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When you have been hit by a speeding car while crossing the road, it is little comfort to hear that it began to accelerate at a lower rate.
by thom 4y ago
When you have been hit by a speeding car while crossing the road, it is little comfort to hear that it began to accelerate at a lower rate.
- shaoonb 4y agoIt's a positive thing to hear that the car behind the one that hit you is braking.
- thom 4y agoIt isn’t braking yet.
- klipt 4y agoIf you have a lot of debt (e.g. a big mortgage) inflation is actually good for you, because it means the amount you owe has gone down in real terms.
- runnerup 4y agoOf course only inasmuch as your wages keep up with inflation.
- googlryas 4y agoExcept most people's wages didn't keep up with inflation, and they're now paying more out of pocket for other necessities every month
- midasuni 4y agoWages are up 6%, inflation up 7% If you are earning and have debt that’s great news. Sure the cost of your weekly shops increased 1%, but your debt has dropped 7%.
- laidoffamazon 4y agoReal wage growth is also positive for the last few months. Even in real terms basically everyone is better off than they were in ~2018.
- kneebonian 4y agoOnly in so much as you own assests that have appreciated with it, and to be frank I can't eat with equity.
- wardedVibe 4y ago"You will not crucify mankind upon a cross of gold!" - William Jennings Bryan
- layoric 4y agoMaybe different in other countries, but in Australia your mortgage payments go up as interest rates rise. So over the life time of the loan you will likely pay more/the same in real terms. And this ignores the lack of wage growth.
- BlargMcLarg 4y agoGenerally speaking, the ones hit hardest by inflation are the ones unable to afford such loans to begin with.
- robocat 4y agoOnly if you live in a country with “long-term fixed rate pre-payable mortgages” - i.e. only the USA and maybe Denmark[1]. Inflation can also screw the equity value for home owners in the US because in the long term house equity value is very roughly inversely related to mortgageInterestRate -- that occurs because house prices are driven by how much people can loan for a mortgage, and maximum mortgage loan is limited by f(personalIncomeAfterOtherCosts, wholesaleInterestRate + bankMargin, futureIncomeStreamPrediction). Living in New Zealand which all mortgages are variable rate (approximately), I can say inflation really screws large mortgage holders here. [1] 2010 https://business.sdsu.edu/_resources/files/real-estate/research/10122_research_riha_lea_report.pdf https://business.sdsu.edu/_resources/files/real-estate/resea...
- midasuni 4y agoIt’s not inflation that’s the problem, it’s interest rates (or swap rates). Raising interest rates are a great way to combat demand driven inflation (everyone borrows money to buy a set amount of goods/services so prices increase). It’s not a good way to deal with supply driven inflation in essential goods (say prices go up because a harvest fails). But it needs to happen to ensure the currency doesn’t fall relative to other currencies thus making imports more expensive.
- thom 4y agoIn the UK at least, about a quarter of mortgages are on variable rates. Of those on fixed rates, all their other bills have gone up, and will continue to do so. In many cases this means people’s mortgages are no longer affordable even if they haven’t changed. It’s not a good situation, and telling people they’re technically incorrect in their complaints because some day in the future they might be able to heat their house again is standard economist fare.
- midasuni 4y agoAnd of the rest about 25% end their fixed deal every year
- pharmakom 4y agoonly if the rate is fixed. huge numbers of consumers in the developed world (e.g. UK) have short term or variable rate.
- edgyquant 4y agoThis metaphor doesn’t hold. Lots of people will in fact be happy that their dollars are worth more than they were a month ago.
- bendbro 4y agoThey aren't, the rate of inflation is slowing, the position of inflation is not decreasing. We would need negative inflation for that to be the case.
- HideousKojima 4y agoExcept inflation hasn't reversed, it's merely slowed. Our dollars are still worth less.
- krisroadruck 4y agoThat's not what this is saying though. Their dollars are still worth less than a month ago, just less so than than previously projects. For their dollar to be worth MORE we'd have to get into deflation territory and we aren't there yet. Simple example: You start with a dollar. Every month it's value falls by 5 cents. However this month it only fell by 2 cents.
- midasuni 4y agoYou’re overestimating inflation by a factor of 10-20.
- krisroadruck 4y agoI'm not estimating at all, it was a made up example to illustrate reduction in inflation. It even says simple example.
- beambot 4y agoIf you are going to be hit every day at the same intersection, the I'd rather the car be decelerating rather than accelerating.
- tintor 4y agoNot decelerating, but accelerating less.
- michaelmrose 4y agoThis is kind of why metaphors are counter productive when the topic is simple enough to discuss correctly. The article states that the rate of inflation is decreasing with the annualized rate falling from greater than 11 to 2.5. It is meaningful to discuss the annual rate but nonsensical to make further decisions based on how much inflation occurred 6 months ago.
- oneoff786 4y agoIf we’re going to make contrived analogies that don’t really match the nuances of the situation then how about being glad that your boat is now taking on water at a rate slower than you can bail?