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A currency being worth half it's value in 25 years is absurd. The US despreately needs to make it's money a stable unit of measure.
by CSMastermind 1y ago
A currency being worth half it's value in 25 years is absurd. The US despreately needs to make it's money a stable unit of measure.
- joshuamcginnis 1y agoWe're $38.8 trillion in debt and still printing. https://www.usdebtclock.org/ https://www.usdebtclock.org/
- kristofferR 1y agoInflation is just what you want when your debt is denominated in the currency that is being inflated, though. The more inflation the easier it will be to service the debt.
- BartjeD 1y agoThat's why everyone sane is fleeing into gold and silver.
- deleted 1y ago[deleted]
- mothballed 1y agoThey're probably too late, it's already priced in. Gold is up like 30% in 3 months.
- nonethewiser 1y agoBeing up doesnt show that it's priced in.
- mothballed 1y agoOf course not. It being known to the market is what causes it to be priced in.
- lesuorac 1y agoThanks, I'll go short gold now since it's going to go down! Things being priced in is such horse shit. Momentum trading works specifically because the market fails to price in information.
- deleted 1y ago[deleted]
- jart 1y agoIt's a foolish idea to short gold on the eve of a currency crisis. Gold went up 1812% the last time this happened. You'll be paying through the nose if you do it with $GLD since it's hard to borrow. You'll get IV crushed if you do it with put options. The smart way to profit off gold's fall from grace is by selling futures each time it hits a new high and then closing your position quickly after the inevitable ~50 point pullback. Markets can be timid. They sometimes price in new information slowly and reluctantly.
- deleted 1y ago[deleted]
- nonethewiser 1y agoIn some sense it's absurd. But historically its normal. And to be more precise, 25 years to halve is actually less inflation than the historical average of 3.29% from 1914-2025. At that rate it would take 21-22 years to halve. Actually there is a surprisingly good trick to be able to calculate this called the rule of 72. Take the inflation percentage (2, 3 %) and divide 72 by it. Thats how many years it will take to halve. Not completing accurate but actually very close. But yeah, inflation is a bitch over long time horizons. It makes me laugh when people say stocks are risky. Say you are 20 years old and want to save $2M USD for your retirement by 65. Expect that to be more like $470k.
- mothballed 1y agoIf you move to before the central bank was created in 1913, the dollar remained remarkably stable in relation, although it did oscillate, it never deviated more than 50% from the starting point until after creation of the fed. https://upload.wikimedia.org/wikipedia/commons/c/c7/Dollar_value_chart.png https://upload.wikimedia.org/wikipedia/commons/c/c7/Dollar_v...
- woodruffw 1y agoIt seems difficult to draw any inference from this, given how different the US’s economy and global position is in 2025 versus 1913.
- mothballed 1y ago... I was directly addressing GGP using 1914 as a cutoff. Now you object to the cutoff I didn't introduce only when someone introduce data on the other side of it? Funny how that magically ends up being the case.
- woodruffw 1y agoTo be clear, I think it’s also hard to make inferences after 1913. But it’s easier (and particularly after 1945, 1971, etc.) because the US’s geopolitical status after those periods is at least analogous and a matter of econometric research.
- mothballed 1y agoGet a brokerage account that has a sister bank account. Put money in, buy TIPS/gold/equities, pay the 30% tax or whatever on the inflationary difference, then buy your stuff. The point is to force you into buying more stable units of account and then taxing the inflation as a "capital gain." Pretty genius because it can be framed as taxing greedy capitalists when literally they're just taxing fractional inflation.
- silisili 1y agoWe tend to target 2% inflation. Half in 25 years is under 3%, so on target. That said, I feel like this number is way off, personally, based on changes in housing and food prices between the two times.
- nonethewiser 1y agoCertainly a lot of that inflation was in the last ~8 years. I certainly know what you mean. Groceries are one of the more discretionary items. Your mortgage is fixed, demand for gas is inelastic, etc. But groceries you respond to the price. And so many staples have become 2,3,4X times more expensive compared to pre-covid. I remember the cheap beef (chuck roast) was about $4/lb and decent steak (ribeye) was about $9/lb. Now its about $10/lb and $22/lb. So psychologically, now your "splurging" just gets you the "cheap" stuff. Wages have risen a bit. But 1) not nearly as much as inflation 2) these are very asymetric and 3) the way they rise doesnt feel like wage inflation. Even those who saw wages rise due to inflation probably felt like it was other things. Such as simply changing jobs. Or just normal yearly review. Or maybe they havent switched jobs and have some "unrealized gains" awaiting them still. No one one saw their wages incrementally rise month by month.
- silisili 1y agoI think wages are a great way to look at it too, rather than just comparing prices. Said another way, I think making 100k in 1995 would make one feel way, way richer than making 200k today.
- lotsofpulp 1y agoHow you feel is also very geographically dependent, and quality of life dependent. The government published nationwide inflation measures are completely irrelevant to anyone who had a goal of buying land in a tier 1 metro, or in the higher end suburbs of tier 2 metros. And you will feel very different based on if you have kids or not. Land, healthcare, and education pretty much eclipse everything else.
- pinkmuffinere 1y agoWhy??? My (very limited) understanding is that we like a small amount of inflation, to incentivize reinvestment into the economy/R&D/etc. If there’s no inflation, you incentivize dragon-hoarding behavior
- jsbg 1y agothat's why no one every buys TVs
- wredcoll 1y agohonestly its a large factor for me personally when I look at buying a new tv!
- gweinberg 1y agoYour understanding is silly. Inflation or no inflation, you'd like to maximize your roi.
- pinkmuffinere 1y agoIn your bank account, do you hold cash? If inflation was higher, say at 10,000%, would you hold less cash? For many people the answer is yes, which shows that higher inflation incentives reinvestment
- deleted 1y ago[deleted]
- jancsika 1y agoWait, what's absurd about it? I feel like this is the real-life version of my favorite joke from Andy Kindler: "I know they said don't re-invent the wheel, but does it have to be so round?" Edit: emphasis
- imtringued 1y agoHow would that work? You have a claim to a past output that no longer exists. If the nominal value of the claim stays the same, the real value of the denomination unit must change. People don't understand that money is a time and location bound object and pretend it is infinitely liquid and fungible when it isn't. Money is kind of like electricity. When you borrow it into existence and spend it, it travels a path through society, but it must then travel along a return path back to the source. Inflation could be thought of as a form of resistive loss, where current stays the same but voltage drops. There's a reason why demurrage (or its ugly brother inflation) is a necessary bitter pill if you want a working money system. It forces money to travel down the return path sooner than later.
- crazygringo 1y agoIt's not absurd. And there's no automatic way to make money perfectly stable. That's not how money works. And deflation is much worse. So we target a small 2% yearly inflation so that if it's 1% or 3% it's not a big deal. Whereas if you target 0% and wind up with -1%, you've got problems.
- jart 1y agoThere's that word we again. So you're the crazy gringo who always picks my pocket? Deflation is only bad for people who hold a lot of debt. For people who are cash positive, deflation means you're richer, you're being paid more to do the same job, etc. all while maintaining your freedom. Deflation actually being good is the central gamble behind bitcoin's design. If more people understood that then they'd probably stop using it for such frivolous purposes. Not everyone is privileged enough to even hold debt, so it's really an exclusionary system. And what do the people who the system trusts to have debt (e.g. private equity firms) do with it? They do leveraged buyouts to rip out the heart and soul of responsible American companies. The only thing inflation is good for is keeping folks running on the hamster wheel and bankrolling entitlements.
- woodruffw 1y ago> Not everyone is privileged enough to even hold debt, so it's really an exclusionary system This seems backwards: I think the most salient debt in the average American consumer's life is student loans, car loans, credit card debts, mortgages, etc. These aren't hallmarks of privilege; not having any of them would be the hallmark. (You might be right about corporate debt, I don't know. But I do think "deflation is only bad for people who hold a lot of debt" does a disservice in suggesting that that isn't a lot of ordinary people.)
- jart 1y agoSo you think being a carless renter with no formal education or credit cards is privileged? I thought privileged people called them rubes.
- asveikau 1y agoUsername is "CS Mastermind". Evidently not an economics mastermind.
- TacticalCoder 1y ago[dead]
- mdnahas 1y agoEconomist here. No, you don’t want that. Inflation is annoying, but deflation is destructive. When that happens, people hold on to money as an investment and it doesn’t flow in the economy. The Great Depression was caused by deflation. (See Milton Friedman and Anna Schwartz’s A Monetary History of the US.) As a result, central banks try to have a little inflation, so that random mistakes don’t push us into deflation. The Fed’s target is 2%. I think it should be a little higher. (See Fischer Black’s “Interest Rates as Options” and the shadow short-term rate.) No one should be holding inflating dollars over the long term. That money should be invested in loans (bonds, mortgages, …) or equity (stocks, real estate, …). We have good ways of comparing investments over time by removing the inflation. These are CPI or the GDP deflator.
- mdnahas 1y agoP.S. Half its value over 25 years is extremely stable if you look at the history of money, especially fiat money. It halved in value in 9 years, from 1974 to 1983.