as in Turkey, you lose some because funds don't 100% invest in their base asset, a significant part (around usually 20%) stays liquid. From that 20% you lose the ability to cope up with inflation, as the official interest rates are negative. (In Turkey's case above -70% a year).

readthenotes1 4y ago

1965 is when inflation started kicking in (we have a recording of a family dinner from around that time and the mother was complaining about inflation). It looks like there were three peaks in overall inflation mountain range, and only one of them was from the oil price shock. I believe the author might have been using the article she linked as a major source: https://www.federalreservehistory.org/essays/great-inflation https://www.federalreservehistory.org/essays/great-inflation

foobiekr 4y ago

1965 is a commonly picked start date because it is the worst time in the last 100+ years to retire with a self-funded portfolio. It’s commonly used in the FIRE community to check withdrawal plans.

paulpauper 4y ago
It depends on your individual consumption preferences. Just because the CPI is 7%/year does not mean you are losing 7%. If you have $1 million in cash and your expenses are $40k/year and CPI goes up 10%, then all you need is to invest the $960,000 in fixed income to negate the increase of $4k due to inflation, which is easily doable. If you are taking that $1 million and buying only energy or only food with it, then you would lose a lot of potential purchasing power but most people do not do that. Food and energy are only a small % of one's wealth beyond a certain amount.
- terminalcommand 4y ago
  Another perspective, we have 83.45 %/year CPI inflation in Turkey. This is the official number an independent research group of academics claim it is nearing 200%. The official interest rate is 10.5%/year. You get maximum 20-25%/year interest on savings accounts. Real estate market and rents go up 220%/year (by the official numbers). Before doing FIRE purchase your own home or sign a really long term lease with upfront payment and no increases, inflation caused by corruption (as in my country's case) wreaks havoc on savings. It is simply not possible to invest in anything that can keep up with the inflation, you get poorer by the day.
  - reducesuffering 4y ago
    Yes, it is underappreciated in urban circles how much owning physical assets (land, reliable fuel-efficient vehicles, fruit trees, tools, wood for construction & heat) help weather rough times. They're very frequent in history, but a scant memory for many in the west. Digital IOU assets will not completely cut it.
    - bombcar 4y ago
      It’s a scenario that has happened many times in many countries, which means it can be studied and investigated. John T Reed wrote a book on it which has decent amount of research and ideas - https://johntreed.com/collections/john-t-reed-s-book-on-hyperinflation-and-depression/products/how-to-protect-your-life-savings-from-hyperinflation-and-depression https://johntreed.com/collections/john-t-reed-s-book-on-hype...
  - Rufbdbskrufb473 4y ago
    > It is simply not possible to invest in anything that can keep up with the inflation Why not just invest in diversified real estate rather than betting on a single property and its local market? In expectation, the returns should be similar on average but with lower volatility. I'd rather rent and put capital in a real estate investment fund. I guess something could be said for buying a property if you're very certain that you'll live there for the rest of your life, but if you would ever like to move, you'd be highly exposed to fluctuations in the value of a single asset, your home.
    - terminalcommand 4y ago
      That's a good idea, real estate investment funds accepting investment from retail investors don't really exist in my country. There are real estate investment companies which I can buy shares in. I am afraid of buying stocks, but I may consider that. Principally speaking you are right to think that real estate investment funds should bring on par profit with real estate increases but during times of very high inflation as in Turkey, you lose some because funds don't 100% invest in their base asset, a significant part (around usually 20%) stays liquid. From that 20% you lose the ability to cope up with inflation, as the official interest rates are negative. (In Turkey's case above -70% a year).