Inflation

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Closer2323
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Inflation

Post by Closer2323 » Tue Mar 24, 2020 4:23 pm

With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html

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willthrill81
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Re: Inflation

Post by willthrill81 » Tue Mar 24, 2020 4:29 pm

The breakeven inflation rate with 10 year TIPS (vs. 10 year Treasuries) is only .97%. So the market must (1) believe that inflation will be very low over the next decade, (2) be placing significant value on TIPS illiquidity premium, or (3) adhere to a combination of #1 and #2.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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vineviz
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Re: Inflation

Post by vineviz » Tue Mar 24, 2020 4:31 pm

Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
If inflation spikes, almost anything is safer bet than cash.

However there are a WORLD of options residing along the risk spectrum between cash and stocks. TIPS and/or Series I savings bonds would be the most logical alternatives to cash IMHO.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

tibbitts
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Re: Inflation

Post by tibbitts » Tue Mar 24, 2020 4:35 pm

Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
The last time 3yr CDs were at 7% I bought 1.5yr because I was convinced inflation would eat away that measly 7% return. Still want my opinion?

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Ramjet
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Re: Inflation

Post by Ramjet » Tue Mar 24, 2020 7:57 pm

Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?
That's the million dollar question

patrick
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Re: Inflation

Post by patrick » Tue Mar 24, 2020 8:15 pm

willthrill81 wrote:
Tue Mar 24, 2020 4:29 pm
The breakeven inflation rate with 10 year TIPS (vs. 10 year Treasuries) is only .97%. So the market must (1) believe that inflation will be very low over the next decade, (2) be placing significant value on TIPS illiquidity premium, or (3) adhere to a combination of #1 and #2.
.97% seems like a very cheap price for inflation insurance, so perhaps now is the best time to buy it.

peskypesky
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Re: Inflation

Post by peskypesky » Tue Mar 24, 2020 8:38 pm

Ramjet wrote:
Tue Mar 24, 2020 7:57 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?
That's the million dollar question
I think you mean "trillion dollar question."

UpperNwGuy
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Re: Inflation

Post by UpperNwGuy » Tue Mar 24, 2020 8:41 pm

I have never found a group of people that worries more about inflation than the Bogleheads.

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Kenkat
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Re: Inflation

Post by Kenkat » Tue Mar 24, 2020 8:46 pm

It didn’t happen in 2008. Not sure it will this time or not.

adamthesmythe
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Re: Inflation

Post by adamthesmythe » Tue Mar 24, 2020 8:56 pm

UpperNwGuy wrote:
Tue Mar 24, 2020 8:41 pm
I have never found a group of people that worries more about inflation than the Bogleheads.
We're not worried about inflation. We are hyper-worried about hyper-inflation.

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arcticpineapplecorp.
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Re: Inflation

Post by arcticpineapplecorp. » Tue Mar 24, 2020 9:00 pm

peskypesky wrote:
Tue Mar 24, 2020 8:38 pm
Ramjet wrote:
Tue Mar 24, 2020 7:57 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?
That's the million dollar question
I think you mean "trillion dollar question."
you mean "two trillion dollar question".
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

gtd98765
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Re: Inflation

Post by gtd98765 » Tue Mar 24, 2020 9:07 pm

Right now aggregate demand must be crashing as people and companies stay at home and don't buy things. This seems to be the opposite problem of "too much money chasing too few goods."

The Fed pumped a fortune into the economy during the Great Recession 10+ years ago. A lot of people were worried about inflation then. Hasn't happened yet....

22oregon22
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Re: Inflation

Post by 22oregon22 » Tue Mar 24, 2020 9:09 pm

Hey do you not know? The way to stop a bubble from bursting is to blow an even bigger bubble to close off the previous bubble. Inflation will be in stock market, real estate, etc. once America gets back to work and pandemic is behind us.

DonIce
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Re: Inflation

Post by DonIce » Tue Mar 24, 2020 9:10 pm

arcticpineapplecorp. wrote:
Tue Mar 24, 2020 9:00 pm
peskypesky wrote:
Tue Mar 24, 2020 8:38 pm
Ramjet wrote:
Tue Mar 24, 2020 7:57 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?
That's the million dollar question
I think you mean "trillion dollar question."
you mean "two trillion dollar question".
Quadrillion dollar question, after inflation.

justsomeguy2018
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Re: Inflation

Post by justsomeguy2018 » Tue Mar 24, 2020 9:15 pm

gtd98765 wrote:
Tue Mar 24, 2020 9:07 pm
Right now aggregate demand must be crashing as people and companies stay at home and don't buy things. This seems to be the opposite problem of "too much money chasing too few goods."

The Fed pumped a fortune into the economy during the Great Recession 10+ years ago. A lot of people were worried about inflation then. Hasn't happened yet....
This is true unless there are major supply shock disruptions. Or the value of the dollar rapidly deteriorates for some reason.

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Darth Xanadu
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Re: Inflation

Post by Darth Xanadu » Tue Mar 24, 2020 9:21 pm

What's inflation?
"A courageous teacher, failure is."

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JoMoney
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Re: Inflation

Post by JoMoney » Tue Mar 24, 2020 9:28 pm

I'm sure there will be inflation, how much and when... and net of the deflationary pressures, will be interesting.
It appears that this 'stimulus' could be putting more money in the hands of consumers (including businesses that have a need to spend), and I believe could be very different than what happened in the 2008 GFC that seemed to predominately be shoring up bank balance sheets... This money could find it's way into actual circulation much quicker.
To the extent that the money eventually finds it's way to savers, what are they going to do with it? Buy bonds yielding next to nothing?
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Ramjet
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Re: Inflation

Post by Ramjet » Wed Mar 25, 2020 6:48 am

peskypesky wrote:
Tue Mar 24, 2020 8:38 pm
Ramjet wrote:
Tue Mar 24, 2020 7:57 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?
That's the million dollar question
I think you mean "trillion dollar question."
Haha yes indeed

alex_686
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Re: Inflation

Post by alex_686 » Wed Mar 25, 2020 7:28 am

I don't think there will be much inflation.

The last time checks were sent out it did not stroke demand much. People save the money. They did not go out and spend it.

Then read up on the definition of money supply M1, M2, and M4. Yeah, the government is pumping lots of high powered money into M1 & M2. But M4 I suspect that M4 is in decline, just like 2008. So I don't think we are going to see much in the way of supply.

I personally think the stimulus package would have to be much bigger to do anything to the economy right now.

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Phineas J. Whoopee
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Re: Inflation

Post by Phineas J. Whoopee » Wed Mar 25, 2020 9:04 pm

I'm not especially worried about inflation, because in my analysis of my own situation I concluded it's the greatest risk my long-term plan faces, therefore built my asset allocation accordingly. That does not, of course, mean I'm perfectly safe. Also, I could get run over by a bus.

Hyperinflation is usually taken to mean at least 50% per month.

PJW

JBTX
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Re: Inflation

Post by JBTX » Wed Mar 25, 2020 9:12 pm

While it is hard to imagine now, it has become clear that the world is not hesitant to intervene in every economic hiccup with massive monetary and fiscal stimulus. Each time when it turns out OK we up the ante. While it may take a while to get there I can't phathom we can do it forever.

TIPS are starting to look better me and may increase my stake in them.

March2009
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Re: Inflation

Post by March2009 » Wed Mar 25, 2020 9:20 pm

I'm concerned about inflation with the Fed now buying mortgage bonds, corporate bonds, small business loans, and consumer loans. That to me seems like a much bigger deal than what they have done the past 12 years with treasuries. In any case, my stocks and TIPS will be adequate with or without an increase in inflation.
In bear markets, stocks return to their rightful owners. - J.P. Morgan

Alex Frakt
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Re: Inflation

Post by Alex Frakt » Thu Mar 26, 2020 12:57 am

Please keep comments focused on investing. Complaints about government policy and generalized economic (as opposed to investing) discussions are off-topic on this site.

Sockpuppet
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Re: Inflation

Post by Sockpuppet » Thu Mar 26, 2020 7:31 am

Falling oil prices don’t point toward inflation.

This is a weird economic situation. Sure government is printing money but there’s nothing to spend it on and wages aren’t likely to increase generally now.

I would be more concerned about what happens inflation wise after crisis is over.

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Ramjet
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Re: Inflation

Post by Ramjet » Thu Mar 26, 2020 8:04 am

Sockpuppet wrote:
Thu Mar 26, 2020 7:31 am
Falling oil prices don’t point toward inflation.

This is a weird economic situation. Sure government is printing money but there’s nothing to spend it on and wages aren’t likely to increase generally now.

I would be more concerned about what happens inflation wise after crisis is over.
Maybe even many years after the crisis is over

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rustymutt
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Re: Inflation

Post by rustymutt » Thu Mar 26, 2020 8:05 am

peskypesky wrote:
Tue Mar 24, 2020 8:38 pm
Ramjet wrote:
Tue Mar 24, 2020 7:57 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?
That's the million dollar question
I think you mean "trillion dollar question."
Two Trillion dollar question. That's $2,000,000,000,000.
Last edited by rustymutt on Thu Mar 26, 2020 8:06 am, edited 1 time in total.
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Forester
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Re: Inflation

Post by Forester » Thu Mar 26, 2020 8:22 am

Probably slightly higher inflation. The main result of the bailout will be a redistribution of wealth from the working & middle classes to large corporations and slower growth in the future, if bad investments are not allowed to be punished & purged. That must be the price of this aid, sclerotic growth, American companies justifying a higher valuation, that phenomenon is diminished.

Coltrane75
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Re: Inflation

Post by Coltrane75 » Thu Mar 26, 2020 11:35 am

Thoughts on Inflation & Bailout:
Too complicated to predict. Will only know with hindsight.

Looking at China for clues where the impact of the virus started much earlier, the link below (2 week old news) shows that inflation is more or less holding still. Food is actually going up.
https://www.channelnewsasia.com/news/bu ... s-12520950

If Inflation Rises:
I'm not sure if stocks would be the place to go. Depends on the money and your time horizon.
For long-term/multi-decade money, just passively index in accordance to plan.
For shorter-term low-risk money, I would consider allocating a good portion to TIPS/IBonds. Then wait and see, Fed would probably consider raising interest rates to eventually fight if inflation levels were getting high (>3%).

Corsair
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Re: Inflation

Post by Corsair » Thu Mar 26, 2020 11:49 am

I'm expecting higher inflation as well, will be buying I-Bonds and physical gold. Bond market has basically been nationalized.

guyinlaw
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Re: Inflation

Post by guyinlaw » Thu Mar 26, 2020 11:50 am

Post coronavirus there will likely be a push to bring at least some of the supply chain local..

If that happens, cost of those items are likely to increase and effect inflation to certain extent. But this is over longer time frame.

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gmaynardkrebs
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Re: Inflation

Post by gmaynardkrebs » Thu Mar 26, 2020 12:02 pm

UpperNwGuy wrote:
Tue Mar 24, 2020 8:41 pm
I have never found a group of people that worries more about inflation than the Bogleheads.
Germans.

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nedsaid
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Re: Inflation

Post by nedsaid » Thu Mar 26, 2020 8:46 pm

Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
Boy, hard to say. You would think that eventually all of this money creation would spur inflation but remember that a lot of money is created in the private banking system. If the Government spending and borrowing is immense and yet private lending is very restrained, the effect on money supply and inflation could be very little. It depends upon the velocity of money. We are putting Modern Monetary Theory to a big test. Does this economic model accurately reflect reality, we are about to find out to the tune of $2 trillion in fiscal stimulus and perhaps $4 trillion in monetary stimulus. Everett Dirksen would be horrified, a trillion dollars hardly seems like anything anymore. A trillion hardly buys a billion anymore.
A fool and his money are good for business.

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Bluce
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Re: Inflation

Post by Bluce » Thu Mar 26, 2020 9:01 pm

nedsaid wrote:
Thu Mar 26, 2020 8:46 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
Boy, hard to say. You would think that eventually all of this money creation would spur inflation but remember that a lot of money is created in the private banking system. If the Government spending and borrowing is immense and yet private lending is very restrained, the effect on money supply and inflation could be very little. It depends upon the velocity of money. We are putting Modern Monetary Theory to a big test. Does this economic model accurately reflect reality, we are about to find out to the tune of $2 trillion in fiscal stimulus and perhaps $4 trillion in monetary stimulus. Everett Dirksen would be horrified, a trillion dollars hardly seems like anything anymore. A trillion hardly buys a billion anymore.
Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
"There are no new ideas, only forgotten ones." -- Amity Shlaes

rgs92
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Re: Inflation

Post by rgs92 » Thu Mar 26, 2020 9:03 pm

Stagflation may be a nice blast from the past.

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nedsaid
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Re: Inflation

Post by nedsaid » Thu Mar 26, 2020 9:25 pm

Bluce wrote:
Thu Mar 26, 2020 9:01 pm
nedsaid wrote:
Thu Mar 26, 2020 8:46 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
Boy, hard to say. You would think that eventually all of this money creation would spur inflation but remember that a lot of money is created in the private banking system. If the Government spending and borrowing is immense and yet private lending is very restrained, the effect on money supply and inflation could be very little. It depends upon the velocity of money. We are putting Modern Monetary Theory to a big test. Does this economic model accurately reflect reality, we are about to find out to the tune of $2 trillion in fiscal stimulus and perhaps $4 trillion in monetary stimulus. Everett Dirksen would be horrified, a trillion dollars hardly seems like anything anymore. A trillion hardly buys a billion anymore.
Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
One reason I have kept my REITs and TIPS even though a lot of Bogleheads have soured on them. I regard inflation as Public Enemy number one, though since the 2008-2009 financial crisis deflation seems to be a bigger problem. Inflation not a problem now or for the foreseeable future but we can't take for granted that Volcker had slayed the inflation beast forever back in the early 1980's. You just have to wonder if inflation will be back at some point. Right now, not a problem.
A fool and his money are good for business.

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timboktoo
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Re: Inflation

Post by timboktoo » Thu Mar 26, 2020 9:26 pm

I thought the previous quantitative easing would bring about high inflation. I was wrong. For years, there was talk of a bond market bubble. That turned out to be wrong. I have no clue what will happen. All I know for certain is that things are much more complex than the books I read seem to indicate.

- Tim

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willthrill81
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Re: Inflation

Post by willthrill81 » Thu Mar 26, 2020 9:28 pm

nedsaid wrote:
Thu Mar 26, 2020 9:25 pm
Bluce wrote:
Thu Mar 26, 2020 9:01 pm
nedsaid wrote:
Thu Mar 26, 2020 8:46 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
Boy, hard to say. You would think that eventually all of this money creation would spur inflation but remember that a lot of money is created in the private banking system. If the Government spending and borrowing is immense and yet private lending is very restrained, the effect on money supply and inflation could be very little. It depends upon the velocity of money. We are putting Modern Monetary Theory to a big test. Does this economic model accurately reflect reality, we are about to find out to the tune of $2 trillion in fiscal stimulus and perhaps $4 trillion in monetary stimulus. Everett Dirksen would be horrified, a trillion dollars hardly seems like anything anymore. A trillion hardly buys a billion anymore.
Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
One reason I have kept my REITs and TIPS even though a lot of Bogleheads have soured on them. I regard inflation as Public Enemy number one, though since the 2008-2009 financial crisis deflation seems to be a bigger problem. Inflation not a problem now or for the foreseeable future but we can't take for granted that Volcker had slayed the inflation beast forever back in the early 1980's. You just have to wonder if inflation will be back at some point. Right now, not a problem.
I agree that inflation is one of the biggest long-term enemies of the investor. I would also add a savings glut resulting in permanently lower returns going forward to that list, but that's for another thread.

The modern monetary theory proponents are about to get their wish. We'll see if inflation remains as tame as it's been for the last decade with money being sloshed around by the trillions.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

adave
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Location: Houston

Re: Inflation

Post by adave » Thu Mar 26, 2020 9:30 pm

The US exports inflation, it is one of the benefits of dollar reserve currency status in a highly globalized economy. Expect significant inflation in the developing countries in the next few years.

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nedsaid
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Re: Inflation

Post by nedsaid » Thu Mar 26, 2020 9:35 pm

willthrill81 wrote:
Thu Mar 26, 2020 9:28 pm
nedsaid wrote:
Thu Mar 26, 2020 9:25 pm
Bluce wrote:
Thu Mar 26, 2020 9:01 pm
nedsaid wrote:
Thu Mar 26, 2020 8:46 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
Boy, hard to say. You would think that eventually all of this money creation would spur inflation but remember that a lot of money is created in the private banking system. If the Government spending and borrowing is immense and yet private lending is very restrained, the effect on money supply and inflation could be very little. It depends upon the velocity of money. We are putting Modern Monetary Theory to a big test. Does this economic model accurately reflect reality, we are about to find out to the tune of $2 trillion in fiscal stimulus and perhaps $4 trillion in monetary stimulus. Everett Dirksen would be horrified, a trillion dollars hardly seems like anything anymore. A trillion hardly buys a billion anymore.
Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
One reason I have kept my REITs and TIPS even though a lot of Bogleheads have soured on them. I regard inflation as Public Enemy number one, though since the 2008-2009 financial crisis deflation seems to be a bigger problem. Inflation not a problem now or for the foreseeable future but we can't take for granted that Volcker had slayed the inflation beast forever back in the early 1980's. You just have to wonder if inflation will be back at some point. Right now, not a problem.
I agree that inflation is one of the biggest long-term enemies of the investor. I would also add a savings glut resulting in permanently lower returns going forward to that list, but that's for another thread.

The modern monetary theory proponents are about to get their wish. We'll see if inflation remains as tame as it's been for the last decade with money being sloshed around by the trillions.
According to the (Foreign Sector + Government Sector + Private Sector = Zero) theory or Sectoral balances, we should see private savings rate continue to go up. Private savings rate last I heard was 7 or eight percent. We should also continue to see Corporate Balance Sheets flush with cash. It appears to me that the Federal Reserve bank will buy up the additional Federal Government debt and more, so that will add to the money supply. Again, we will have to see what happens with lending from private banks.
A fool and his money are good for business.

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willthrill81
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Re: Inflation

Post by willthrill81 » Thu Mar 26, 2020 9:38 pm

nedsaid wrote:
Thu Mar 26, 2020 9:35 pm
willthrill81 wrote:
Thu Mar 26, 2020 9:28 pm
nedsaid wrote:
Thu Mar 26, 2020 9:25 pm
Bluce wrote:
Thu Mar 26, 2020 9:01 pm
nedsaid wrote:
Thu Mar 26, 2020 8:46 pm


Boy, hard to say. You would think that eventually all of this money creation would spur inflation but remember that a lot of money is created in the private banking system. If the Government spending and borrowing is immense and yet private lending is very restrained, the effect on money supply and inflation could be very little. It depends upon the velocity of money. We are putting Modern Monetary Theory to a big test. Does this economic model accurately reflect reality, we are about to find out to the tune of $2 trillion in fiscal stimulus and perhaps $4 trillion in monetary stimulus. Everett Dirksen would be horrified, a trillion dollars hardly seems like anything anymore. A trillion hardly buys a billion anymore.
Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
One reason I have kept my REITs and TIPS even though a lot of Bogleheads have soured on them. I regard inflation as Public Enemy number one, though since the 2008-2009 financial crisis deflation seems to be a bigger problem. Inflation not a problem now or for the foreseeable future but we can't take for granted that Volcker had slayed the inflation beast forever back in the early 1980's. You just have to wonder if inflation will be back at some point. Right now, not a problem.
I agree that inflation is one of the biggest long-term enemies of the investor. I would also add a savings glut resulting in permanently lower returns going forward to that list, but that's for another thread.

The modern monetary theory proponents are about to get their wish. We'll see if inflation remains as tame as it's been for the last decade with money being sloshed around by the trillions.
According to the (Foreign Sector + Government Sector + Private Sector = Zero) theory or Sectoral balances, we should see private savings rate continue to go up. Private savings rate last I heard was 7 or eight percent. We should also continue to see Corporate Balance Sheets flush with cash. It appears to me that the Federal Reserve bank will buy up the additional Federal Government debt and more, so that will add to the money supply. Again, we will have to see what happens with lending from private banks.
Yes, the private banks are a big factor in the inflation issue. After the last recession, they mostly shut up their coffers tighter than a clam. Now that there seemingly isn't a liquidity problem, it will be interesting to see if they play as fast and loose with lending as the Fed appears to want them to. And if they do, it will also be interesting to see if inflation remains very low.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Ramjet
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Re: Inflation

Post by Ramjet » Thu Mar 26, 2020 9:42 pm

willthrill81 wrote:
Thu Mar 26, 2020 9:38 pm
nedsaid wrote:
Thu Mar 26, 2020 9:35 pm
willthrill81 wrote:
Thu Mar 26, 2020 9:28 pm
nedsaid wrote:
Thu Mar 26, 2020 9:25 pm
Bluce wrote:
Thu Mar 26, 2020 9:01 pm


Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
One reason I have kept my REITs and TIPS even though a lot of Bogleheads have soured on them. I regard inflation as Public Enemy number one, though since the 2008-2009 financial crisis deflation seems to be a bigger problem. Inflation not a problem now or for the foreseeable future but we can't take for granted that Volcker had slayed the inflation beast forever back in the early 1980's. You just have to wonder if inflation will be back at some point. Right now, not a problem.
I agree that inflation is one of the biggest long-term enemies of the investor. I would also add a savings glut resulting in permanently lower returns going forward to that list, but that's for another thread.

The modern monetary theory proponents are about to get their wish. We'll see if inflation remains as tame as it's been for the last decade with money being sloshed around by the trillions.
According to the (Foreign Sector + Government Sector + Private Sector = Zero) theory or Sectoral balances, we should see private savings rate continue to go up. Private savings rate last I heard was 7 or eight percent. We should also continue to see Corporate Balance Sheets flush with cash. It appears to me that the Federal Reserve bank will buy up the additional Federal Government debt and more, so that will add to the money supply. Again, we will have to see what happens with lending from private banks.
Yes, the private banks are a big factor in the inflation issue. After the last recession, they mostly shut up their coffers tighter than a clam. Now that there seemingly isn't a liquidity problem, it will be interesting to see if they play as fast and loose with lending as the Fed appears to want them to. And if they do, it will also be interesting to see if inflation remains very low.
Your best guess? Assuming the banks play like the Fed wants then to

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nedsaid
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Re: Inflation

Post by nedsaid » Thu Mar 26, 2020 9:45 pm

willthrill81 wrote:
Thu Mar 26, 2020 9:38 pm
nedsaid wrote:
Thu Mar 26, 2020 9:35 pm
willthrill81 wrote:
Thu Mar 26, 2020 9:28 pm
nedsaid wrote:
Thu Mar 26, 2020 9:25 pm
Bluce wrote:
Thu Mar 26, 2020 9:01 pm


Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
One reason I have kept my REITs and TIPS even though a lot of Bogleheads have soured on them. I regard inflation as Public Enemy number one, though since the 2008-2009 financial crisis deflation seems to be a bigger problem. Inflation not a problem now or for the foreseeable future but we can't take for granted that Volcker had slayed the inflation beast forever back in the early 1980's. You just have to wonder if inflation will be back at some point. Right now, not a problem.
I agree that inflation is one of the biggest long-term enemies of the investor. I would also add a savings glut resulting in permanently lower returns going forward to that list, but that's for another thread.

The modern monetary theory proponents are about to get their wish. We'll see if inflation remains as tame as it's been for the last decade with money being sloshed around by the trillions.
According to the (Foreign Sector + Government Sector + Private Sector = Zero) theory or Sectoral balances, we should see private savings rate continue to go up. Private savings rate last I heard was 7 or eight percent. We should also continue to see Corporate Balance Sheets flush with cash. It appears to me that the Federal Reserve bank will buy up the additional Federal Government debt and more, so that will add to the money supply. Again, we will have to see what happens with lending from private banks.
Yes, the private banks are a big factor in the inflation issue. After the last recession, they mostly shut up their coffers tighter than a clam. Now that there seemingly isn't a liquidity problem, it will be interesting to see if they play as fast and loose with lending as the Fed appears to want them to. And if they do, it will also be interesting to see if inflation remains very low.
Lending standards, particularly for mortgages, seem to be high. Not so easy to get loans. So even after the economy recovered, private banks seemed tight on lending. One reason you are seeing such things as peer to peer lending. Hard to know exactly what is going on out there, back in 2008-2009, subprime took a lot of people by surprise. It was a lot bigger than even the experts realized. Hopefully, the peer-to-peer Alternative lending isn't going to be the next subprime. Let's see what happens.
A fool and his money are good for business.

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willthrill81
Posts: 17362
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Re: Inflation

Post by willthrill81 » Thu Mar 26, 2020 9:55 pm

nedsaid wrote:
Thu Mar 26, 2020 9:45 pm
willthrill81 wrote:
Thu Mar 26, 2020 9:38 pm
nedsaid wrote:
Thu Mar 26, 2020 9:35 pm
willthrill81 wrote:
Thu Mar 26, 2020 9:28 pm
nedsaid wrote:
Thu Mar 26, 2020 9:25 pm


One reason I have kept my REITs and TIPS even though a lot of Bogleheads have soured on them. I regard inflation as Public Enemy number one, though since the 2008-2009 financial crisis deflation seems to be a bigger problem. Inflation not a problem now or for the foreseeable future but we can't take for granted that Volcker had slayed the inflation beast forever back in the early 1980's. You just have to wonder if inflation will be back at some point. Right now, not a problem.
I agree that inflation is one of the biggest long-term enemies of the investor. I would also add a savings glut resulting in permanently lower returns going forward to that list, but that's for another thread.

The modern monetary theory proponents are about to get their wish. We'll see if inflation remains as tame as it's been for the last decade with money being sloshed around by the trillions.
According to the (Foreign Sector + Government Sector + Private Sector = Zero) theory or Sectoral balances, we should see private savings rate continue to go up. Private savings rate last I heard was 7 or eight percent. We should also continue to see Corporate Balance Sheets flush with cash. It appears to me that the Federal Reserve bank will buy up the additional Federal Government debt and more, so that will add to the money supply. Again, we will have to see what happens with lending from private banks.
Yes, the private banks are a big factor in the inflation issue. After the last recession, they mostly shut up their coffers tighter than a clam. Now that there seemingly isn't a liquidity problem, it will be interesting to see if they play as fast and loose with lending as the Fed appears to want them to. And if they do, it will also be interesting to see if inflation remains very low.
Lending standards, particularly for mortgages, seem to be high. Not so easy to get loans. So even after the economy recovered, private banks seemed tight on lending. One reason you are seeing such things as peer to peer lending. Hard to know exactly what is going on out there, back in 2008-2009, subprime took a lot of people by surprise. It was a lot bigger than even the experts realized. Hopefully, the peer-to-peer Alternative lending isn't going to be the next subprime. Let's see what happens.
I don't think that P2P lending is big enough to do much. Most of the money in that space is, ironically, from corporations looking to juice some of the returns of their hefty cash balances, so it's money that can seeming 'afford to be lost'.

Your point about lending standards being high is well taken. Banks may need to reevaluate those standards if they have any realistic chance of complying with the Fed's desire. But frankly, I don't think that even cheaper money (as if we haven't had cheap money for a long time now anyway) is going to solve the current problem. Until the average person believes that s/he can safely interact with others and loosen the purse strings, the economy will be in shambles.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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willthrill81
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Re: Inflation

Post by willthrill81 » Thu Mar 26, 2020 9:57 pm

Ramjet wrote:
Thu Mar 26, 2020 9:42 pm
willthrill81 wrote:
Thu Mar 26, 2020 9:38 pm
Yes, the private banks are a big factor in the inflation issue. After the last recession, they mostly shut up their coffers tighter than a clam. Now that there seemingly isn't a liquidity problem, it will be interesting to see if they play as fast and loose with lending as the Fed appears to want them to. And if they do, it will also be interesting to see if inflation remains very low.
Your best guess? Assuming the banks play like the Fed wants then to
The break-even inflation rate on 10 year TIPS is probably about as valid an estimate of the next decade's inflation as any. It's currently 1.07%, although it's been quite volatile of late. A month ago, it was at 1.54%. Last week, it was at .5%.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

bayview
Posts: 1977
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Re: Inflation

Post by bayview » Thu Mar 26, 2020 10:26 pm

Bluce wrote:
Thu Mar 26, 2020 9:01 pm
nedsaid wrote:
Thu Mar 26, 2020 8:46 pm
Closer2323 wrote:
Tue Mar 24, 2020 4:23 pm
With this massive bailout in the works what are your thoughts on the likely impact on inflation?

Secondly if greater than average inflation could occur would stocks be a safer bet right now than cash considering this?

https://www.cnbc.com/2020/03/23/dow-fut ... -bill.html
Boy, hard to say. You would think that eventually all of this money creation would spur inflation but remember that a lot of money is created in the private banking system. If the Government spending and borrowing is immense and yet private lending is very restrained, the effect on money supply and inflation could be very little. It depends upon the velocity of money. We are putting Modern Monetary Theory to a big test. Does this economic model accurately reflect reality, we are about to find out to the tune of $2 trillion in fiscal stimulus and perhaps $4 trillion in monetary stimulus. Everett Dirksen would be horrified, a trillion dollars hardly seems like anything anymore. A trillion hardly buys a billion anymore.
Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
Everett Dirksen, 1896-1969, Illinois-Republican.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Bluce
Posts: 879
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Location: Finger Lakes, NYS

Re: Inflation

Post by Bluce » Thu Mar 26, 2020 10:44 pm

bayview wrote:
Thu Mar 26, 2020 10:26 pm
Bluce wrote:
Thu Mar 26, 2020 9:01 pm
Who was the Congresscritter who said 20-30 years ago: "A billion here, a billion there, pretty soon you're talking about real money." How quaint.

Why can't we print our way to prosperity? LOL
Everett Dirksen, 1896-1969, Illinois-Republican.
How time flies, ha.

I see now that name was mentioned above, but it didn't ring a bell with me.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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gmaynardkrebs
Posts: 1974
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Re: Inflation

Post by gmaynardkrebs » Thu Mar 26, 2020 10:51 pm

willthrill81 wrote:
Thu Mar 26, 2020 9:57 pm
Ramjet wrote:
Thu Mar 26, 2020 9:42 pm
willthrill81 wrote:
Thu Mar 26, 2020 9:38 pm
Yes, the private banks are a big factor in the inflation issue. After the last recession, they mostly shut up their coffers tighter than a clam. Now that there seemingly isn't a liquidity problem, it will be interesting to see if they play as fast and loose with lending as the Fed appears to want them to. And if they do, it will also be interesting to see if inflation remains very low.
Your best guess? Assuming the banks play like the Fed wants then to
The break-even inflation rate on 10 year TIPS is probably about as valid an estimate of the next decade's inflation as any. It's currently 1.07%, although it's been quite volatile of late. A month ago, it was at 1.54%. Last week, it was at .5%.
The range of possible outcomes is very wide IMO.

Enganerd
Posts: 130
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Re: Inflation

Post by Enganerd » Fri Mar 27, 2020 1:24 pm

UpperNwGuy wrote:
Tue Mar 24, 2020 8:41 pm
I have never found a group of people that worries more about inflation than the Bogleheads.
I take it you have not yet found the Austrian economics communities. The gold and bitcoin folks

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rustymutt
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Re: Inflation

Post by rustymutt » Fri Mar 27, 2020 1:29 pm

Forester wrote:
Thu Mar 26, 2020 8:22 am
Probably slightly higher inflation. The main result of the bailout will be a redistribution of wealth from the working & middle classes to large corporations and slower growth in the future, if bad investments are not allowed to be punished & purged. That must be the price of this aid, sclerotic growth, American companies justifying a higher valuation, that phenomenon is diminished.
I love that explanation. Redistribution is correct. We've made golden calves out of business. These are not normal times.
I personalty think we'll see slightly higher inflation than expected very quickly, and the Federal bank can't do much but print money.

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I'm amazed at the wealth of Knowledge others gather, and share over a lifetime of learning. The mind is truly unique. It's nice when we use it!

garlandwhizzer
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Re: Inflation

Post by garlandwhizzer » Fri Mar 27, 2020 2:22 pm

vineviz wrote:

If inflation spikes, almost anything is safer bet than cash.
This is exactly the opposite to my understanding. The damage to fixed income in real inflation adjusted returns from inflation if it is persistent and increasing is in direct relation to bond duration. LT bonds suffer more principal losses than IT, IT suffer more than ST, and ST suffer more than MMF. MMF with a zero duration do not suffer principal losses at all and can constantly be re-invested at higher yields as long as rates go up which they do in the presence of inflation. Equity provides some long term inflation protection but suffers real losses in the short term as inflation discounts the real value of expected future earnings. In 1982 when inflation peaked, average LCB PE ratios dropped to below 8 due to his discounting. Nominal bonds are stuck with the nominal yields reflecting the bond market on their date of issuance. When substantial inflation intervenes over a long period of time those nominal yields from years ago become a joke in real terms.

Garland Whizzer

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