The Collapse in Global Inflation Expectations

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phantom0308
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Re: The Collapse in Global Inflation Expectations

Post by phantom0308 »

KlangFool wrote: Thu Apr 30, 2020 4:38 pm
Broken Man 1999 wrote: Thu Apr 30, 2020 4:24 pm
KlangFool wrote: Thu Apr 30, 2020 3:51 pm
SimpleGift wrote: Thu Apr 30, 2020 3:03 pm
KlangFool wrote: Thu Apr 30, 2020 2:01 pm I disagreed. We are heading towards hyperinflation after the short-term deflation.
Seriously, what changes to your investment portfolio have you been making in light of your expectations for the hyperinflation to come? Or are you just trolling this thread?
SimpleGift,

I am buying Gold and Silver as my hedge against hyper-inflation.

KlangFool
What form are you buying? The only thing I would trust so far as having gold or silver would be physical coins/bars.

Me, I like 1 oz silver rounds. Gold seems as though it would be difficult to actually use. Gold rounds are available, but if you wanted smaller portions of gold, the price is quite a premium compared to the one oz pieces. Not sure how practical an oz of gold would be.

I will not be buying ETFs for gold or silver. I just don't trust anyone to hold my gold or silver for me. Physical only for all my current stash. Small, but growing with occasional buys.

Broken Man 1999
Broken Man 1999,

1) I am buying gold and silver coins.

<<if you wanted smaller portions of gold, the price is quite a premium compared to the one oz pieces. >>

2) It is not a problem if you believe gold price is going up 10X to 30X in hyperinflation.

3) Keeping 1% of your portfolio in Gold/Silver as an hyperinflation insurance.

KlangFool
I respectfully disagree as someone who was worried about the same thing after the financial crisis and have a less valuable stash of silver as a result (bought in 2012 after getting my first real job).

Goldbugs the world over have been predicting imminent hyperinflation in Japan and US for years because of high debts and massive QE.Year after year we undershoot inflation targets and expectations and are stuck in secular stagnation because the fed can’t improve money velocity enough to increase inflation. It’s hard to see the glut of savings and price of commodities leading to inflation any time soon. The only places I could ever find high inflation was on shadow stats “real” inflation data. I’m happy I got out of that world.
typical.investor
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Re: The Collapse in Global Inflation Expectations

Post by typical.investor »

SimpleGift wrote: Thu Apr 30, 2020 9:49 pm
typical.investor wrote: Thu Apr 30, 2020 8:55 pm What would it take to see inflation globally? Is that something that could happen in my lifetime?
One can imagine ways that we might see short-term bouts or spikes of global inflation in the next 10 or 20 years — for example, a war in the Middle East that blocked oil shipments through the Strait of Hormuz. But surely this would be temporary, as the military might of the developed world would not stand it for long.

To have sustained, high inflation in the advanced countries in the years ahead, we'd need to see more rapid economic growth, higher aggregate demand from consumers and greater investment by corporations, I believe. But this would be in the face of strong demographic and technological headwinds that have been pushing down inflation for decades.

Personally, I can't be too optimistic about rapid future economic growth in the developed world. If interested in more on this, see a recent Forum discussion: BOOK: Fully Grown, Why a Stagnant Economy is a Sign of Success
Basically I agree. Supply shortage is the inflation risk.

War can do that. Ecological collapse can do that. Economic growth seems unlikely to do that.

To me then, war is probably the greatest risk in my lifetime or the lifetime of my children.
beth65
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Re: The Collapse in Global Inflation Expectations

Post by beth65 »

Eric Basmajian wrote a great article on this exact topic two days ago:

The Inflation Vs. Deflation Tug Of War
https://seekingalpha.com/article/434032 ... tug-of-war
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alpine_boglehead
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Re: The Collapse in Global Inflation Expectations

Post by alpine_boglehead »

Great post, Simplegift, always appreciate your long-term view on things. Low inflation is indeed a plausible scenario that's obviously now the expectation of many.
KlangFool wrote: Thu Apr 30, 2020 4:38 pm
Broken Man 1999 wrote: Thu Apr 30, 2020 4:24 pm
KlangFool wrote: Thu Apr 30, 2020 3:51 pm
SimpleGift wrote: Thu Apr 30, 2020 3:03 pm
KlangFool wrote: Thu Apr 30, 2020 2:01 pm I disagreed. We are heading towards hyperinflation after the short-term deflation.
Seriously, what changes to your investment portfolio have you been making in light of your expectations for the hyperinflation to come? Or are you just trolling this thread?
SimpleGift,

I am buying Gold and Silver as my hedge against hyper-inflation.

KlangFool
What form are you buying? The only thing I would trust so far as having gold or silver would be physical coins/bars.

Me, I like 1 oz silver rounds. Gold seems as though it would be difficult to actually use. Gold rounds are available, but if you wanted smaller portions of gold, the price is quite a premium compared to the one oz pieces. Not sure how practical an oz of gold would be.

I will not be buying ETFs for gold or silver. I just don't trust anyone to hold my gold or silver for me. Physical only for all my current stash. Small, but growing with occasional buys.

Broken Man 1999
Broken Man 1999,

1) I am buying gold and silver coins.

<<if you wanted smaller portions of gold, the price is quite a premium compared to the one oz pieces. >>

2) It is not a problem if you believe gold price is going up 10X to 30X in hyperinflation.

3) Keeping 1% of your portfolio in Gold/Silver as an hyperinflation insurance.

KlangFool
KlangFool, I also always appreciate your pragmatism.

Having recently read "The Great Depression: A Diary", it was interesting to read and also a bit amusing with hindsight how the author Benjamin Roth kept on writhing throughout the depression the equivalent of "all this money printing will lead to high inflation", and your stubborn position of "we'll have hyperinflation" reminds me of this.

Benjamin Roth was eventually right, there was some inflation in the 1940s, and then of course in the 1970s. So it's really hard to predict something because you also need to have the timing right for it to make sense.

I guess the most rational approach is like this (and I'm interpreting your stance also to be derived from it) - the future is an infinite branching of possible scenarios.

The tricky part is assigning probabilities. If you were 100% sure on a hyperinflation, starting tomorrow, you'd be all gold, and maybe more exotic hedges. That doesn't seem to be the case as you advocate for a 1% gold/precious metal holding.

Of all the possible scenarios, you'll never know which one it will be, because things can also change abruptly. There's some where you don't survive (well, all of them, eventually, but you're usually planning for a reasonable life expectancy), so you don't need to plan for these. Then there's the others (arbitrary categorization):

The good: Innovation continues, society finds ways to deal with its many self-made issues, a golden age perhaps. Star Trek. No great need to prepare for this.

The normal: things work out, there's no-so-good times interspersed with bouts of advance. A reasonable boglehead-ish portfolio with a good mix of stocks and bonds will be ok, maybe even very ok. The US has been there for a long time now. I would position the mid/long-term deflation thing of this thread also in this category.

The bad: hyperinflation would be one of these, Wikipedia defines it as 50% monthly inflation. In my view simple QE/money printing won't bring this about, you need to have a government completely out of control of things (which is entirely possible). It also has severe social implications, like the rise of authoritarianism like post-depression in Europe. Investment-wise, a normal portfolio would greatly suffer. This is the one for which you can probably prepare. A helping of precious metals would compensate, but I guess it would not fully make up for other losses. Global diversification would help to avoid bad scenarios that hit individual countries.

The ugly: breakdown of society over a long term. Your own survival is at stake. On a global scale, maybe WW3 or ecological devastation. Syria over the last few years. You know it when you see it. It's the preppers category, but that might or might not help, having a bunker full of food won't help if you're forced out of the country. Investment-wise, a classical portfolio is nearly worthless (confiscated, institutions broken down), physical previous metals might help, but only so far. Really unknowable how this would affect one personally.

Note that this doesn't have to be the same everywhere on the planet. Venezuela is your's to decide whether it falls in the bad or the ugly stage, Switzerland and the Nordic countries seem to be borderline good - but still waiting for public replicators to be put up in Stockholm :D.

If it's prolonged moderate deflation with low economic growth, and investment portfolios producing very muted returns but not suffering greatly ... I'll take that any day. The Japanese haven't very much died of it, either.
bigskyguy
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Re: The Collapse in Global Inflation Expectations

Post by bigskyguy »

AerialWombat wrote: Thu Apr 30, 2020 8:57 pm What impact might this have on arguments for or against investing in TIPS?
To answer your question as to why I have invested in TIPS, it is because they track the CPI. For me, as a 70 year old retiree, they allow me to have an annually maturing investment that provides predictable purchasing power, whether inflation or deflation dominates. It’s much less about return on investment than it is predictability of purchasing power moving forward. Now I realize that there is an argument that the CPI may well be a poor metric for my personal purchasing power; problem is I don’t see a better one out there. No you won’t get rich holding TIPS, but you won’t go broke either. And at age 70, I worry more about cash flow than wealth accumulation.
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SimpleGift
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Re: The Collapse in Global Inflation Expectations

Post by SimpleGift »

alpine_boglehead wrote: Fri May 01, 2020 1:31 am I guess the most rational approach is like this...the future is an infinite branching of possible scenarios.

The tricky part is assigning probabilities.
A very good way to put it, alpine_boglehead. Personally in retirement, we still keep a 50% allocation to stocks in our portfolio (for expected real returns), and pretty much split our 50% bond portfolio between nominal Treasuries (for deflation protection) and TIPS (for unexpected inflation protection).

Though we don't worry about hyperinflation (as we have faith in central banks around the world to control inflation), we do feel that it's important to cover all the "possible branching scenarios" as best we can. It certainly helps one sleep at night and not worry too much about what the future might bring. Appreciate your insights.
KlangFool
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Re: The Collapse in Global Inflation Expectations

Post by KlangFool »

Folks,

I know that I know nothing. Hence, the base assumption of my financial planning assumes that everything is possible.

1) Why 1% in Gold/Silver?

A) If I am wrong, it won't matters.

B) If I am right and we hit hyperinflation, the Gold/Silver will go up to 30X to 100X. 1% is more than enough.

2) What if USD is no longer the world reserve currency and the only thing that everyone can agree on is Gold/Silver for their basis in exchange?

3) Supply chain disruption. What if this is permanent? Or, it lasted a few years? Then, we could have an inflation caused by supply shortage.

Be prepared. Diversification is a good thing.

KlangFool
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Re: The Collapse in Global Inflation Expectations

Post by KlangFool »

SimpleGift wrote: Fri May 01, 2020 8:16 am
alpine_boglehead wrote: Fri May 01, 2020 1:31 am I guess the most rational approach is like this...the future is an infinite branching of possible scenarios.

The tricky part is assigning probabilities.
A very good way to put it, alpine_boglehead. Personally in retirement, we still keep a 50% allocation to stocks in our portfolio (for expected real returns), and pretty much split our 50% bond portfolio between nominal Treasuries (for deflation protection) and TIPS (for unexpected inflation protection).

Though we don't worry about hyperinflation (as we have faith in central banks around the world to control inflation), we do feel that it's important to cover all the "possible branching scenarios" as best we can. It certainly helps one sleep at night and not worry too much about what the future might bring. Appreciate your insights.
SimpleGift,

The choice is to have

A) faith in the central banks to control inflation

or

B) keep 1% of your portfolio in Gold/Silver.

IMHO, (B) is better than (A) in terms of personal financial planning.

KlangFool
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Horton
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Re: The Collapse in Global Inflation Expectations

Post by Horton »

QE isn’t new. It has generally led to inflation in asset prices (e.g., equities), not in consumer prices.

Seems like a more reasonable argument if it focuses on the federal stimulus, but that is likely to offset the dramatic decreases in employment and pay.

The even better argument would be centered around demographics and debt/GDP levels, but I expect the effects of this won’t be felt for some time.
InvestingGeek
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Re: The Collapse in Global Inflation Expectations

Post by InvestingGeek »

I wonder if inflation will arrive when the world starts moving away from China as the exclusive provider of all manufactured goods and either reverts to domestic industry or diversifies to other cheap (but not as cheap as China) locations. Highly possible after Covid.
typical.investor
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Re: The Collapse in Global Inflation Expectations

Post by typical.investor »

KlangFool wrote: Fri May 01, 2020 8:22 am
SimpleGift wrote: Fri May 01, 2020 8:16 am
alpine_boglehead wrote: Fri May 01, 2020 1:31 am I guess the most rational approach is like this...the future is an infinite branching of possible scenarios.

The tricky part is assigning probabilities.
A very good way to put it, alpine_boglehead. Personally in retirement, we still keep a 50% allocation to stocks in our portfolio (for expected real returns), and pretty much split our 50% bond portfolio between nominal Treasuries (for deflation protection) and TIPS (for unexpected inflation protection).

Though we don't worry about hyperinflation (as we have faith in central banks around the world to control inflation), we do feel that it's important to cover all the "possible branching scenarios" as best we can. It certainly helps one sleep at night and not worry too much about what the future might bring. Appreciate your insights.
SimpleGift,

The choice is to have

A) faith in the central banks to control inflation

or

B) keep 1% of your portfolio in Gold/Silver.

IMHO, (B) is better than (A) in terms of personal financial planning.

KlangFool
I’m not a fan of gold but 1-5% certainly seems reasonable.

It’s surely not going to torpedo returns too much. It might be a good insurance policy.
InvestingGeek wrote: Fri May 01, 2020 8:55 am I wonder if inflation will arrive when the world starts moving away from China as the exclusive provider of all manufactured goods and either reverts to domestic industry or diversifies to other cheap (but not as cheap as China) locations. Highly possible after Covid.
Beyond that, I see countries moving towards less open markets. We saw shortages in critical areas, and I think countries will want to ensure critical supplies.

I mean, for instance, the US has worked to get access to agricultural markets. However what if nations decide food security is more important than they previously thought, and protest national security types of arguments. It actually been sort of a common argument for those pursuing protectionism.
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AerialWombat
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Re: The Collapse in Global Inflation Expectations

Post by AerialWombat »

bigskyguy wrote: Fri May 01, 2020 7:51 am
AerialWombat wrote: Thu Apr 30, 2020 8:57 pm What impact might this have on arguments for or against investing in TIPS?
To answer your question as to why I have invested in TIPS, it is because they track the CPI. For me, as a 70 year old retiree, they allow me to have an annually maturing investment that provides predictable purchasing power, whether inflation or deflation dominates. It’s much less about return on investment than it is predictability of purchasing power moving forward. Now I realize that there is an argument that the CPI may well be a poor metric for my personal purchasing power; problem is I don’t see a better one out there. No you won’t get rich holding TIPS, but you won’t go broke either. And at age 70, I worry more about cash flow than wealth accumulation.
Thank you for this explanation. Seems perfectly reasonable to me. I’m 30 years behind you, but have the exact same financial objective. I’m 30/70 and plan for 0% real returns going forward.
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Oicuryy
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Re: The Collapse in Global Inflation Expectations

Post by Oicuryy »

rockthisworld wrote: Thu Apr 30, 2020 8:01 pm
7eight9 wrote: Thu Apr 30, 2020 6:33 pm Deflation would be a dream come true. Just put the money under the mattress and sleep well at night. No need to gamble, speculate, invest in the stock market.
Actually it is the exact reason that deflation is scary for economic growth as it changes the behavior and instead of the money circulating in the economy it will be hoarded thus slowing growth.
People are not waiting for deflation. Expectations of low inflation are enough to cause people to save more and spend less. Economic growth is already slower than it would be if inflation expectations were higher.

Central banks have convinced the world that inflation will never go above 2%. People are managing their money accordingly. Savings are not just going into mattresses. They are going into bank accounts, bonds and even stocks.

Money creation is likely to increase saving more than spending. If monetary policymakers want to increase spending they will need to convince people that inflation rates can go higher than 2%.

In the meantime, stocks are my preferred mattress alternative.

Ron
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packer16
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Re: The Collapse in Global Inflation Expectations

Post by packer16 »

An interesting insight into future growth (Idea Multiplier) but probably more deflationary then inflationary is the following from Vanguard:

https://personal.vanguard.com/pdf/megat ... vation.pdf

IMO inflation will only occur if one of the three conditions of shortages happen: war, famine or epidemic. These are the documented causes of inflation from "The Great Wave". The last two if severe enough (kills enough people) caused labor shortages. At this point, the bond market appears to saying these risks are small/remote.

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siamond
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Re: The Collapse in Global Inflation Expectations

Post by siamond »

SimpleGift wrote: Thu Apr 30, 2020 1:28 pm
KlangFool wrote: Thu Apr 30, 2020 1:00 pm Why do you believe those inflation expectations are reasonable? With the amount of QE that is going on, it is unlikely to be true.
See this analysis by the Bureau of Labor Statistics of the accuracy of Treasury breakeven inflation rates (TBI) to approximate actual inflation before and after the 2008-09 Financial Crisis:
Bureau of Labor Statistics wrote:The analysis finds that TBI breakeven rates reasonably approximated inflation reality before and after the financial crisis of 2008-09. Moreover, the dispersion of deviations, as measured by standard deviation and range, decreases as maturity horizon increases.

Thus, inflation expectations, as measured by TBI rates, reasonably approximated inflation reality during the years before and after the crisis, with greater precision for long-term rates than short-term rates. This was true even at the height of the financial crisis in the early months of 2009, though tracking risk was high for the 6-month and 1-year horizons.
Tracking error was higher for the shorter-term breakeven rates (less than one year), but had greater precision on the longer-term rates — which is the subject of the OP, as it looks at 10-year breakeven rates.

Breakeven inflation rates are being set every day around the world by investors with real money in the game. One has to expect a certain degree of inaccuracy in any projection, but this is the best outlook on inflation we have at present.
Hm, last time I ran the numbers by myself, my conclusion was nowhere near as 'positive'. The breakeven inflation was a terrible crap shot when compared to actuals. The only thing which made it looks like a somewhat reasonable approximation was the simple fact that we've been in a world of low and fairly stable inflation for a couple of decades. So if one predicted 1.5% instead of 2% actual, it *looks* accurate because we tend to look at absolute numbers. But truth is the estimate was actually completely off, by 25%...

No researcher came up with a decent inflation prediction model based on ex ante data before TIPS and breakeven inflation rates were invented, nobody. And now, magically, thanks to the 'wisdom of the crowd', we have a fairly reliable mechanism? I'm sorry, but I am extremely skeptical... Maybe I am stuck in confirmation bias, but those wisdom of the crowd arguments rarely hold any water when it comes to financials.

I have absolutely no clue if we're going towards a secular inflation decrease or if the helicopter money being thrown left and right during recent crises will ultimately lead to an inflation revival. I would strongly advise to NOT make any financial planning decision based on breakeven inflation rates though. Personally, I use the Fed target when I need an inflation expectation number, this is a crap shot as well, but at least, it is based on hard facts (Fed's official policy), not wisdom of the crowd (or lack thereof)...
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Re: The Collapse in Global Inflation Expectations

Post by patrick »

KlangFool wrote: Fri May 01, 2020 8:18 am Folks,

I know that I know nothing. Hence, the base assumption of my financial planning assumes that everything is possible.

1) Why 1% in Gold/Silver?

A) If I am wrong, it won't matters.

B) If I am right and we hit hyperinflation, the Gold/Silver will go up to 30X to 100X. 1% is more than enough.
Protecting 1% of your portfolio may not be enough.

Suppose you have 99,000 in cash and 1,000 in gold. If prices rise by a factor of 100 and gold follows suit, then your gold would be worth 100,000 so your total portfolio is worth 199,000. But accounting for inflation is is only worth 1,990 -- a 98.01% loss overall.

Perhaps you expect gold to do more than just keep up with inflation. But it would have to rise by a factor of 98.01 in real terms, or 9801 in nominal terms, to counter the losses in the rest of the portfolio. This would be truly remarkable -- for instance, US gold reserves currently have a 445 billion market value, but would have to rise to 4.4 quadrillion in nominal terms, or 44 trillion in real terms.

Then again, the rest of the portfolio might be in something safer than cash. Note that stocks turned out much safer than cash in 1920s Germany. Perhaps a hypothetical US hyperinflation scenario would show similar results for US stocks -- at the very least corporations would find their debts much easier to repay.
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Re: The Collapse in Global Inflation Expectations

Post by KlangFool »

patrick wrote: Fri May 01, 2020 4:36 pm
KlangFool wrote: Fri May 01, 2020 8:18 am Folks,

I know that I know nothing. Hence, the base assumption of my financial planning assumes that everything is possible.

1) Why 1% in Gold/Silver?

A) If I am wrong, it won't matters.

B) If I am right and we hit hyperinflation, the Gold/Silver will go up to 30X to 100X. 1% is more than enough.
Protecting 1% of your portfolio may not be enough.
Patrick,

It may not be enough for someone with a 100K portfolio. And, if the portfolio is only 100K, it may not matter. However, for someone with a portfolio of more than 1 million, that is more than enough for someone to move to some other places in the world and retire.

KlangFool
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SimpleGift
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Re: The Collapse in Global Inflation Expectations

Post by SimpleGift »

siamond wrote: Fri May 01, 2020 11:12 am The only thing which made it looks like a somewhat reasonable approximation was the simple fact that we've been in a world of low and fairly stable inflation for a couple of decades. So if one predicted 1.5% instead of 2% actual, it *looks* accurate because we tend to look at absolute numbers.
Yes, agreed that breakeven inflation rates work best as a metric of expected inflation in periods when inflation is well-anchored and relatively stable. Just like now, before (and after) the virus crisis.

The bond market is currently expecting inflation to be something like that experienced during and after the 2008-09 Financial Crisis (chart below). A short period of deflation, followed by low and mild inflation — but this time 1.5% or less inflation, rather than 2.5% or less after 2008-09.
So it's reasonable to say that breakeven inflation rates do forecast expected inflation best only when it is relatively stable and well-anchored — which is where we've been for the past decade and likely to be for the decade to come.
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Re: The Collapse in Global Inflation Expectations

Post by EnjoyIt »

KlangFool wrote: Fri May 01, 2020 8:18 am Folks,

I know that I know nothing. Hence, the base assumption of my financial planning assumes that everything is possible.

1) Why 1% in Gold/Silver?

A) If I am wrong, it won't matters.

B) If I am right and we hit hyperinflation, the Gold/Silver will go up to 30X to 100X. 1% is more than enough.

2) What if USD is no longer the world reserve currency and the only thing that everyone can agree on is Gold/Silver for their basis in exchange?

3) Supply chain disruption. What if this is permanent? Or, it lasted a few years? Then, we could have an inflation caused by supply shortage.

Be prepared. Diversification is a good thing.

KlangFool
Klangfool,
In 2010 I felt just like you do now. I started buying some gold and silver. At the time it was about 5% of my portfolio. To be honest I don’t know the cost basis on all those coins but I am likely in the red if you add in inflation. I still hold those coins today which are l little less than 1% of my portfolio. I hold them as a novelty and also as a reminder to never do that again.

Your plan of 1% isn’t going to harm you, but I also doubt it will help much either. If the US goes into runaway inflation so will the rest of the world. There won’t be anywhere to run. I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well.

If owning a small amount of gold coins allows you to sleep better at night, then more power to you. I sleep better at night because we have a dog and we each keep loaded Glocks on our nightstands. Sometimes we need to do what makes us comfortable.
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Re: The Collapse in Global Inflation Expectations

Post by KlangFool »

EnjoyIt wrote: Sat May 02, 2020 9:38 am

Your plan of 1% isn’t going to harm you, but I also doubt it will help much either. If the US goes into runaway inflation so will the rest of the world. There won’t be anywhere to run. I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well.
EnjoyIt,

It is obvious that you are not a minority. So, you would not stand out in those kinds of situations. It would be safer for me to be someplace that I would not stand out.

<<If the US goes into runaway inflation so will the rest of the world.>>

1) But, in some places, the cost of living is lowered than in the USA. And, that will hold true even in hyperinflation.

2) In a country where everyone is poor, there is no one and no reason to rob.

<<I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well. >>

This strategy only works if you are not a minority.

<<Your plan of 1% isn’t going to harm you, but I also doubt it will help much either.>>

In summary, your plan B does not include getting out of where you live now. Hence, you do not think that Gold can help you.

KlangFool
EnjoyIt
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Re: The Collapse in Global Inflation Expectations

Post by EnjoyIt »

KlangFool wrote: Sat May 02, 2020 10:11 am
EnjoyIt wrote: Sat May 02, 2020 9:38 am

Your plan of 1% isn’t going to harm you, but I also doubt it will help much either. If the US goes into runaway inflation so will the rest of the world. There won’t be anywhere to run. I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well.
EnjoyIt,

It is obvious that you are not a minority. So, you would not stand out in those kinds of situations. It would be safer for me to be someplace that I would not stand out.

<<If the US goes into runaway inflation so will the rest of the world.>>

1) But, in some places, the cost of living is lowered than in the USA. And, that will hold true even in hyperinflation.

2) In a country where everyone is poor, there is no one and no reason to rob.

<<I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well. >>

This strategy only works if you are not a minority.

<<Your plan of 1% isn’t going to harm you, but I also doubt it will help much either.>>

In summary, your plan B does not include getting out of where you live now. Hence, you do not think that Gold can help you.

KlangFool
Just curious how do you plan to hide that you have gold from others if you will need to spend it on living expenses. Particularly in a VLCOL country.
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WS1
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Re: The Collapse in Global Inflation Expectations

Post by WS1 »

EnjoyIt wrote: Sat May 02, 2020 10:19 am
KlangFool wrote: Sat May 02, 2020 10:11 am
EnjoyIt wrote: Sat May 02, 2020 9:38 am

Your plan of 1% isn’t going to harm you, but I also doubt it will help much either. If the US goes into runaway inflation so will the rest of the world. There won’t be anywhere to run. I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well.
EnjoyIt,

It is obvious that you are not a minority. So, you would not stand out in those kinds of situations. It would be safer for me to be someplace that I would not stand out.

<<If the US goes into runaway inflation so will the rest of the world.>>

1) But, in some places, the cost of living is lowered than in the USA. And, that will hold true even in hyperinflation.

2) In a country where everyone is poor, there is no one and no reason to rob.

<<I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well. >>

This strategy only works if you are not a minority.

<<Your plan of 1% isn’t going to harm you, but I also doubt it will help much either.>>

In summary, your plan B does not include getting out of where you live now. Hence, you do not think that Gold can help you.

KlangFool
Just curious how do you plan to hide that you have gold from others if you will need to spend it on living expenses. Particularly in a VLCOL country.
I suspect it will all be spent fleeing the country and as start-up capital in the new country. I doubt the Jews fleeing Europe treated the gold and diamonds sewn into their clothing like a wallet they constantly dipped into.
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Re: The Collapse in Global Inflation Expectations

Post by KlangFool »

EnjoyIt wrote: Sat May 02, 2020 10:19 am
KlangFool wrote: Sat May 02, 2020 10:11 am
EnjoyIt wrote: Sat May 02, 2020 9:38 am

Your plan of 1% isn’t going to harm you, but I also doubt it will help much either. If the US goes into runaway inflation so will the rest of the world. There won’t be anywhere to run. I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well.
EnjoyIt,

It is obvious that you are not a minority. So, you would not stand out in those kinds of situations. It would be safer for me to be someplace that I would not stand out.

<<If the US goes into runaway inflation so will the rest of the world.>>

1) But, in some places, the cost of living is lowered than in the USA. And, that will hold true even in hyperinflation.

2) In a country where everyone is poor, there is no one and no reason to rob.

<<I would recommend you stock up on some ammunition as well because if the day comes that you need your gold, someone will find out you have some to barter with and will come looking for it. BTW, I have lots of ammunition as well. >>

This strategy only works if you are not a minority.

<<Your plan of 1% isn’t going to harm you, but I also doubt it will help much either.>>

In summary, your plan B does not include getting out of where you live now. Hence, you do not think that Gold can help you.

KlangFool
Just curious how do you plan to hide that you have gold from others if you will need to spend it on living expenses. Particularly in a VLCOL country.
EnjoyIt,

1) The point of Gold is to get out of location A to location B. After I reach the location B, I have family and community support. I do not need to hide gold and/or need gold after that.

My family is spread all over the world.

2) Why do I need to hide gold in a place where it is common for normal people to keep gold jewelry? You only need to hide if you stand out. What is a drop of water in an ocean? It is invisible. For example, in India, there is more goldsmith in the rural area than bank branches.

KlangFool
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Re: The Collapse in Global Inflation Expectations

Post by alpine_boglehead »

KlangFool wrote: Fri May 01, 2020 8:18 am Folks,

I know that I know nothing. Hence, the base assumption of my financial planning assumes that everything is possible.

1) Why 1% in Gold/Silver?

A) If I am wrong, it won't matters.

B) If I am right and we hit hyperinflation, the Gold/Silver will go up to 30X to 100X. 1% is more than enough.

2) What if USD is no longer the world reserve currency and the only thing that everyone can agree on is Gold/Silver for their basis in exchange?

3) Supply chain disruption. What if this is permanent? Or, it lasted a few years? Then, we could have an inflation caused by supply shortage.

Be prepared. Diversification is a good thing.

KlangFool
It might be called Pascal's Wager of investing (one of many possible wagers of this kind) - no big pain if you're wrong, a good payoff if a hyperinflation scenario happens.
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Re: The Collapse in Global Inflation Expectations

Post by willthrill81 »

In other words, investors in the U.S. are not convinced that the Fed will be able to achieve its 2% target.
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Re: The Collapse in Global Inflation Expectations

Post by KlangFool »

alpine_boglehead wrote: Sat May 02, 2020 12:54 pm
KlangFool wrote: Fri May 01, 2020 8:18 am Folks,

I know that I know nothing. Hence, the base assumption of my financial planning assumes that everything is possible.

1) Why 1% in Gold/Silver?

A) If I am wrong, it won't matters.

B) If I am right and we hit hyperinflation, the Gold/Silver will go up to 30X to 100X. 1% is more than enough.

2) What if USD is no longer the world reserve currency and the only thing that everyone can agree on is Gold/Silver for their basis in exchange?

3) Supply chain disruption. What if this is permanent? Or, it lasted a few years? Then, we could have an inflation caused by supply shortage.

Be prepared. Diversification is a good thing.

KlangFool
It might be called Pascal's Wager of investing (one of many possible wagers of this kind) - no big pain if you're wrong, a good payoff if a hyperinflation scenario happens.
Correct! The pragmatic approach.

KlangFool
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Re: The Collapse in Global Inflation Expectations

Post by JonnyB »

willthrill81 wrote: Sat May 02, 2020 12:55 pm In other words, investors in the U.S. are not convinced that the Fed will be able to achieve its 2% target.
I think it is the market realizing that there is a limit to what the Fed can accomplish unilaterally with monetary policy and not trusting the fiscal side to do what is necessary because of political limitations.
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Re: The Collapse in Global Inflation Expectations

Post by Chicken Little »

ballons wrote: Thu Apr 30, 2020 3:07 pm
SimpleGift wrote: Thu Apr 30, 2020 2:24 pm The OP study looked at all 22 instances around the world since 1990 in which countries doubled or triples their monetary base in response to a financial crisis. None of them experienced high inflation. Don't forget that central banks can also easily do "quantitative tightening" if inflationary pressures arise in the years ahead.
"Easily?" They tried QT in 2018 which sent the economy heading towards the toilet.

https://www.federalreserve.gov/monetary ... trends.htm

There is now two great depressions sitting on the Fed's balance sheet.
SimpleGift,

I'd be interested to hear more of your take on this as well. Didn't the Fed turn around on the repo-spike also?

Now there are conversations about yield-curve control? The one thing we know is that things discussed in crazy conversations tend to materialize more often than not anymore?

How, exactly, would we service our debt if rates rose?

The chairman just made it explicitly clear that he thinks we're in a terrible fiscal position.

Incidentally, the repo-spike was well before anyone recognized that this wasn't just another SARS or MERS. The economy was in pretty bad shape before this thing arrived, at least on the macro level.
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Re: The Collapse in Global Inflation Expectations

Post by happyisland »

patrick wrote: Fri May 01, 2020 4:36 pm
Protecting 1% of your portfolio may not be enough.

Suppose you have 99,000 in cash and 1,000 in gold. If prices rise by a factor of 100 and gold follows suit, then your gold would be worth 100,000 so your total portfolio is worth 199,000. But accounting for inflation is is only worth 1,990 -- a 98.01% loss overall.

Perhaps you expect gold to do more than just keep up with inflation. But it would have to rise by a factor of 98.01 in real terms, or 9801 in nominal terms, to counter the losses in the rest of the portfolio. This would be truly remarkable -- for instance, US gold reserves currently have a 445 billion market value, but would have to rise to 4.4 quadrillion in nominal terms, or 44 trillion in real terms.

Then again, the rest of the portfolio might be in something safer than cash. Note that stocks turned out much safer than cash in 1920s Germany. Perhaps a hypothetical US hyperinflation scenario would show similar results for US stocks -- at the very least corporations would find their debts much easier to repay.
I don't know why this post didn't get more attention. It's not that the buying power of your gold will increase 100x, but that the buying power of your cash will decrease by 100x, correct?
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Re: The Collapse in Global Inflation Expectations

Post by JonnyB »

ballons wrote: Thu Apr 30, 2020 3:07 pm
SimpleGift wrote: Thu Apr 30, 2020 2:24 pm The OP study looked at all 22 instances around the world since 1990 in which countries doubled or triples their monetary base in response to a financial crisis. None of them experienced high inflation. Don't forget that central banks can also easily do "quantitative tightening" if inflationary pressures arise in the years ahead.
"Easily?" They tried QT in 2018 which sent the economy heading towards the toilet.

https://www.federalreserve.gov/monetary ... trends.htm

There is now two great depressions sitting on the Fed's balance sheet.
Regardless of whether "heading towards the toilet" is an exaggeration, doesn't this prove the point. Inflation doesn't easily get out of hand. Just a small amount of quantitative tightening and rate increases was sufficient to rein in the possibility of an overheating economy and reduce inflation.
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Re: The Collapse in Global Inflation Expectations

Post by Chicken Little »

The Fed can influence inflation by controlling rates. If (if) inflation ever "shows up", there's really no stopping it because rising rates would be a disaster relative to current debt of all manner; government, corporate, individual. It would almost have to spin out of control if it ever got started?

Conversely, if we're fine right now, the why are the checks only for $1200? Wouldn't things be better if they fast-forwarded to $5K per month for everybody?
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Re: The Collapse in Global Inflation Expectations

Post by EnjoyIt »

happyisland wrote: Sat May 02, 2020 1:32 pm
patrick wrote: Fri May 01, 2020 4:36 pm
Protecting 1% of your portfolio may not be enough.

Suppose you have 99,000 in cash and 1,000 in gold. If prices rise by a factor of 100 and gold follows suit, then your gold would be worth 100,000 so your total portfolio is worth 199,000. But accounting for inflation is is only worth 1,990 -- a 98.01% loss overall.

Perhaps you expect gold to do more than just keep up with inflation. But it would have to rise by a factor of 98.01 in real terms, or 9801 in nominal terms, to counter the losses in the rest of the portfolio. This would be truly remarkable -- for instance, US gold reserves currently have a 445 billion market value, but would have to rise to 4.4 quadrillion in nominal terms, or 44 trillion in real terms.

Then again, the rest of the portfolio might be in something safer than cash. Note that stocks turned out much safer than cash in 1920s Germany. Perhaps a hypothetical US hyperinflation scenario would show similar results for US stocks -- at the very least corporations would find their debts much easier to repay.
I don't know why this post didn't get more attention. It's not that the buying power of your gold will increase 100x, but that the buying power of your cash will decrease by 100x, correct?
The way I understand what KlangFool is saying is that he is not protecting his portfolio. He is protecting his ability to flee to another country. You just need enough gold to get him to where he wants to go. He just needs enough purchasing power for that and nothing more. Probably 5-10 1oz gold coins will be plenty for that.
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Re: The Collapse in Global Inflation Expectations

Post by Chicken Little »

JonnyB wrote: Sat May 02, 2020 1:36 pmRegardless of whether "heading towards the toilet" is an exaggeration, doesn't this prove the point. Inflation doesn't easily get out of hand. Just a small amount of quantitative tightening and rate increases was sufficient to rein in the possibility of an overheating economy and reduce inflation.
There wasn't inflation. The Fed was attempting to "normalize", and the economy tanked. By extension, if inflation "appeared" and the Fed wanted to combat it by tightening, they would again tank the economy.

Or inflation is permanently dead-and-burried (which, of course, would mean that it "is different this time").

Edit: I don't think "tanking the economy" is a monetary too for combating inflation, either, incidentally (just in case that's where this was going). If you look at countries where there has been high inflation, generally those economies are "tanked".
Last edited by Chicken Little on Sat May 02, 2020 1:52 pm, edited 1 time in total.
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Re: The Collapse in Global Inflation Expectations

Post by JonnyB »

Chicken Little wrote: Sat May 02, 2020 1:41 pm
JonnyB wrote: Sat May 02, 2020 1:36 pmRegardless of whether "heading towards the toilet" is an exaggeration, doesn't this prove the point. Inflation doesn't easily get out of hand. Just a small amount of quantitative tightening and rate increases was sufficient to rein in the possibility of an overheating economy and reduce inflation.
There wasn't inflation. The Fed was attempting to "normalize", and the economy tanked. By extension, if inflation "appeared" and the Fed wanted to combat it by tightening, they would again tank the economy.

Or inflation is permanently dead-and-burried (which, of course, would mean that it "is different this time").
Can you show where you get the idea that the economy "tanked" in 2018? GDP growth was between 2% and 3% throughout 2018 and 2019 and 2020 right up until the epidemic.
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Re: The Collapse in Global Inflation Expectations

Post by Chicken Little »

JonnyB wrote: Sat May 02, 2020 1:47 pm
Chicken Little wrote: Sat May 02, 2020 1:41 pm
JonnyB wrote: Sat May 02, 2020 1:36 pmRegardless of whether "heading towards the toilet" is an exaggeration, doesn't this prove the point. Inflation doesn't easily get out of hand. Just a small amount of quantitative tightening and rate increases was sufficient to rein in the possibility of an overheating economy and reduce inflation.
There wasn't inflation. The Fed was attempting to "normalize", and the economy tanked. By extension, if inflation "appeared" and the Fed wanted to combat it by tightening, they would again tank the economy.

Or inflation is permanently dead-and-burried (which, of course, would mean that it "is different this time").
Can you show where you get the idea that the economy "tanked" in 2018? GDP growth was between 2% and 3% throughout 2018 and 2019 and 2020 right up until the epidemic.
No. Ask ballons.

My thing is the repo-spike, which was explained-away on a daily basis on here as it unfloded over months. "Normalization" efforts ended around July 2019. The spike was in September 2019, after which rate decreases accelerated until November, well before virus arrived. Economy was good?

https://fred.stlouisfed.org/series/FEDFUNDS

Can you show me how this current fiscal picture isn't a disaster. Can you paint a picture for me, even a theoretical one, where debt goes...down?
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Re: The Collapse in Global Inflation Expectations

Post by JonnyB »

Chicken Little wrote: Sat May 02, 2020 1:50 pm
JonnyB wrote: Sat May 02, 2020 1:47 pm
Can you show where you get the idea that the economy "tanked" in 2018? GDP growth was between 2% and 3% throughout 2018 and 2019 and 2020 right up until the epidemic.
No. Ask ballons.

My thing is the repo-spike, which was explained-away on a daily basis on here as it unfloded over months. "Normalization" efforts ended around July 2019. The spike was in September 2019, after which rate decreases accelerated until November, well before virus arrived. Economy was good?

https://fred.stlouisfed.org/series/FEDFUNDS

Can you show me how this current fiscal picture isn't a disaster. Can you paint a picture for me, even a theoretical one, where debt goes...down?
Maybe this is some sort of Rorschach Test but you are going to have to explain what it is that you are seeing in the economic data that shows that the economy tanked or the economy was not good leading up to the epidemic.

The monthly jobs reports for November 2019 to February 2020 were 150,000 to 250,000 new jobs per month. GDP grew 2.1% in in Q3 and Q4. Where's the bad news?
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Re: The Collapse in Global Inflation Expectations

Post by patrick »

SimpleGift wrote: Thu Apr 30, 2020 2:24 pm
KlangFool wrote: Thu Apr 30, 2020 2:11 pm Why do you think the opinion of this paper is correct in spite of the extreme amount of QE that is going on now?
The paper determined that breakeven inflation rates were reasonably accurate before, during and after the 2008-09 Financial Crisis, which had a comparable amount of quantitative easing as today's virus crisis. The monetary responses were not completely the same, but the relative accuracy of breakeven inflation rates is not invalidated.
KlangFool wrote: Thu Apr 30, 2020 2:15 pm 1) We are printing a lot of currency via QE.
2) In the short-term, the demand is not there. -> Deflation.
3) In the longer-term, too much currency = hyper-inflation.
See this recent Forum discussion: Does "Quantitative Easing" Lead to Higher Inflation?

The OP study looked at all 22 instances around the world since 1990 in which countries doubled or triples their monetary base in response to a financial crisis. None of them experienced high inflation. Don't forget that central banks can also easily do "quantitative tightening" if inflationary pressures arise in the years ahead.
The current crisis is not mainly a financial one. Does data based on financial crises still apply?
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Re: The Collapse in Global Inflation Expectations

Post by JBTX »

JonnyB wrote: Thu Apr 30, 2020 4:56 pm
KlangFool wrote: Thu Apr 30, 2020 2:15 pm
nif wrote: Thu Apr 30, 2020 1:54 pm
KlangFool wrote: Thu Apr 30, 2020 1:39 pm We are heading towards a short-term deflation and a long-term inflation.
Why do you think this is so?
1) We are printing a lot of currency via QE.

2) In the short-term, the demand is not there. -> Deflation.

3) In the longer-term, too much currency = hyper-inflation.

KlangFool
No, the Fed is not printing currency with quantitative easing. It is "printing" bank reserves, electronic money. These reserves are just sitting in the accounts of commercial banks at the Federal Reserve going nowhere.

Some people have been saying for 10 years that these reserves will leak into the money supply and cause inflation. They have been consistently wrong for 10 years.
This is true and I've posted the same thing on several occasions.

The problem is if we keep doing that, it basically enables infinite deficit spending, and puts us in a defacto MMT mode. Deficit spend and then have the fed buy it back. I think we will have a 4 trillion deficit this year. If no inflation, then we will continue to test the limits. At some point sufficient deficit spending will be inflationary, and MMT is right about that. Where it is likely wrong is it is next to impossible to turn the spigot off.
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Re: The Collapse in Global Inflation Expectations

Post by SimpleGift »

patrick wrote: Sat May 02, 2020 2:54 pm The current crisis is not mainly a financial one. Does data based on financial crises still apply?
That study looked at selected cases worldwide since 1990 in which countries doubled or tripled their monetary base in response to a crisis. It focused primarily on the Nordic banking crisis of the 1990s and the 2007-09 Financial Crisis, but also included quite a few other countries and crises.

Granted none of these crises were precipitated by a global pandemic, so it's hard to say. But in most cases, it seems rather remarkable that the monetary expansions did not lead to high inflation. My guess is there's been much more powerful secular trends offsetting any inflationary pressures worldwide (falling birth rates, increasing longevity and per capita wealth, slowing economic growth, etc.) — all of which are still a backdrop to the current virus crisis.
Last edited by SimpleGift on Sat May 02, 2020 5:12 pm, edited 1 time in total.
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Re: The Collapse in Global Inflation Expectations

Post by fatFIRE »

I'm not an econs person, but with us and so many govt printing money, shouldn't high inflation be expected?
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Re: The Collapse in Global Inflation Expectations

Post by ballons »

JonnyB wrote: Sat May 02, 2020 1:36 pm
ballons wrote: Thu Apr 30, 2020 3:07 pm "Easily?" They tried QT in 2018 which sent the economy heading towards the toilet.

https://www.federalreserve.gov/monetary ... trends.htm

There is now two great depressions sitting on the Fed's balance sheet.
Regardless of whether "heading towards the toilet" is an exaggeration, doesn't this prove the point. Inflation doesn't easily get out of hand. Just a small amount of quantitative tightening and rate increases was sufficient to rein in the possibility of an overheating economy and reduce inflation.
My issue is with "easily" doing QT. The everything bubble gets reined in which takes the economy with it. The Fed was forced to resume QE and begin their repos.
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Re: The Collapse in Global Inflation Expectations

Post by ballons »

JonnyB wrote: Sat May 02, 2020 1:47 pm
Chicken Little wrote: Sat May 02, 2020 1:41 pm
JonnyB wrote: Sat May 02, 2020 1:36 pmRegardless of whether "heading towards the toilet" is an exaggeration, doesn't this prove the point. Inflation doesn't easily get out of hand. Just a small amount of quantitative tightening and rate increases was sufficient to rein in the possibility of an overheating economy and reduce inflation.
There wasn't inflation. The Fed was attempting to "normalize", and the economy tanked. By extension, if inflation "appeared" and the Fed wanted to combat it by tightening, they would again tank the economy.

Or inflation is permanently dead-and-burried (which, of course, would mean that it "is different this time").
Can you show where you get the idea that the economy "tanked" in 2018? GDP growth was between 2% and 3% throughout 2018 and 2019 and 2020 right up until the epidemic.
I said QT started in 2018. QT kills the everything bubble which takes the economy with it.

Fed’s First-in-a-Decade Intervention Will Be Repeated Wednesday
https://www.bloomberg.com/news/articles ... rket-rates

https://www.nasdaq.com/articles/the-fed ... 2020-01-20

Does this look like QT can "easily" fight inflation?
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Re: The Collapse in Global Inflation Expectations

Post by absolute zero »

alpine_boglehead wrote: Sat May 02, 2020 12:54 pm
KlangFool wrote: Fri May 01, 2020 8:18 am Folks,

I know that I know nothing. Hence, the base assumption of my financial planning assumes that everything is possible.

1) Why 1% in Gold/Silver?

A) If I am wrong, it won't matters.

B) If I am right and we hit hyperinflation, the Gold/Silver will go up to 30X to 100X. 1% is more than enough.

2) What if USD is no longer the world reserve currency and the only thing that everyone can agree on is Gold/Silver for their basis in exchange?

3) Supply chain disruption. What if this is permanent? Or, it lasted a few years? Then, we could have an inflation caused by supply shortage.

Be prepared. Diversification is a good thing.

KlangFool
It might be called Pascal's Wager of investing (one of many possible wagers of this kind) - no big pain if you're wrong, a good payoff if a hyperinflation scenario happens.
Not sure why you refer to it as a “payoff”. In klangfool’s example, gold may go up 100x (or 10,000%) in nominal terms during hyperinflation, but it will be much closer to a 0% real return.

If all you can count on in hyperinflation is that 1% of your portfolio will hold at a 0% real return...well, I suppose it’s better than nothing. But it won’t do much.
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Re: The Collapse in Global Inflation Expectations

Post by Chicken Little »

JonnyB wrote: Sat May 02, 2020 2:41 pm
Chicken Little wrote: Sat May 02, 2020 1:50 pm
JonnyB wrote: Sat May 02, 2020 1:47 pm
Can you show where you get the idea that the economy "tanked" in 2018? GDP growth was between 2% and 3% throughout 2018 and 2019 and 2020 right up until the epidemic.
No. Ask ballons.

My thing is the repo-spike, which was explained-away on a daily basis on here as it unfloded over months. "Normalization" efforts ended around July 2019. The spike was in September 2019, after which rate decreases accelerated until November, well before virus arrived. Economy was good?

https://fred.stlouisfed.org/series/FEDFUNDS

Can you show me how this current fiscal picture isn't a disaster. Can you paint a picture for me, even a theoretical one, where debt goes...down?
Maybe this is some sort of Rorschach Test but you are going to have to explain what it is that you are seeing in the economic data that shows that the economy tanked or the economy was not good leading up to the epidemic.

The monthly jobs reports for November 2019 to February 2020 were 150,000 to 250,000 new jobs per month. GDP grew 2.1% in in Q3 and Q4. Where's the bad news?
It's like picking kickball teams in the 3rd grade;

1. You picked a junked up employment number that doesn't include millions of eligible people who are "not looking" in an economy drowning in low-wage work.

2. I picked The Federal Reserve of the United States of America

3. You picked a ho-hum GDP number

The Fed increases fed funds rate when things are going "well", leaves it alone when they don't know what else to do, and lowers the rate when things are "bad".

What happened to the rate between July 19 and Nov 19, well before virus?

So either I win the kickball game, or I and the Fed lose the kickball game. I'm content with either result, because if I lose, so does the Fed, and all of the fed-watching-policy-lovers-on-here-who-never-talk-about-policy-while-knee-jerk-defending-all-fed-moves-at-all-costs, since they would be wrong too.

That would amuse me.
Last edited by Chicken Little on Sat May 02, 2020 4:09 pm, edited 2 times in total.
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Re: The Collapse in Global Inflation Expectations

Post by FIREchief »

abuss368 wrote: Thu Apr 30, 2020 1:37 pm Do TIPS have as much of a role in portfolio's as 10 years ago?
I can't see that anything has really changed. TIPS aren't in my portfolio to protect against "high" inflation. They're there to protect against unexpected inflation.
Last edited by FIREchief on Sat May 02, 2020 6:04 pm, edited 1 time in total.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: The Collapse in Global Inflation Expectations

Post by JonnyB »

Chicken Little wrote: Sat May 02, 2020 3:51 pm 2. I picked The Federal Reserve of the United States of America

The Fed increases fed funds rate when things are going "well", leaves it alone when they don't know what else to do, and lowers the rate when things are "bad".
The Federal Funds Rate was 1.6% in February, the same as it was less than a year previously, and much higher than it had been for the previous 10 years. Hard to call that a sign of disaster. Like I said, it's a Rorschach Test, but I have a hard time seeing a 0.8% swing in the Federal Funds Rate as unusual. That's exactly what you expect the Fed to do, modulate the funds rate as they work to modulate the economy.
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Re: The Collapse in Global Inflation Expectations

Post by Chicken Little »

JonnyB wrote: Sat May 02, 2020 4:36 pm
Chicken Little wrote: Sat May 02, 2020 3:51 pm 2. I picked The Federal Reserve of the United States of America

The Fed increases fed funds rate when things are going "well", leaves it alone when they don't know what else to do, and lowers the rate when things are "bad".
The Federal Funds Rate was 1.6% in February, the same as it was less than a year previously, and much higher than it had been for the previous 10 years. Hard to call that a sign of disaster. Like I said, it's a Rorschach Test, but I have a hard time seeing a 0.8% swing in the Federal Funds Rate as unusual. That's exactly what you expect the Fed to do, modulate the funds rate as they work to modulate the economy.
Rate went from 2.40 in Jul 2019, a near post-crisis high, to 1.55 in Nov 2019.

If you think that the Fed thought the economy was strong, I can't help you.

I have no idea what point you are trying to make with 1.6% and, therefore, am not interested. Like I said, if you win, I lose, which means I win, so I wish you luck.

Now, I am taking my kickball and going home.
tibbitts
Posts: 11930
Joined: Tue Feb 27, 2007 6:50 pm

Re: The Collapse in Global Inflation Expectations

Post by tibbitts »

fujiters wrote: Thu Apr 30, 2020 2:21 pm With expectations like this, EE bonds look great (assuming the Treasury doesn't change the 20 year doubling).
This has been discussed here many times - they don't look great for everyone, but maybe for a market niche.
JonnyB
Posts: 688
Joined: Sun Jan 19, 2020 5:28 pm

Re: The Collapse in Global Inflation Expectations

Post by JonnyB »

Chicken Little wrote: Sat May 02, 2020 4:51 pm Rate went from 2.40 in Jul 2019, a near post-crisis high, to 1.55 in Nov 2019.

If you think that the Fed thought the economy was strong, I can't help you.
Well, let's have Fed Chairman Jerome Powell speak for himself in testimony to Congress on November 14, 2019:

"The U.S. economy is now in the 11th year of this expansion, and the baseline outlook remains favorable. Gross domestic product increased at an annual pace of 1.9 percent in the third quarter of this year after rising at around a 2.5 percent rate last year and in the first half of this year ...

Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2 percent objective as most likely. This favorable baseline partly reflects the policy adjustments that we have made to provide support for the economy ..."

He mentions the possibility of downside risks, and he always mentions the possibility of downside risks, but his overall outlook was favorable.
https://www.federalreserve.gov/newseven ... 91113a.htm
ARoseByAnyOtherName
Posts: 1000
Joined: Wed Apr 26, 2017 12:03 am

Re: The Collapse in Global Inflation Expectations

Post by ARoseByAnyOtherName »

Chicken Little wrote: Sat May 02, 2020 1:23 pm The chairman just made it explicitly clear that he thinks we're in a terrible fiscal position.
I missed this. Can you post a link to where he said this?
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