Longterm trend -inflation

Posted by: NIM

Longterm trend -inflation - 01/20/10 02:00 AM

Hi,

I was wondering what everyone's thoughts are on inflation destroying the purchasing power of your wages.

For example,
In Canada, (based on the average rate of inflation from 1914-2009 and monthly inflation source source:Stats Canada) if that average rate of inflation is kept the same ....in 45 years the average monthly income will be less than $500 per month (in Today's $ value).

What is my point? It's this: at some time in the future inflation will make life very hard to live. $500 a month in Canada will only get you a room to yourself and groceries. No car, clothing -anything else. Just basic life support for the average Canadian.

Is there something I'm missing? What is the long term solution to this? Self sufficiency? Ideas/Comments?


-NIM
Posted by: MDinana

Re: Longterm trend -inflation - 01/20/10 02:17 AM

I think you're forgetting to factor inflation with everything. Cost of products, certainly, but salaries increase as well. Not sure what math you're using for your $500/mo figure though.

Yeah, a car in the '50s cost $2000, but people brought home $100/week (or something ridiculous). I really don't think that inflation has affected things equally though. If Canada has an hourly minimum wage, look at how much that's changed while doing your math.

Long term solution? worst case, you make like mexico and re-do your money. "Nuevo pesos" ("new pesos") have been in use for maybe 10+ years, to replace the crap that had an exchange rate with the US of several hundred/dollar. Now it's more like 13/dollar.
Posted by: hikermor

Re: Longterm trend -inflation - 01/20/10 02:26 AM

Ah, the 50s! On my first "real" job, I earned the then minimum wage of 75 cents an hour, but then I could see a first run movie for 50 cents - lots of dates cost less than half a day's wages. Where did I put that Elvis album?
Posted by: Susan

Re: Longterm trend -inflation - 01/20/10 02:39 AM

Some salaries may increase equally with inflation, but most do not, esp for those on the survival end of the yardstick.

Inflation is strictly manmade at the top of the food chain, it is NOT part of the natural order of things. Government always wants to change part of the economy without considering the long-term effects of their decisions. Nothing in economics exists by itself, every decision affects many other facets of it.

In the 60s, gold was worth about $35/oz. Today, it is worth about $1200USD/oz. The value of gold itself hasn't increased so much as our dollar has seriously deteriorated. Our government is printing money as fast as they can, spending it as fast as they can, and going into debt as fast as they can. When the money is first printed, it is worth more than when it trickles down to you and me. The more money in circulation, the less it's worth.

[The following is not an indication clear across the board, because there are other factors involved, too, but just to give you an idea...]

In 1968, gas was $0.28/gallon and CA minimum wage was $1.65. You could buy almost 6 gallons of gas for one hour of work.

Today, CA gas is about $3/gal and min. wage is $8, so you can buy about 2.6 gallons of gas for one hour of work. Minus deductions.

And to tell the truth, I don't think we've hit bottom yet. It's scary.

Sue
Posted by: Eugene

Re: Longterm trend -inflation - 01/20/10 03:00 AM

Originally Posted By: NIM
Hi,

I was wondering what everyone's thoughts are on inflation destroying the purchasing power of your wages.

For example,
In Canada, (based on the average rate of inflation from 1914-2009 and monthly inflation source source:Stats Canada) if that average rate of inflation is kept the same ....in 45 years the average monthly income will be less than $500 per month (in Today's $ value).

What is my point? It's this: at some time in the future inflation will make life very hard to live. $500 a month in Canada will only get you a room to yourself and groceries. No car, clothing -anything else. Just basic life support for the average Canadian.

Is there something I'm missing? What is the long term solution to this? Self sufficiency? Ideas/Comments?


-NIM


Start planning for things now. If I go buy a pants now I buy two and have a few more than what I need now so I could go a few years without buying any. I have several pair of good thick socks stocked up and an extra pair of shoes.
You can live without a car http://www.bikeforums.net/forumdisplay.php?20-Commuting
We moved to the suburb where all the jobs are moving to ,could have moved elsewhere and gotten a much larger house for the $ but were in the middle of everything here, could easily pick up a second job if needed. Pick the worst house in the best neighborhood.
Posted by: LED

Re: Longterm trend -inflation - 01/20/10 03:19 AM

Unfortunately inflation will always be around cause most countries in the west are debtor nations and depend on being able to pay back loans with cheaper dollars. Inflation also works well for those who get the money first so to speak, like government contractors and financial institutions. Good for borrowers, bad for savers. Long term solution? There isn't one. Just hope your income and investments beat the rate of inflation. People are very creative though and I think if things keep going the way they are there will be a huge growth in the barter economy, both tangible goods and exchangeable credits, lessening the ability of governments to manipulate your "currency." Plumber swapping services with a dentist for example. Although, never wanting to be left out of the action, I think they recently passed a law that requires you to pay taxes on barterable services now. Oh well.
Posted by: Susan

Re: Longterm trend -inflation - 01/20/10 03:45 AM

You were always supposed to pay taxes on bartered goods/services. It was the catching that the IRS had problems with.

Sue
Posted by: scafool

Re: Longterm trend -inflation - 01/20/10 04:12 AM

Inflation is the biggest hidden tax.
One of the things it does is save the government real wealth when it is paying off debt.
Inflation also reduces accumulated savings.
There is more to inflation than just consumer pricing.
Not everything about inflation is bad either.
Inflation actually benefits holders of real assets by depreciating their costs.
Another effect of inflation is it tends to increase the rate at which an economy can grow. First it allows central banks to keep an interest rate that seems positive while it is actually negative.
In terms of real investment this means a borrower actually profits by investing his cash in real businesses or commodities instead of financial instruments.
Posted by: TheSock

Re: Longterm trend -inflation - 01/20/10 07:14 AM

>if that average rate of inflation is kept the same ....in 45 years

any statician would laugh at that assumption. You can prove anything by picking a point or period and then extrapolating forwards at the same rate.
So the climate sceptics chose the hottest year ever recorded: '1998' and then use that to 'prove' the climate is getting colder. And it's undeniable that no year since has been as hot.
But if they'd chosen any other year, they'd have got a different picture.
Or racists in the UK chose the present rate of immigration to 'prove' that in 50 years we'll be crowded. But someone using the rate for another period; say the 70s. would 'prove' we'd be emptying in 50 years time.
In reality no periods features can be extrapolated forward at the same rate.
The Sock
Posted by: Blast

Re: Longterm trend -inflation - 01/20/10 12:46 PM

Quote:
Start planning for things now. If I go buy a pants now I buy two and have a few more than what I need now so I could go a few years without buying any.


Yep, that's my solution. Buy goods now that I'll need in the future. Shoes, tools, camping gear, etc...

Lots of camping gear. grin

-Blast
Posted by: unimogbert

Re: Longterm trend -inflation - 01/20/10 01:00 PM

Best possible solution would be to go back in time and nip "it" in the bud. (whatever your understanding of "it" might be)

From here the solution would be to buy everything you'll ever need now before the prices go up (same as saying before your money is worth less). Buy stuff NOW using money that has value to purchase something you know you'll need later when the figures in your bank account won't buy as much.

A comment I recall from the inflation-ridden early 1980's (when a home loan interest rate might be 18%!) was from somebody - possibly Donald Trump- stating that the best return on an investment he got was from buying mouthwash by the case. Buy it before the prices go up (actually the value of the $ goes down).

Trouble is that it's very hard to buy fresh fruits and vegetables ahead of time. And I really can't store all the gasoline I'll need for the rest of my life and so forth.But some stuff can be anticipated and purchased and stored. Like .... camping gear! And a new Bass Boat :-) And a new big-screen TV :-) And ..... (then I wake up)

Posted by: Eugene

Re: Longterm trend -inflation - 01/20/10 08:00 PM

f you had purchased $1,000.00 of Nortel stock one year ago, it would
now be worth $49.00.

With Enron, you would have $16.50 left of the original $1,000.00.

With WorldCom, you would have less than $5.00 left.

If you had purchased $1,000.00 of Delta Air Lines stock you would have
$44.00 left.

If you had purchased United Airlines, you would have nothing left.

But, if you had purchased $1,000.00 worth of beer one year ago, drank
all the beer, then turned in the cans for the aluminum recycling refund,
you would have $214.00. Based on the above, the best current investment
advice is to drink heavily and recycle.
Posted by: benjammin

Re: Longterm trend -inflation - 01/20/10 08:06 PM

The more things change, the more they stay the same. How I apply that to inflation is if the value of the money I am making now goes down, then I find a way to make more to overcome the disparity. My first rule is never to fix a price by contract when I can do the work at will. If I am stuck in a contract employment with a fixed price for an extended period, I risk losing if inflation overtakes me. Thus contract work gets negotiated at my highest scale. At will work, (where I can leave or get fired with minimal notice and no remunerative impact) allows me to seek new employment in my trade anytime I think I can get a better deal elsewhere, or use the market trend to insist on more compensation from my current employer. If we have runaway inflation, then my employer can request a price adjustment from his client to compensate as that is a changed condition. In turn, one of his justifications will be that employee compensation must increase or he will lose his talent base and be unable to get the work done because he is not able to stay competitive. Since I have worked hard to acquire a skill set that is in high demand and I have located in an area where on-going employment is all but guaranteed, I keep the upper hand, and the only thing I have to do is continue to out-produce my competition. If I don't, then I don't deserve a competitive wage, and will lose income to inflation.

That's how the free market system works. Seems awfully fair to me. I didn't choose a career I liked. I chose one I was darned good at and that had a significant future demand potential. Then I worked hard for a long time to become very good at it. If it was easy and enjoyable, more people would be doing it and the value would thus diminish.

A person has to weigh their priorities in life and determine what paths will suit their needs and, if possible desires. There are very few who will just get what they want handed to them and never have to worry about earning it.

So the simple solution to inflation is to beat enough people at the game that you can make sure your earnings increase at a higher rate than inflation does. Either that or hope you are lucky. As Burgess Meredith once said, you can hope in one hand and dump in the other and see which one fills first. Not everyone gets to win. We got evicted from Eden a long, long time ago.
Posted by: ki4buc

Re: Longterm trend -inflation - 01/26/10 02:52 AM

Originally Posted By: hikermor
Ah, the 50s! On my first "real" job, I earned the then minimum wage of 75 cents an hour, but then I could see a first run movie for 50 cents - lots of dates cost less than half a day's wages. Where did I put that Elvis album?


Assuming 1955, US$0.75, that's US$5.75 per hour in 2007. First run movie at US$0.50, that's US$3.83 in 2007. As you can see, for some reason movies haven't kept pace...
Posted by: Russ

Re: Longterm trend -inflation - 01/26/10 02:55 AM

Avatar cost $11.50 and that was the senior rate. . .
Posted by: Susan

Re: Longterm trend -inflation - 01/27/10 02:53 AM

We don't really have a free market. We have a market that is heavily regulated to suit certain parties, some sections are heavily subsidized to suit certain parties, and most businesses are heavily controlled to suit certain parties.

If you are in an industry that doesn't have some kind of government-instigated 'parity', you have more leverage. That's nice, but not all that common these days. YOU may be part of a free market with your job, but everything you buy with the proceeds from that job is affected by ongoing inflation. You may think you're immune, but I don't think you are, you just make enough money where your income still exceeds your outgo. Just because you add zeros to your income, you're not really keeping up with the zeros that are added to all your living costs. What is happening to the money that is (for instance) being put into savings accounts or invested? Every week the numbers in the accounts may increase, but the real value of that money has decreased. You've lost money as it sits in the bank or the stock market.

And the average worker is an employee, not an independent contractor. An employee is heavily controlled, is usually fairly easily replaced, and with today's economy there's a long line of people ready to step into his job for a lower wage than what he is being paid.

You can kind of smirk that you are better off than an employee, but you are still subsidizing his employer's industry when you buy his products. It isn't like you have the choice of only buying everything from independent contractors, is it?

I doubt that we would be allowed to go back to anything even resembling a free market even if we had a major crash. The controllers have us pretty much in an iron grip, and have done so for many, many years (this is nothing recent, just fine-tuned). But our economy (and the world's) is like a large rock on a long, thin stick that isn't stuck into the ground very securely. A little more wind, a little bit of earth movement....

Sue
Posted by: Art_in_FL

Re: Longterm trend -inflation - 01/27/10 06:45 AM

The idea that here are controllers is scary on its face, but actually comforting. It is very much like the vast conspiracy theories. Casts of millions conspiring to give control to a few who sit at a big table and figure it all out. You can posit the CFR or the IMF or the UN or the Justice League as running things. And you would be wrong.

The truth is much, much scarier. Yes there are powerful groups of frightfully rich and powerful people out there. They do have an influence. But they don't really control things. They can corner a market in some narrow areas. Look up LTCM.

http://en.wikipedia.org/wiki/Long-Term_Capital_Management

A huge amount of capital and influence and control. And it all slipped away because they failed to understand that as much as it is possible to plan ahead in narrow fields and for limited times it is ultimately impossible to predict the future with sufficient accuracy to avoid a fall. Many of the same people and concepts that were in play with LTCM were involved with Michel Milken and Enron and the housing bubble and the crash in silver and ... You get the idea.

Of course we will never have sound economic policies without the economists understanding one thing:
http://impossiblehamster.org/
Posted by: benjammin

Re: Longterm trend -inflation - 01/27/10 06:11 PM

To some extent that is true, certainly moreso for most, but I find myself in a rare situation, in that I can and do go from contractor to employee. Since there's nothing I alone can do about the regulators and the games the government and big business play with our economy and our monetary system, I try to focus my efforts on the things I can control, namely the skillset I deploy into industries with a greater need than the supply can support. While I don't exactly get to name my own price, I do manage to stay ahead of my cost of living fairly well, and that is really all I need to worry about. Since I don't keep money (except my 401k, which I consider a novelty anyways) as a protected asset, but convert it to material goods that can be resold for present market value, I don't feel the pinch of inflation on any real investments; depreciation being a naturally expected loss that can only be offset with prudent purchases.

I reckon it all boils down to what you are willing to do to stay afloat. Today I am an employee. Next year I might contract again. It all depends on what the market in my industry and area needs the most. Having the flexibility to choose at any given time affords me a better opportunity to stay ahead of the game. I wouldn't smirk one way or another, just take the checks to the bank, watching them get progressively bigger. Since 2005 I have more than doubled my income, and it will continue to progress at that level for the foreseeable future, with a good measure of security built into it. It doesn't seem to matter much whether I am in a government run industry or outside of it. In fact, I would say the government work is doing better for me in general.

I would agree it is not common. It is something I worked damned hard to accomplish. The good news is as CPI increases because of inflation, so to will the cost of doing business for my employer/client, and so whatever the inflation issues are, they remain perpetually pass through on my end. The fact that I remain very hard to replace, competitive with my peers, and willing to do things others refuse only works more in my favor. It might not be pleasant, but it is effective.

I learned at a young age that most of the time we don't get to do what we want, but we almost always get to do something. Learning how to make the most of the whatever the something was/is, regardless of whether we like it or not, is a life skill I am still trying to teach my kids. There's almost always a chance to do more, so worrying whether what I do will be enough to keep up with inflation is not a consideration. I always make sure I am doing more than enough whwenever possible. I don't waste time pursuing career opportunities that won't produce sufficiently. As long as I have the means to do better, I will. When that situation changes, I will make do with whatever I have or can get within my means.

For most of us, whatever we think we need, most often we can learn to get by with less anyways, but for our constant need to feed our egos and our laziness.
Posted by: Pete

Re: Longterm trend -inflation - 02/01/10 02:53 AM

Quick answer to original post. I saw an estimate from Dr John Hussman (www.hussmanfunds.com) who is usually pretty objective about the economy. His conservative estimate is that the costs of average goods will double in the USA over the next decade. In other words, the cost index for inflation will double (i.e. consumer price index, CPI, will double).

Real wages (wages adjusted for inflation) did not increase at all over the past decade in America. Therefore, incomes did not keep up with rising costs. I doubt that things will turn rosy over the next 10 years, given that so many manufacturing jobs have been outsourced overseas. Therefore, it's a very good bet that most Americans will struggle with price increases - esp. those living on fixed incomes (retirees).

There's a lot to be said for aiming for a more sustainable lifestyle, and/or living close to a region where food is produced and water is plentiful.

otherPete
Posted by: MartinFocazio

Re: Longterm trend -inflation - 02/01/10 05:51 PM

Originally Posted By: NIM
Hi,

I was wondering what everyone's thoughts are on inflation destroying the purchasing power of your wages.
...
Is there something I'm missing? What is the long term solution to this? Self sufficiency? Ideas/Comments?



Ummm...Yeah. You know what, Inflation isn't your worry.
Wage Stagnation and Housing Costs are.

Let's put things in perspective.

In 1975, my dad was a butcher. We bought a house on his salary alone. He was able to save enough to buy a summer home in New Hampshire, which we had until it burned down some years later. My mom did not work outside the home.

Now, if you're working as a butcher in a grocery store today, I don't think a single-family detached home is in reach, much less an EXTRA home.

Fast forward.

1980 to 2004, U.S. gross domestic product per person rose by almost two-thirds, the wages of the average worker fell after adjusting for inflation in the same time period.

Over the three decades from 1972 to 2001, the wages and salaries of even those Americans at the 90th percentile (those doing better than 90 percent of their fellow citizens) experienced income gains of only 1 percent a year on average.
I was once in this group of income gainers in real, inflation-adjusted dollars. I am not anymore. Each year, I see my salary growing slower than my expenses - and I earn "good money" by most standards, but I know, in my heart, that my lifestyle is slipping.

But those at the 99.9th percentile - meaning they earn more than 99.9% of all others - saw their income rise by 181 percent over these same years (to an income averaging almost $1.7 million).

Those at the 99.99th percentile - a group of a few thousand that includes Warren Buffet, Bill Gates, Steve Jobs and so on...had income growth of 497 percent.

Inflation is, on the whole, fairly contained. At a current rate of 2.72% it's modest and able to be sustained.

However, as we grow more an more efficient, squeezing more and more productivity out of each worker, the gains are not being shared with employees.

Most of us - except those on government programs like soldiers and congress critters - will never have a defined pension - because they were replaced with the casino-culture 401(k) in the late 1970's.

In fact, I think that this is my biggest worry - not inflation, but the fact that, eventually, the Chinese crap they sell at Wal-Mart will reach some lower limit of "manufacutrability" cost and that your average American worker with an income of $40,208 just won't be able to buy stuff they need (forget "want" - I'm talking about basic here). In real dollars, the cost of goods and food has come way down from when I was a kid. WAY down. But even with these drops in prices, wages have not kept up.

I am very close to two people who have gone off the "wage cliff" so to speak - they work more than one job, they are hardly slackers in any sense. The work they do is, in one case semi-skilled and in the other, requires an expensive license.

Both of them are desperately poor, I mean poor like when I get a deer, I cut it up and give it to them. Poor like the heat is off in most of the house and poor like they are forgoing all medical care.

And they are working - but they don't get paid a living wage.

We're way off into the political woods here, but if you're talking long-term issues, your ability to earn a living if you actually have a job is the main concern, not inflation.

Posted by: MartinFocazio

Re: Longterm trend -inflation - 02/01/10 05:55 PM

Originally Posted By: Eugene
f you had purchased $1,000.00 of Nortel stock one year ago, it would
now be worth $49.00.


Not quite true, as I did buy Nortel stock a while ago, and it's worth $0 now.

If you panic sold in 2008 and 2009, you then missed out on a rally of epic proportions.

I continued to contribute every month to my 401(k) - even as month after month, it lost more and more value. But each month, my dollars bought more of the devalued stocks, and then, on the turnaround, I watched as my holdings increased by 5 figures in a matter of days. The stock market is a 25 year + game, and it's only part of the game. 10 Year TIPS for some of your holdings, and a bit of bonds and some nice, juicy ultra-high risk stuff for money you can afford to waste - because it pays so well. Read "Black Swan" and enjoy.

Posted by: tomfaranda

Re: Longterm trend -inflation - 02/01/10 06:02 PM

Let me just point out that in the late 70's/early 80's we had STAGFLATION - high inflation, high interest rates and double digit unemployment.

We are likely to see at least two of those three - high inflation and high unemployment - in the next several years.
Posted by: Arney

Re: Longterm trend -inflation - 02/01/10 07:15 PM

Originally Posted By: martinfocazio
Inflation isn't your worry. Wage Stagnation and Housing Costs are.

Ain't that the truth, brother. There are so many different developments over the years and decades to point to that help explain how we got into this mess. Ultimately, the "solution" to this situation is a political one but since we're not a political discussion group, I'll leave it at that. Unfortunately, political change on that scale is not something readily achieved through one person's effort, so it's hard to truly "prepare" for it, the way we individually prepare for disasters and such.

I still dread the possibility one day when we all suddenly realize (some say we did, last fall) that investing in financial markets like the stocks and bonds we buy in our 401K's were just another long-lasting bubble or Ponzi scheme after all. Just look to Japan's stock market as a real life example of what is possible. Personally, I'm so disgusted with the financial system that I have stopped putting money into my mutual funds since last year while I reassess what to do, not that I have much left over these days for retirement savings anyway.
Posted by: NancyRaymon

Re: Longterm trend -inflation - 02/04/10 12:38 AM

Around 1990 I lived in Moscow with my family. My mother decided to buy a new refrigerator for 5000 rubles (a lot of money back then and the average salary was about 200 rubles) and pay for it monthly for three years.

At some point high inflation took place in Russia. The prices and salaries began to grow. People who had large amounts of money in the bank were losing their wealth because their money was losing its value. As time passed by, the prices and salaries eventually grew to be six digit numbers.

The refrigerator for which my mother was supposed to pay for three years, she bought it with one salary half a year later since the money lost its real value and the 5000 rubles, which seemed a lot at one point, was worth almost nothing. At some point the government decided to fix the inflation problem by compensating the loss to the people whose money lost value in the banks. The banks were supposed to calculate 40% of the total money that were stored in the bank then convert it from present value (before inflation) to future value (after inflation). Since the whole process look a while, by the time everything was converted, the calculated total was worth very little again because inflation was high and prices and salaries kept growing so the real value of money kept falling. People who had large amounts of money in their savings account lost most of it. Those who owed, repaid their debts very quickly
Posted by: clarktx

Re: Longterm trend -inflation - 02/04/10 03:27 AM

I agree that inflation is probably a lesser demon here.

I also agree that wage stagnation is a very real concern.

If you have time, there is a very interesting book... I've only read excerpts from it, my father is going to loan it to me the next time he's in town. Its called cheap, and it talks about America's fascination with buying things as cheaply as possible, and how this is destroying our culture and economy.

Its here...

Of course, this is just one strand of the spiderweb. But it does talk about something that Martin mentioned, which I think is worth repeating. Martin said:
Originally Posted By: martinfocazio
However, as we grow more an more efficient, squeezing more and more productivity out of each worker, the gains are not being shared with employees.

The author makes a case about photo developing, and how this has gone from being a job that a person did, to being done by a machine, and now you can even get it done using an automated kiosk in a store that you stick your own memory card into. The author makes the point that while the savings of the machine is passed on to the consumer (you can have a photo printed in 60 minutes for a quarter). This situation, and situations like it, have removed thousands of jobs from the economy, which are not being replaced. The number of middle-class jobs is shrinking (this is explained in greater detail, of course). Leaving you with the choice of a lower paid job or being a highly paid "professional".

Obviously, this destroys your middle class culture where people can have a second home on a middle class job, and reshapes your national culture.

I thought it was interesting... check the book out if you have the chance...
Posted by: LED

Re: Longterm trend -inflation - 02/04/10 07:41 AM

Either way we're screwed. We either mimic the Japanese situation with a 20 year recession, (the Nikkei is still well below 1990 highs!) or we're headed for inflation as the fed keeps devaluing the dollar to make paying our debts more affordable. It was mentioned the other day that interest payments on the national debt will exceed all other government spending in the next 10 years! Thats just the interest. And of course, if the rest of the world thinks the US will default on its debt (or is massively inflating) they will unload faster than we can blink to cut their losses early. Over the last 100 years we've worked ourselves into a fiscal corner and one of the solutions will probably be higher interst rates. But thats political suicide and would stall any hopes of an economic recovery. In other words, it'll never happen. Oh, and BTW, Japan has racked up so much national debt trying to "correct" their 20 year recession that they're now on the verge of insolvency. Thats what happens when you keep zombie financial institutions and business' on stimulus life support.
Posted by: benjammin

Re: Longterm trend -inflation - 02/04/10 02:26 PM

I wrote a huge post I was going to add, but decided it was too redundant.

I'll say this; we are getting every bit of what we have been paying for. If we don't like the outcome, we've only ourselves to blame for it.
Posted by: NIM

Re: Longterm trend -inflation - 02/05/10 01:58 AM

"your ability to earn a living if you actually have a job is the main concern, not inflation."

Really? Perhaps? I'm just not happy with the way I see things going. Working a day's wages just for food and shelter isn't what I'm after. Wage slavery is still slavery to me.

"At a current rate of 2.72% it's modest and able to be sustained. "

Wages aren't keeping up to inflation so how can that percentage be sustainable? I don't see it.


I guess I'm just feeling a little down. I'm not a doomer but I don't see a way out. Hoping someone else had some ideas.
What good is stocking up food and materials when everyone else around you is suffering? I want to help everyone not just myself.
I don't want to walk by a schoolyard and see starving children while I'm at least getting 3 squares. Perhaps isolation and personal survival is what things will be reduced to. I can prepare for that. I'd just like to turn this train wreck around.

The system needs a reboot. I'll stop sniveling now smile

-NIM
Posted by: thseng

Re: Longterm trend -inflation - 02/05/10 03:33 AM

Inflation can only outstrip wages for so long. Sooner of later there has to be a correction, or there's no one left to buy anything and nothing to buy.

The correction can be large, sudden and painful or gradual, slow and painful.
Posted by: LED

Re: Longterm trend -inflation - 02/05/10 07:44 AM

Originally Posted By: NIM
I don't want to walk by a schoolyard and see starving children while I'm at least getting 3 squares. Perhaps isolation and personal survival is what things will be reduced to. I can prepare for that. I'd just like to turn this train wreck around.

The system needs a reboot. I'll stop sniveling now smile

-NIM


Call me optimistic but I don't think people will be starving. Will there be a significantly reduced standard of living? Probably. But don't worry, at least here in North America, healty food is very affordable. Beans, vegetables, rice, wheat, a whole chicken, etc. are usually cheaper than a box of name brand sugary cereal.
Posted by: clarktx

Re: Longterm trend -inflation - 02/05/10 02:31 PM

NIM, I don't think things will be that bad. There will be massive corrections in our EXTREMELY wasteful lifestyles. Children will actually start eat food that they don't "lurve". Restaurants will cook food to order again, instead of precooking massive quantities so that they can serve it quickly. People will go back to making french toast from stale bread that was considered "inedible" a few years before, and they'll realize it tastes good. Someone will make a large sum of money by starting a cooking show based on how to make "turned" food taste good.

A lot of what will happen will be necessary and long overdue. I don't believe there will be famines.

People on the ETS forum will smile inwardly, as this will all have been foretold and they will have been prepared.

But overall we will persevere. I think the chance of us going into a 20 year recession are plausible, although it will be more like the "new normal" than a recession.
Posted by: Glock-A-Roo

Re: Longterm trend -inflation - 02/05/10 10:28 PM

This issue is especially germane to those who use Dave Ramsey's methods of finance, specifically the "emergency fund". That fund has to be immediately liquid and is only to be used for real financial emergencies (medical bills, big home/car repairs, etc). Being immediately liquid means it will yield little or no interest, which means it will be eroded over time by inflation.

The slow loss of value due to inflation might be seen as the cost of the security provided by the emergency fund.
Posted by: Susan

Re: Longterm trend -inflation - 02/06/10 02:39 AM

I just heard on the radio today that Ohio will be out of funds for unemployment payments at the end of this month. Kentucky is already out of money and is borrowing from the Feds. California is probably just using IOUs...

But the 'big news' is that 'unemployment has slowed'. I think all that has happened is that some people have run out of unemployment and have fallen off the rolls, so they're not being counted.

The neighbors behind me (the ones with the dogs that killed my chickens) have moved out and abandoned their house, leaving a bunch of trash and an old car. The neighbors next door to me have moved out without saying a word, and there is a for-sale sign in the front yard today. The neighbor on my other side is living in his 25' travel trailer.

More houses for sale, more empty business storefronts. One has a series of signs on it: "For Rent", "For Lease", "For Sale", and "Take Your Pick".

"But don't worry, at least here in North America, healty food is very affordable. Beans, vegetables, rice, wheat, a whole chicken, etc...."

And much of our food is coming from the Midwest and California, and the rest is coming from outside the country. Add processing and transportation costs, delete a job and the Fed/State/County assistance programs, and then what?

Economic solutions seem to be just about as rigid as the laws of physics: There are no shortcuts, it only really works one way, you have to plan for long-term results, not just the short-term ones. All they are really talking about is fixing the job problem. The job problem is not the main problem, the housing problem is not the main problem, the economy is the main problem. Our government and the people who control them are looking for short-term shortcuts and ways to make profits. Until they really decide to settle down and fix the problems with the SYSTEM, I think it's all just going to get worse.

If we go into a major depression but the talking heads don't admit it, is it still a depression? YES! Remember the Emperor's New Clothes?

Sue
Posted by: thseng

Re: Longterm trend -inflation - 02/06/10 03:54 AM

Originally Posted By: Glock-A-Roo
This issue is especially germane to those who use Dave Ramsey's methods of finance, specifically the "emergency fund". That fund has to be immediately liquid and is only to be used for real financial emergencies (medical bills, big home/car repairs, etc). Being immediately liquid means it will yield little or no interest, which means it will be eroded over time by inflation.

The slow loss of value due to inflation might be seen as the cost of the security provided by the emergency fund.

Dave reccomends the emergency fund be in a money market fund (mine's in a so-called "high interest savings" account). This ought to more or less follow short term interest rates, so it should to stay about even with inflation. Granted, it is not where you will make your millions.

What's the alternative? A credit card or HELOC? Lines of credit may be closed just when you need them the most, especially nowadays.
Posted by: Art_in_FL

Re: Longterm trend -inflation - 02/06/10 03:56 AM

Originally Posted By: thseng
Inflation can only outstrip wages for so long. Sooner of later there has to be a correction, or there's no one left to buy anything and nothing to buy.

The correction can be large, sudden and painful or gradual, slow and painful.


IMHO people can adapt to slowly changing conditions. As things tighten look for families to move in together. During the 30s it wasn't uncommon for for three, sometimes four, generations to be under one roof. This may be the up side to the huge McMansions. Stuff the grandparents in one bedroom, and and the grand kids in another. Convert that golf course sized yard into a garden and the SUV, on blocks in the great southern tradition, into a potting shed.

What really hurts is, like falling off a cliff, the sudden stop at the end. In economics it is the sudden shocks that tears things up and causes the greatest pain.
Posted by: thseng

Re: Longterm trend -inflation - 02/06/10 05:42 PM

Originally Posted By: Art_in_FL
During the 30s it wasn't uncommon for for three, sometimes four, generations to be under one roof. This may be the up side to the huge McMansions.

Only problem is that there are fewer children and even fewer grandchildren.

Seems we're headed for a Demographic Winter
Posted by: Art_in_FL

Re: Longterm trend -inflation - 02/07/10 12:46 AM

Originally Posted By: thseng
Originally Posted By: Art_in_FL
During the 30s it wasn't uncommon for for three, sometimes four, generations to be under one roof. This may be the up side to the huge McMansions.

Only problem is that there are fewer children and even fewer grandchildren.

Seems we're headed for a Demographic Winter


The other side was that a lot of people with a spare room let out the space. Humans are social animals and coming together is our default response to stress. It is, on its face, more complicated with non-family but then again dealing with family is always fraught. A stranger may be more of a unknown quantity at first but you can always kick a stranger out. Your lame brother-in-law is safer initially but more difficult to deal with.
Posted by: Susan

Re: Longterm trend -inflation - 02/07/10 03:46 AM

Grouping together isn't necessarily a choice between strangers and family, the best may be friends. Who wants to go up against a set of armed Golden Girls? NOT ME!

What I worry about is some of those old people in care facilities.

Sue
Posted by: Glock-A-Roo

Re: Longterm trend -inflation - 02/08/10 03:58 AM

Originally Posted By: thseng
Dave reccomends the emergency fund be in a money market fund (mine's in a so-called "high interest savings" account). This ought to more or less follow short term interest rates, so it should to stay about even with inflation.


What kind of interest rates are you currently seeing on these types of accounts?
Posted by: benjammin

Re: Longterm trend -inflation - 02/08/10 02:58 PM

Inflexibility breeds insolvency.

A creative mind can find a solution to any problem given time, conditioning, and the proper motivation.

"Can't" means "Won't"

It is in our nature to choose the path of least resistance. Great men became great by going against their nature.

An excuse will buy nothing. An idea can save the world.

My monday morning zen zingers. I contend we still all have a choice, and it appears many have made theirs already.
Posted by: clarktx

Re: Longterm trend -inflation - 02/08/10 04:07 PM

I agree 100%. But as you said people have to go against their nature. I think most people have a tribal mentality even with our sophistication. What you described above is completely true but will only occur in a very small fraction of the population. Oh the humanity.
Posted by: benjammin

Re: Longterm trend -inflation - 02/08/10 05:58 PM

Yes. Sadly I feel we have been molly-coddled into a society that rejects challenge and expects entitlement. I watched "Zombieland" this weekend. I found it interesting what one character would go through for a twinkie. Some good lines in that movie, despite being rather simple minded most of the time.

We ought to post the rules list from that movie. I'll see if I can find it somewhere.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/13/10 11:24 PM

We feel the next survival situation we will encounter is an economic one. My wife and I are doing the same thing as some of you. We are buying hard goods, and paying down our house at an almost crippling rate. That knocks off 17 years and 45K in interest, and if all goes well, will insulate us from what is coming. With the national debt that has already accrued, taxes and interest rates will be high enough to change all of our lifestyles permanently. In the recession of the late 70's, the government printed more money, and as an example, the mortgage interest rate went to 24% in 1982 (that's the year I bought my first house). Anytime the gov't prints more money, the fed must collect it back through higher interest rates, and banks must follow suit. This keeps the value of the dollar from falling, and prices from skyrocketing (inflation). We are in a recession now, and the government is again printing more money. This is the scarey part...In the late '70's, they printed an extra 25% relative to the existing money supply. In 2009, they printed an extra 120% relative to the existing money supply. Do the math.....and be prepared.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/13/10 11:38 PM

Originally Posted By: ki4buc
[quote=hikermor]

Assuming 1955, US$0.75, that's US$5.75 per hour in 2007. First run movie at US$0.50, that's US$3.83 in 2007. As you can see, for some reason movies haven't kept pace...



That's because popcorn and two Cokes costs $15.99 at the theater now.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/13/10 11:49 PM

Originally Posted By: benjammin

That's how the free market system works. Seems awfully fair to me. I didn't choose a career I liked. I chose one I was darned good at and that had a significant future demand potential. Then I worked hard for a long time to become very good at it. If it was easy and enjoyable, more people would be doing it and the value would thus diminish.

So the simple solution to inflation is to beat enough people at the game that you can make sure your earnings increase at a higher rate than inflation does. Either that or hope you are lucky. As Burgess Meredith once said, you can hope in one hand and dump in the other and see which one fills first. Not everyone gets to win. We got evicted from Eden a long, long time ago.


This is what concerns me; the gov't TARP program has propped up failing businesses with unlimited borrowed money which we taxpayers are on the hook for. Other businesss have to compete against them using only their own resources. This is the opposite of the free market system. In the long run, no company is 'too big to fail.'
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/13/10 11:58 PM

Originally Posted By: martinfocazio
Originally Posted By: Eugene
f you had purchased $1,000.00 of Nortel stock one year ago, it would
now be worth $49.00.


Not quite true, as I did buy Nortel stock a while ago, and it's worth $0 now.

If you panic sold in 2008 and 2009, you then missed out on a rally of epic proportions.

I continued to contribute every month to my 401(k) - even as month after month, it lost more and more value. But each month, my dollars bought more of the devalued stocks, and then, on the turnaround, I watched as my holdings increased by 5 figures in a matter of days. The stock market is a 25 year + game, and it's only part of the game. 10 Year TIPS for some of your holdings, and a bit of bonds and some nice, juicy ultra-high risk stuff for money you can afford to waste - because it pays so well. Read "Black Swan" and enjoy.



I am worried about my 401k, and I'm honestly looking for someone to calm me down. Have you factored in the probability of interest rates in the 40% range, along with a devaluation of the dollar and a doubling of the current income tax rate? The national debt is approaching the GDP and confgress just votedto increase it. These scenarios would also cause another market 'correction' and look very likely to me.
Posted by: Susan

Re: Longterm trend -inflation - 02/14/10 11:06 PM

Here in WA, our governor, Queen Christine, is trying to find a way to increase every existing tax, and new ways to tax everything else.

One of the new taxes is ticketing people for going through yellow traffic lights. It isn't really illegal, but they're doing it anyway, as a source of revenue. If you don't show up to fight it, you have to pay the ticket. If you don't go to work so you can fight the ticket, you lose your job money for that day. Now they want to cut the yellow light times down to four seconds -- if you try to stop too fast to stop in time and get rear-ended, you're caught, if you can't stop in time, you're caught, and if you speed up to make it through, you're caught.

It's a pity they weren't that creative when they were SPENDING the money.

Sue
Posted by: UncleGoo

Re: Longterm trend -inflation - 02/15/10 02:32 AM

Originally Posted By: Susan
...One of the new taxes is ticketing people for going through yellow traffic lights. It isn't really illegal, but they're doing it anyway, as a source of revenue...
Sue

State law (RCW 46.61.055(2)(a)) specifically states that you MAY enter an intersection on a yellow light, until that light turns red:"Vehicle operators facing a steady circular yellow or yellow arrow signal are thereby warned that the related green movement is being terminated or that a red indication will be exhibited immediately thereafter when vehicular traffic shall not enter the intersection." In addition, the normal response time to a stimulus is between one and one and one quarter seconds for a normal driver. They cannot arbitrarily assign a length of four seconds to all yellow lights, without regard to the posted speed limit on that roadway, because four seconds may not allow a reasonably perceptive driver to react, AND STOP, at higher speeds, given the braking ability of the vehicle combined with the coefficient of friction of the roadway (I'll spare you the mathematics). Drivers who are rearended while attempting to stop, are victims of drivers behind them, who are violating RCW 46.61.145(Following too closely). This cannot be attributed to the changing of the light, as the drivers of the following vehicles should have left enough room for ANY emergency braking by the lead vehicle(e.g. a small child running into the roadway).
Posted by: Susan

Re: Longterm trend -inflation - 02/15/10 03:28 AM

Yes, and everyone seems to know it.

They're using it simply as a source of revenue, making up their own little rules as they go.

One of my rail crews says if you just show up in front of the judge, he/she will cancel the charges and the fine. If you don't/can't show up, you're 'admitting guilt', and KA-CHING! BUT it doesn't show up on your driving record. And since it's all done by camera, not live cops making a decision... *shrug*

They'll probably get some attorney one day and he'll fight it and win and they'll stop, but in the meantime they're making quite a bit of money at $124 a pop.

Western WA isn't exactly Mensa Country. It all sounds totally insane to me.

This must be where they got the idea...
6 Cities That Were Caught Shortening Yellow Light Times For Profit

Sue
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/15/10 11:49 AM

I am seeing the same thing. Instead of patrolling and attempting to prevent crime, the state and local cops are sitting in the median and trying to catch and tag speeders. The company I work for has experienced a huge increase in federal state and local public agency inspections. Fire, Agriculture, Health, Osha, BATF, Weights and Measures...all looking for fine money (which, I'm happy to say, has mostly eluded them in my place of employment).
Posted by: Susan

Re: Longterm trend -inflation - 02/16/10 04:06 PM

You know things are getting bad when...

Harley-Davidson Has It's First Loss in 16 Years

Sue
Posted by: benjammin

Re: Longterm trend -inflation - 02/16/10 04:43 PM

Okay, here's a little perspective on some things mentioned:

If you get a traffic ticket, there's a little thing called preponderance of the evidence, which basically translates to "guilty unless proven innocent". This means that it is on the perpetrator to prove to the court that the policeman that issued the citation is in error. If the cop says you ran a red light, unless you have a video camera in your car and filmed the condition of the light as you went through it, or you bring three witnesses to court with you that will swear you didn't run the light, you will lose.

Now you may say that isn't the same as getting a citation for running a yellow light. Well, here's the way that goes. If they issue a lot of yellow light tickets and they get contested often, then it is not much of a stretch for them to just say it was red instead. Since they are obviously willing to fraud the court on a yellow light citation, why not just take the fraud the extra step and call it a red light? You say that cops have more integrity than that. Well, cops like to get paid, and if it means the difference between a junior cop on the force having a job or getting laid off due to budget cuts, I am sure the state would have no trouble finding people who would be willing to work as a cop righting red light tickets all day long. This isn't to say all cops, or even most cops, will do such a thing or that cops in general aren't brimming with integrity, but I've watched how the system works, and if a municipality wants to generate revenue this way, it will be done. This applies to radar traps, parking violations, you name it. The government will get their cut one way or another. You can pass all the initiatives and referendums you can imagine, and elect all the politicians who make big campaign promises for reform you want, but government is the biggest business going, and the golden rule applies to them more than anyone out there; he who has the gold makes the rules.

As for a 401k or any other savings mechanism, prudence dictates that one should always face ANY investment strategy with a good deal of cynicism. It is not any different than taking your money to Vegas. All investments contain risk, and all are a gamble, even investments in the government. If you think that you can invest in anything and be assured of an adequate return, then you are preparing to fail.

My greatest asset, and the only one I find worthy of investing my greatest interest in, is my ability to outperform anyone else around me in whatever is paying the top dollar for my abilities. I am not the best at everything, I am not even the best at the things I do well, but I am willing to do things that others won't or can't, and that has real value I can parlay into gain today. I beat inflation and stupid government budgeting snafu's by finding out what is in great demand in the marektplace that I am capable of and then doing whatever I have to so that I can secure a position where someone is willing to pay me a premium for my services. Salesmanship is my greatest asset. Convincing people with money and a need that I can satisfy their need in exchange for some of their money is my greatest success. The next one is delivering on the deal so that my reputation is my bona fide for the next client. I never get fired, terminated, or laid off. I leave when it is time for me to move on and before my client has no further use for me. I don't ever expect to retire, so having a retirement fund is trivial. I save for the unexpected as my needs allow. I keep my debt to a minimum. I don't consider my situation unique; I suspect most people to be able to accomplish roughly the same or better than what I have. I am not worried about the market so much because no matter how bad things get, I am confident that I can always take care of my needs at least as well as anyone else out there, if not better than most. If things get so bad that no one can take care of their needs, then I doubt any amount of money I save now will be of much help at that point, but a can-do attitude might make a big difference.

There are (at least) two movie quotes I live by: "I don't believe in the no-win scenario" and "There are certain levels of existence we are (I am) willing to accept".
Posted by: Susan

Re: Longterm trend -inflation - 02/16/10 06:07 PM

Just out of curiosity, Ben... What is your plan under the conditions of runaway inflation (big-time)?

Re: 401-k retirements
Aren't all of these a situation where you take your money and put it in the stock market? Why would anyone put any money that they can't afford to lose in the stock market? The stock market is easily affected by rumor and whim, and can be easily manipulated. That's always been a puzzle to me.

Sue
Posted by: hikermor

Re: Longterm trend -inflation - 02/16/10 10:37 PM

Historically, the stock market has been one of the better ways of keeping up with inflation. Of course, you must think, use your head, and invest with care.

Most 401-k's (at least the ones with which I am familiar) allow you to expose your money to varying degrees of risk. Usually there is a nice conservative bond fund, right next to the stock straight from Las Vegas. The bond fund is where my dough is right now....
Posted by: ki4buc

Re: Longterm trend -inflation - 02/17/10 03:09 AM

Originally Posted By: Susan
Yes, and everyone seems to know it.

They're using it simply as a source of revenue, making up their own little rules as they go.
Sue



Make your brakes turn red on yellow so you don't pay green!
Posted by: Susan

Re: Longterm trend -inflation - 02/17/10 05:14 AM

"Make your brakes turn red on yellow so you don't pay green!"

I just can't seem to figure out how to stop the Suburban before the green light changes to yellow!

Sue
Posted by: benjammin

Re: Longterm trend -inflation - 02/17/10 08:11 PM

Given that most contemporary/traditional investment strategies are always frought with risk, it seems to me a better deal to simply make more money in time than inflation will devalue.

In volatile times when inflation is expected to increase quickly, I find that switching from one assignment to another affords me a great opportunity to negotiate a better deal on a regular basis allowing for inflationary adjustments. For instance, if I am presently making a $100k per year salary, and inflation goes up 25% this year (an egregious amount to be sure), I would simply seek another opportunity as quickly as possible and set my expected compensation level accodingly.

As I've said before, I consider my 401k and other financial investments a novelty. My hedge against inflation is having a commodity that is market-proof and negotiating a better deal as often as needed. If the market ever gets bad enought that I can't peddle my wares here, then our country is in an extremely dire situation, and I will probably end up doing what I do in China since they haven't the skill set to compete, and will have a huge need for my services there (they already do, but I don't need to pull that string yet).
Posted by: benjammin

Re: Longterm trend -inflation - 02/17/10 08:15 PM

Gonna be hard for them to take a picture of someone passing through a red or yellow light if the camera iris is burned out. If they really get that stupid then a $1,000 equipment purchase will be money well spent.
Posted by: Susan

Re: Longterm trend -inflation - 02/18/10 05:03 AM

"If the market ever gets bad enough that I can't peddle my wares here, then our country is in an extremely dire situation, and I will probably end up doing what I do in China since they haven't the skill set to compete, and will have a huge need for my services there..."

I am not understanding that last step, Ben. By the time something like that appears necessary to you, hasn't the S already HTF? This economic 'problem' (okay, 'disaster') is worldwide, not just us -- we're all going down together if we go.

Our government went for the final solution, printing a lot more money as a solution to the economic problem. Europe is doing the same. Japan and Greece are already in trouble. Why would China need your services when no one will be buying what they're selling?

Do you really see a happy ending for this problem? Not just for yourself, but for all of us? It looks awfully scary to me.

Sue

Posted by: LED

Re: Longterm trend -inflation - 02/18/10 07:25 AM

Keep in mind the government can print all the money it wants. If the banks aren't lending that money out, (they're not) inflation is not likely, yet. But you're certainly right. 2 years, 5 years, or 10 years, eventually we're gonna drive this bus right off the cliff. Crazy as it sounds though, there are some short term gains to be made in the stock market. Still kicking myself for not making lots of buys in Jan. of last year. If you make even $500 to $1000 on a trade and convert that money into something useful, it might be worth it. Just sayin.
Posted by: unimogbert

Re: Longterm trend -inflation - 02/18/10 12:51 PM

Originally Posted By: LED
If you make even $500 to $1000 on a trade and convert that money into something useful, it might be worth it. Just sayin.



Converting your govt money to something useful in the future is the key.

In Weimar Germany employers were paying employees twice daily.
At lunch they'd go out to try to buy something physical with the money before the value of that dose of money wouldn't buy anything at all. Do it again after work with another wheelbarrow load of bills.

Just think of the opposite side of that deal- why sell now when you can get double for the same potato tomorrow? But what will the potato farmer trade the bills for?

Not a stable situation.
Posted by: benjammin

Re: Longterm trend -inflation - 02/18/10 03:00 PM

Yes, I believe there is a ceiling to the escalation, and if we hit it, it could get bad all over. I was thinking progressively, but if global economics do go that foul, well, that's why a good portion of my investment portfolio is in blued steel, copper jacketed lead, a cadre of like minded and capable partners, and 40 acres out somewhere not on a map.

Besides, even in desperate times, there's a market for some items. Money may be worthless, but as long as there are resources to be collected, processed and distributed, there will be trade of one form or another. It pays to diversify a little. whistle wink
Posted by: Susan

Re: Longterm trend -inflation - 02/19/10 06:12 AM

LED, the banks say they ARE willing to lend it out to small businesses, but the small businesses aren't applying. And that makes sense to me: why get a loan and put your collateral in danger with the economy as unstable as it is?

The small business person can't control economic conditions, but they can be victimized by them.

The crazy politicians keep saying that if only they can provide enough jobs, it will fix the economy. They're holding a tiger by the tail and trying to force him to walk backwards, and don't see a problem. I would say they need to fix the problems with the economy first, and all the other improvements will follow more or less naturally. Presidents Hoover and Roosevelt tried the same thing that they're trying to do now, trying to create 'artificial' jobs to stimulate the economy. It didn't work then (they tried for 14 years with no success), and it won't work now.

"Those who cannot remember the past are condemned to repeat it" is something they must think doesn't apply to them. They probably also think they can repeal the Laws of Physics.

Sue
Posted by: Susan

Re: Longterm trend -inflation - 02/19/10 06:15 AM

Okay, Ben, I get it. wink It's always best to have a backup plan.

I was thinking that I was misunderstanding something. I am suspect that if things do get worse, they are apt to hit bottom with a very sudden THUNK! I would hate to think that you couldn't get home from China... sick

Sue
Posted by: Russ

Re: Longterm trend -inflation - 02/19/10 02:41 PM

Because I don't know what's really going to happen, (there is an incredible amount of manipulation going on in the markets), what makes sense is maybe not on their agenda. I see inflation coming like a freight train with no brakes cresting a hill. Those in charge have ruined the economy by taking us up this hill with uncontrolled spending by the trillions; once they run out of wiggle room and gravity takes hold, that train is going to accelerate out of control.

From what I hear, commercial real estate is next. (Apparently due to the way these loans are set up there is some stuff coming due and it's going to get ugly.) That may be the crest of the hill.

My crystal ball has been wrong so often, I keep my assets diversified hoping that some of those choices will work for me. I don't expect to win them all. It's about survival, not winning.

edited to remove a lot of unimportant trivia.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/20/10 03:38 AM

The only reason that I went with the 401k was that the company matched every dollar I put in with 50c. With the tax benefits at the time, there really was no way to lose. As the economy cooled recently, my company quit matching, and I quit contributing. I have the money split between funds of various risk levels in an attempt to minimize risk, and maximize returns. My fear now is that if taxes go way up, it will erode all of my gains (and even some of my contributions) in the 401k as I withdraw the funds for retirement. I'm considering converting it to a Roth IRA and pay the taxes now, at the current tax rate that I believe is lower than future tax rates.
Posted by: Susan

Re: Longterm trend -inflation - 02/20/10 04:05 AM

The manipulation by the Greedy Controllers makes it hard to know which way to jump. I think that's why so few people traded in their clunkers for high car payments, and why small business loans are available but businesses are scared to get them.

Sue
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/20/10 01:04 PM

I think the best insight into the future is to study the past. The same forces were at work in the 1920's and 30's and again in the late 70's as now. Having a working plan is a great comfort, but everyone's situation is different, due to geography, age, family considerations, occupation, etc. Here's what I am doing:

1. Prepare a (semi-portable) four week home survival outfit. We keep AA batteries, radios, AA lanterns, dry food, candles, 30 gallons of water, tarps and tents and other camping gear with tote bags and plastic tubs available. This covers long term weather, power outtage, and bug-out concerns. All of this fits in a space the size of a big closet.

2. Prioritize future economic needs. I think the easiest way to think about this is to imagine that your take home pay was suddenly reduced by half or more. Look at your durable goods: your home, your car, stove, refrigerator, shotgun...... With your reduced income, what would you fervently wish you had purchased, payed off or replaced when you had the money? Do it now.

3. What skill or hard goods would you have to barter with to obtain goods and services that you needed if your income was reduced? A lot of people buy gold for this purpose, but it is too expensive for me. Farmers have it made in this category, as they can barter with food. People who don't have access to land will have to decide on a commodity that will be in short supply, affordable now, is portable, and of value to anyone, and stock up on it. World War II economic conditions in Europe provide a lot of insight into possible future scenarios.
Posted by: Russ

Re: Longterm trend -inflation - 02/20/10 01:28 PM

We payed off the mortgage here due to the uncertainty of the next few years. Neither of us liked the way the economy was going and even with the theory that during inflationary times it is best to take a loan and pay it off with cheaper future dollars, what if the economy tanks and you can't make even the cheaper payment?

We decided that this could be the rainy day that rainy day funds are for and we payed off the mortgage. Major hit but monthly expenses immediately dropped and the future foreclosure threat is now gone.
Posted by: Russ

Re: Longterm trend -inflation - 02/20/10 02:07 PM

A little light reading for a current events update. IMF Gold Sales, Fed Rate Hike, China, Soros and Inflation. IMO this is good analysis of what has happened recently and to where it points.

What if?. . . China could easily take a few $billion of the U.S. Treasuries they are holding and buy the IMF's 191 tons of gold. That would draw a solid support line under the price of gold in the neighborhood of $1100/troy oz.

If China accumulates the amount of gold they indicate, they will have a recently documented holding of >/= the U.S. Treasury's supposed 8000 tons (no independent audit since before Nixon was in the Oval Office). They may be attempting to replace the dollar as the reserve currency -- really not good. Hold on, the ride could get bumpy.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/20/10 08:04 PM

Originally Posted By: Russ
We payed off the mortgage here due to the uncertainty of the next few years. Neither of us liked the way the economy was going and even with the theory that during inflationary times it is best to take a loan and pay it off with cheaper future dollars, what if the economy tanks and you can't make even the cheaper payment?

We decided that this could be the rainy day that rainy day funds are for and we payed off the mortgage. Major hit but monthly expenses immediately dropped and the future foreclosure threat is now gone.


We are doing the same thing for the same reasons. Don't have the funds to do it all at once, but with an additional amount automatically added each month, we will take 14 years and almost $50,000 of interest off of the original fixed rate 30 year mortgage. It will be payed off in 8 years instead of 22. We are playing it by ear for another 6 months. If it looks dicey at that time, we will liquidate our 401k (at the current tax rates) and pay off the mortgage.
Posted by: Susan

Re: Longterm trend -inflation - 02/21/10 02:14 AM

"I think the best insight into the future is to study the past."

You are totally correct. Everything that is happening now has happened before. Our government is attempting to 'fix' the problem using the same backwards, ineffective methods that Hoover and Roosevelt used back in the 30s and early 40s. They didn't work then, and they won't work now. Instead of fixing the economy, they are attempting to bulldoze their way by trying to change the results (unemployment, bank failures, housing foreclosures).

Unfortunately, the people of the Great Depression lived closer to the land than now, with about a third of the population living on farms. In 1935 there were nearly 7 million farms, spread all over, but now there are fewer than 2.5 million in centralized areas and trucked about 1,000 miles -- heavily dependent on fossil fuels and infrastructure.

If we end up in a 'Greater' Depression, the results are going to be mind-boggling, and I'll bet the death rate from starvation is going to be tremendous.

As I see it:
1) Do your best to keep your home, or be prepared to create one, even if you have to move your family/friends into an abandoned one.
2) Learn to grow at least some of your own food. There is a fairly steep learning curve on this, it's best you get started now. Encourage your neighbors to do the same, with different crops, then trade. Plan food harvesting and year-round storing.
3) Check out rainwater harvesting and storing.
4) Keep everything crossed: fingers, toes, eyes.

Sue
Posted by: LED

Re: Longterm trend -inflation - 02/21/10 02:47 AM

Not only are business' reluctant to take on new debt, banks have tightened their loan requirements, making it even more difficult to borrow. Even in good times banks require mounds of paperwork that only lawyers can sort through, seriously. It may seem like a lot, but its not uncommon for a small business to spend upwards of $200,000 for remodeling, repair, and maintenance, especially in industries like food service, where equipment wears out fast. They're kind of the canaries in the coal mine since they operate on more of a cash basis than most other business and employ more people than any other industry. Right now, sales seem to be down for everyone. My question is, who in their right mind is gonna hire more employees when when sales figures are declining? Sorry, but until a recovery can be proven by an increase in sales, no business in their right mind would hire more employees than they need, much less take on new loans.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/21/10 04:59 AM



Unfortunately, the people of the Great Depression lived closer to the land than now, with about a third of the population living on farms. In 1935 there were nearly 7 million farms, spread all over, but now there are fewer than 2.5 million in centralized areas and trucked about 1,000 miles -- heavily dependent on fossil fuels and infrastructure.

If we end up in a 'Greater' Depression, the results are going to be mind-boggling, and I'll bet the death rate from starvation is going to be tremendous.

[/quote]

This may be the time to stock up on seeds. There were crops that were common then and kept a long time without refrigeration. I'm thinking of turnips, rutabegas, and parsnips. The home I grew up in had a root cellar, and there were always potatoes and fat carrots in there.
Posted by: Susan

Re: Longterm trend -inflation - 02/22/10 05:58 AM

Very true, Byrd!

But when you're buying seeds, you might want to skip most of the ones in the racks at the local stores (there are some exceptions), as their germination rate isn't usually the best, and some of the stuff doesn't grow well under your local conditions.

Get some of the better seed catalogs and study their plant descriptions. Some varieties are best for northern or southern gardens, some store very well and others are better to eat right away, some are hybrids (you have to buy more of the same kind of seed to get the same results because they don't 'breed true') and some are open-pollinated (OP) that you can save the seeds from, once you learn how. Some plants are better for growing in fall/winter in milder areas or in an unheated greenhouse, and others will simply croak.

Some good seed and plant catalogs that I have seen:

Territorial Seed www.territorialseed.com
Bountiful Gardens http://www.bountifulgardens.org
Johnny's Selected Seeds www.johnnyseeds.com
R.H. Shumway www.rhshumway.com
Nichol's Garden Nursery www.nicholsgardennursery.com
Raintree Nursery (food plants) www.raintreenursery.com
Burnt Ridge Nursery (food plants) http://www.burntridgenursery.com/
Seeds of Change www.seedsofchange.com
Pinetree Garden Seeds www.superseeds.com
Bear Creek Heirloom Seed www.rareseeds.com
Vesey's Seeds www.veseys.com
John Scheeper's Kitchen Garden Seed www.kitchengardenseeds.com
Vermont Bean Seed Co. http://www.vermontbean.com/
Fedco Seeds http://www.fedcoseeds.com/
Filaree Farm (lots of garlic) http://www.filareefarm.com
Heirloom Tomatoes http://www.heirloomtomatoes.net/
Landreth Seed Co. http://www.landrethseeds.com/
Native Seeds/SEARCH http://www.nativeseeds.org
Ronninger's Potato Farm http://www.ronnigers.com/
Sand Hill Preservation Center http://www.sandhillpreservation.com/
South Carolina Foundation Seed Assoc. http://virtual.clemson.edu/groups/seed/heirloom.htm
Southern Exposure Seed Exchange http://www.southernexposure.com/index.html
Victory Seeds http://victoryseeds.com/

There is also the Garden Watchdog service, that rates sources of garden seeds and equipment: http://davesgarden.com/products/gwd/


Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/22/10 11:25 AM

Susan,

Wow, you have done your homework. I'm going to start looking through the catalogs and obtaining some legacy variety seeds that I can keep in the freezer.
Posted by: Russ

Re: Longterm trend -inflation - 02/22/10 03:19 PM

Not something you can do after the SHTF. . .

'Buy farmland and gold,' advises Dr Doom
Quote:
The world’s most powerful investors have been advised to buy farmland, stock up on gold and prepare for a “dirty war” by Marc Faber, the notoriously bearish market pundit, who predicted the 1987 stock market crash.

The bleak warning of social and financial meltdown, delivered today in Tokyo at a gathering of 700 pension and sovereign wealth fund managers.

Dr Faber, who advised his audience to pull out of American stocks one week before the 1987 crash and was among a handful who predicted the more recent financial crisis, vies with the Nouriel Roubini, the economist, as a rival claimant for the nickname Dr Doom. . . .

Do it now or don't.
Posted by: clarktx

Re: Longterm trend -inflation - 02/23/10 07:21 PM

its interesting to talk about teotwawki like that but I have never felt that it is a likely thing where I live. I live near a lot of farmland, horse country, etc. Famine and such is a possibility in many "unsustainable" locales but I still feel its unlikely. our country wastes amazing amounts of resources. gloom'n'doom predictions often assume that we are running on fumes which has never been the case.

if you are worried about it, great questions to ask yourself include:
Did people live here 100 years ago? if not, why not? Did they thrive? what challenges did they have with each season?

History is a wonderful teacher.

Speaking of history being a wonderful teacher...

I think that this article deftly summarizes our events. The very amusing thing is that it was written 8 years ago about Japan. Someone else on this forum mentioned that a 15 year recession like Japan's is far more likely. After doing some research, I tend to agree.

In the article, you could replace "Japan" with "USA" and it would be right on the money.

That being said, i think everyone should consider getting seeds and chickens, which I've done. I only kept the chickens for 9 months, but better to become familiar with them now... the seeds are in windowsill milk boxes starting to sprout even as I type!
Posted by: Susan

Re: Longterm trend -inflation - 02/23/10 11:45 PM

"if you are worried about it, great questions to ask yourself include: Did people live here 100 years ago? if not, why not? Did they thrive? what challenges did they have with each season?"

You're just skimming over the top of the problem.

Seventy years ago, most Americans knew how to do things that were pertinent to survival that most don't have a clue how to do today.

A large percentage of people in this country today would be unable to do things such as grow their own food, preserve their food, milk a cow or goat, harvest seed for the next crop, prepare a brooder for chicks, cut firewood without a chainsaw, build a year-round shelter family without power tools, butcher a deer, render fat, make soap, bury a body, or bake a loaf of bread.

Just imagine suddenly being put into an America without fast food, without the internet, without cell phones, without daily food delivery to your local market, without fuel for your $50,000 pickup, without (OMG!) Starbucks, without WallyWorld's daily deliveries of entire trainloads of junk from China.

How would people deal with their kids who suddenly find themselves without their video games, television and FaceBook?

The Americans of today are not the same Americans of the 1930s.

Sue
Posted by: Am_Fear_Liath_Mor

Re: Longterm trend -inflation - 02/24/10 01:19 AM

Quote:
Just imagine suddenly being put into an America without fast food, without the internet, without cell phones, without daily food delivery to your local market, without fuel for your $50,000 pickup, without (OMG!) Starbucks, without WallyWorld's daily deliveries of entire trainloads of junk from China.

How would people deal with their kids who suddenly find themselves without their video games, television and FaceBook?


A trip to the local Irish Pub (about 50 yards from my workplace) for a Guinness (this is allowed because they have been making it for a couple hundred years) in the town sounds about right or some sea fishing at Auchmithie or a round of golf at Carnoustie. I've been to McDonalds twice now in the last 2 years and wasn't too impressed. KFC (the horror the horror). sick Never been in a Starbucks. What's Facebook? Less cars on the road, what a tremendous idea, I can get back to enjoying my cycling as it was in the late 1980s/early 1990s (but all the potholes the traffic has caused need to be repaired though). No Internet. Teenage boys will just have to be content with finding used copies of Mayfair found in the local park. At least it will get them out of the house instead of slowly becoming clinically obese sitting in front of the computer games consoles eating pizza. wink TV should be restricted to 3 TV channels and should close down at night and only start again in the afternoon.

http://www.youtube.com/watch?v=vQyxkC_Mg90



Celebrity stories on the news media should be legally banned. (these stories aren't news, just another waste of everyones time).

Apparently humanity just about make it through the later half of the 20th century (a lot of close calls though). In many ways the beginning of the 21st century is perhaps actually less optimistic even with all the toys and gadgets like GPS receivers, Laptops, Mobile & iPhones and Ipads etc. (must be the drip drip effect of those news media celebrity and lifestyle stories)



Posted by: clarktx

Re: Longterm trend -inflation - 02/24/10 02:50 AM

The "golden hordes" (Rawles) that you are referring to are certainly a consideration... I did get kinda thrown because you really digressed a lot into how "people ain't what they was". But now i think what you mean is that you don't want to be in the path of the golden hordes. Certainly that can be a part of it depending on the situation.

However, the golden hordes are more a factor when a single large event happens. I was saying that I think a "nonevent" is more likely, probably in the form of a very long recession, which wouldn't create the same kinda golden hordes that you would see from an "event".

In the event of a 15 year recession, you want to have a place that can sustain you as much as possible, maybe a farm like Russ is saying.

It really all depends on what you feel is "the most likely". A lot of popular survival fiction goes into the whole cannibalism stuff. I'm afraid what we'll be dealing with will be a lot less interesting than that...
Posted by: benjammin

Re: Longterm trend -inflation - 02/24/10 02:28 PM

This brings up another stress related question. In an event, you would expect self termination to be common. I wonder, if the stress of a 15 year gradual recession is enough to acutely raise the suicide rate, or if people can learn to live with less and adapt to a different MO.
Posted by: Russ

Re: Longterm trend -inflation - 02/24/10 02:41 PM

Ignore the Illusion of Spring is an interesting read. This guy is "a deflationist".
Quote:
. . .Taking the debt out of the system is in itself a deflation process. You can see it in falling housing prices. As debt comes out of the housing and mortgage markets, it deflates prices. We're going to see the same in stock prices. Wealth is being reduced considerably, and that is deflationary.

A lot of people who argue for inflation say that all the money being printed eventually has to go through the banks back into the economy. But it's like being on a treadmill. You running as fast as the treadmill goes, but you don't get anywhere. The Federal Reserve is printing copious amounts of money trying to re-start the economy. Unfortunately, the rate of debt being taken out of the system eventually will overwhelm their ability to do that.. . .
We'll see. He may be right in that initially we will have a period of deflation, but later inflation has got to step up.

Just my $.02, $.03, $.04. . .$2 wink
Posted by: Blast

Re: Longterm trend -inflation - 02/24/10 04:08 PM

Originally Posted By: benjammin
This brings up another stress related question. In an event, you would expect self termination to be common. I wonder, if the stress of a 15 year gradual recession is enough to acutely raise the suicide rate, or if people can learn to live with less and adapt to a different MO.


I believe it did in Japan, though there are also cultural reasons for that.

fake edit: according to Wikipedia the Japanese economy has lead to a huge number of suicides.

-Blast
Posted by: Art_in_FL

Re: Longterm trend -inflation - 02/25/10 04:43 AM

An interesting take on deficits, market capacity, and how things interact.

http://www.truthout.org/the-budget-deficit-crisis-crisis56749
Posted by: thseng

Re: Longterm trend -inflation - 02/25/10 02:01 PM

Well, I for one am looking forward to the day when Keynesianism takes its rightful place on the ash-heap of history right on top of Collectivism and Feng Shui.

As the article points out, the left thinks the stimulus was too small and the right thinks it was too big. Please note that no one thinks the goverment got it right!
Posted by: Russ

Re: Longterm trend -inflation - 02/25/10 02:34 PM

As I see it the bail-outs have prevented the capitulation that is needed before the economy can really rebound. Wall Street's bad moves were rewarded with major government bail-outs, so they are doing the same thing over again. That's what happens when you reward bad behavior. (When your new puppy chews your shoes do you say "good boy" and give him a treat? Only if you like going barefoot.) Companies and institutions that should have gone bankrupt were instead propped up on the taxpayer's dime. At this rate we'll all be barefoot soon.

Word I have (third hand -- RE broker > investment broker > me) is that within a couple months we'll see commercial real-estate take a major hit and then look for a follow-on residential crunch -- apparently bills are coming due. Everyone looked at their calendars and expected it to be over by now; it's not over.
Posted by: Susan

Re: Longterm trend -inflation - 02/26/10 01:51 AM

"...I for one am looking forward to the day when Keynesianism takes its rightful place on the ash-heap of history..."

AMEN!

"Wall Street's bad moves were rewarded with major government bail-outs, so they are doing the same thing over again... Companies and institutions that should have gone bankrupt were instead propped up on the taxpayer's dime."

Their attitude was (and still is) that if someone has to pay, it would either be Wall Street and the Banking industry, or all us little people. The decision was made.

And NO, it's NOT over.

Sue
Posted by: nursemike

Re: Longterm trend -inflation - 02/26/10 03:11 AM

It seems so strange to me. We are quite clearly being betrayed by elected officials, banks, and, god help us, toyota. We are a prodigiously well-armed populace, well-informed, with communication capabilities that previous generations could not imagine. Where is the populist revolt? Why aren't we seeing a replay of the french revolution?
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/26/10 03:23 AM

Originally Posted By: thseng
Well, I for one am looking forward to the day when Keynesianism takes its rightful place on the ash-heap of history right on top of Collectivism and Feng Shui.

As the article points out, the left thinks the stimulus was too small and the right thinks it was too big. Please note that no one thinks the goverment got it right!



Alas, I fear that won't happen as long as progressive/liberal types believe that as 'post modern' humans one evolutionary rung above us God fearing, gun toting, mud sloggers, they are duty bound to protect us from our base instincts and impulses.
Posted by: Art_in_FL

Re: Longterm trend -inflation - 02/26/10 04:07 AM

Hate to break it to you but if it wasn't for the bail-outs the economy, as we know it, wouldn't exist. Like it or not almost the entire economy is operating with a purchase on credit and working a JIT (Just In Time) supply system. If the banks would have folded the entire credit system would have folded.

No major business, and very few small ones, maintain enough cash on hand to run for more than a few days. Which means that if the credit system tanks all the grocery stores close their doors in three days. When the gas station runs out of gas they can't order more.

Contractors typically make payroll by maintaining a loan that tides them over until the contract pays off, either quarterly or upon a set stage of completion. If the credit system fails the loans either come due immediately or, if collateral covers them, they complete their term but cannot be renewed pending more collateral. This is where you see small time contractors selling off their personal assets to cover payroll or selling off the tools used to do business.

In essence the entire US economy would have frozen solid. Estimates vary from 25% to 75% unemployment inside of a month.

Contemplating collapse:
http://cluborlov.blogspot.com/2008/02/five-stages-of-collapse.html

Of course if the economy locks up the guys who got us into this would suffer. They would shed a bitter tear as they flew off to Aruba on their Gulfstream. Yes, they would lose their five homes and most of their physical assets but most of their money is off shore.

What your missing here is that the nation is like a ship. No matter how incompetent and feckless the passengers in first class may be they will always get a seat in the lifeboats. You and I, down here in steerage, are the first to get wet and drown. Sure I could live off of stored food, wild game and danelion greens but it is a misserable life. I'm getting too old to think roughing it is fun. And there is no guarantee we rebuild. There are conditions that can slide and just keep on sliding.

I would love to see the financial geniuses who got us here suffer. Allowing the ship to sink so those who are to blame are punished sounds good. A noble act to maintain justice and accountability. But are you really willing to drown so that the owners of JPMorgan have a bad day?

They set up the system so that they couldn't lose. In theory it shouldn't be possible for credit and market system to fail. Greenspan and all the other Randians had accepted on faith that a free market would always self-correct to optimize resource allocations. This was based on the idea that investors are rational actors. That people would always do the right thing with their own money. That people can see through scams and bad actors would be shut down before they could seriously effect the markets.

The thing is that, as anyone following cognitive sciences knows, people are not rational actors. That the wisdom of crowds, and the wisdom of markets, works fine right up until it fails to work at all.

Of course the question comes around to why these financial shenanigans have so much effect. Used to be, back in the 60s, we had a fairly diversified economy. If the financial sector failed we could ride out the storm working in manufacturing, or farming or industry. It would have worked that way except that in the mid and late 70s we started to consolidate. They aren't separate any more. They are all combined into huge corporations and all interactions are controlled by finance. Finance is better than a third of the national economy.

Free markets sound good but even if they work like a Randian dream there has to be actual competition. Walk into the local big box store and you see tooth and nail competition, right?:

"In the health aisle, the vast array of toothpaste options on display is mostly the work of two companies: Colgate-Palmolive and Procter & Gamble, which split nearly 70 percent of the U.S. market and control even such seemingly independent brands as Tom’s of Maine. And in many stores the competition between most brands is mostly choreographed anyway. Under a system known as "category management," retailers like Wal-Mart and their largest suppliers openly cooperate in determining everything from price to product placement."

Read about consolidation and the effects:
http://www.washingtonmonthly.com/features/2010/1003.lynn-longman.html




Posted by: Russ

Re: Longterm trend -inflation - 02/26/10 04:43 AM

Originally Posted By: Art_in_FL
Hate to break it to you but if it wasn't for the bail-outs the economy, as we know it, wouldn't exist. . . .
Well yeah, that's the point. We're giving a treat to the guys that chewed our shoes. It's not like someone else wouldn't have stepped in and picked up the pieces.
Posted by: LED

Re: Longterm trend -inflation - 02/26/10 06:17 AM

Originally Posted By: Byrd_Huntr
Alas, I fear that won't happen as long as progressive/liberal types believe that as 'post modern' humans one evolutionary rung above us God fearing, gun toting, mud sloggers, they are duty bound to protect us from our base instincts and impulses.



Its not a left/right, liberal/conservative thing. The political class has one direction. More. Government grows, rights recede, period. And of course cable news and talk radio do their best to make everyone think we're an irreconcilably divided electorate. Truth is, middle class conservatives and middle class liberals have far more in common with eachother than they do with any members of the political class. People don't want to believe that though. They'd rather be fooled by the illusion of progress whenever their team is in power. I suppose its always been that way though.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/26/10 10:51 AM

Originally Posted By: Art_in_FL
Free markets sound good but even if they work like a Randian dream there has to be actual competition. Walk into the local big box store and you see tooth and nail competition, right?:


Precisely why small business has been and will always be the jewels of freedom and capitalism.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 02/26/10 11:09 AM

Originally Posted By: LED
Originally Posted By: Byrd_Huntr
Alas, I fear that won't happen as long as progressive/liberal types believe that as 'post modern' humans one evolutionary rung above us God fearing, gun toting, mud sloggers, they are duty bound to protect us from our base instincts and impulses.



Its not a left/right, liberal/conservative thing. The political class has one direction. More. Government grows, rights recede, period. And of course cable news and talk radio do their best to make everyone think we're an irreconcilably divided electorate. Truth is, middle class conservatives and middle class liberals have far more in common with eachother than they do with any members of the political class. People don't want to believe that though. They'd rather be fooled by the illusion of progress whenever their team is in power. I suppose its always been that way though.


I agree with you, but you're talking about the large and moderate center, of which I am a member. I'm referring to the far end of the spectrum. Economic survival cannot be ensured until megalithic business and government alike is beaten back into it's proper place.
Posted by: benjammin

Re: Longterm trend -inflation - 02/26/10 03:14 PM

Art,

I would tend to agree with you for the most part, but for the one glaring inequity; that being that we have turned to the worst of the worst offenders to fix what was broken. The federal government has been and will continue to be the most inefficient, bureaucratic, incompetent, self serving organization in the free market, both as supplier and consumer. To have to turn to them as our only salvation indicates we have lost the war already, and the bailout did nothing but delay the inevitable, and quite probably make the eventual outcome that much worse.

We haven't avoided a calamity, we've only forestalled it, and the premium we are going to pay for that little respite will likely compound the adverse effects of tanking our economy by perhaps an order of magnitude now. By allowing our government to sell out our GDP as they have, we have converted what would've been a burden born on the backs of today's workers and extended it to encompass the lives of our children's children. In a very short time from now, we will be paying more in interest on our debt than the whole of the remaining budget, and more than our GDP. How do we recover from that? The answer is that we won't. It is fatal, and the most likely outcome will be that, just like the ruble and 1980s mexican peso, our dollars won't be worth the paper they are printed on.

Even if the current government were willing, I doubt there's anything they can do now to prevent our collapse. When the rebound from the bailout finally hits (and you can't expect to put that much more money into circulation and not have it seriously devalue the currency) and inflation takes off, bartering will be all that is left for us simple folks to get by on. That, and whatever you have stocked up beforehand. It won't be a temporary hit we take. I fully expect to die broke and in debt.
Posted by: thseng

Re: Longterm trend -inflation - 02/26/10 04:23 PM

This is getting a little too hot for ETS. Perhaps we should take this to PM?
Posted by: Blast

Re: Longterm trend -inflation - 02/26/10 05:37 PM

Okay folks, I have a hose and a stray cat, don't make me combine the two.

-The Sheriff
Posted by: tomfaranda

Re: Longterm trend -inflation - 02/26/10 06:39 PM

"... a hose and a stray cat ..." hmmm, must be a Texas saying
Posted by: Susan

Re: Longterm trend -inflation - 02/26/10 07:28 PM

My last word on this thread: whatever the people in power see fit to do, the results are going to be bad, so PREPARE as best you can.

Sue
Posted by: benjammin

Re: Longterm trend -inflation - 02/26/10 09:10 PM

and for after the hose, I have a spare roll of duct tape, LOL.
Posted by: Russ

Re: Longterm trend -inflation - 02/27/10 01:02 AM

more light reading -- Warning of ‘Financial Meltdown’ - US Senator Gregg on exit

The US is heading for a debt-driven “financial meltdown” within five to seven years, according to Judd Gregg. . .

In a robust and at times testy video interview for the Financial Times’s View from DC series, Mr Gregg also complimented China for showing rising alarm about the US’s mounting levels of public debt.

“We have had China say that they are looking for other places to put their reserves and that is probably a smart decision on their part,” said Mr Gregg, who will not seek re-election in November.“So the warning signs are pretty clear and the path is unsustainable and, at this point, unless we take different actions, unavoidable.”. . .continues
Posted by: LED

Re: Longterm trend -inflation - 02/27/10 09:22 PM

This article highlights something intersting. There used to be a time when savings were encouraged and living within your means was the norm. Not so today. I understand the economic theory underlining why they would say this, but it still doesn't make sense. Watch out frugal savers, the world's economists are coming for you.


Quote:

A growing number of economists now say that must change to ensure the euro's survival. If Greece must slash spending and put its books in order to restore faith in the euro, then Germans must also begin to consume more of what Germany and its neighbors manufacture.

The economic imbalances in Europe underscore a broader global problem, the solving of which President PHRASECENSOREDPOSTERSHOULDKNOWBETTER. and others have called key to laying a path to sustained growth in the wake of the financial crisis. They argue that nations like Germany, China and Japan must do more to open the wallets of their consumers, who have some of the highest savings rates in the world, just as nations like United States, Britain and Greece must begin to export more while weaning themselves off the kind of credit-fueled spending sprees that have generated the economic bubbles of recent years.


http://www.washingtonpost.com/wp-dyn/content/article/2010/02/27/AR2010022701421.html





Posted by: clarktx

Re: Longterm trend -inflation - 03/04/10 01:50 PM

Thats a good article.
Here is the latest on walmart, which is actually highlighting deflation, not inflation.

I think longterm trend-inflation is a very long term thing.

same store sales are down, and deflation is being blamed for part of that.

The article about Japan's economy, which I was quoting earlier, said that this is what happened there too.
Posted by: Dagny

Re: Longterm trend -inflation - 03/04/10 03:28 PM

For years there was much bemoaning in academia and government that Americans' saving rate was abysmal.

But our economy is 70% consumer-driven.

This past year Americans have dramatically altered their behavior -- much higher saving rate and significant paying down of household debt.

And that worsens the unemployment situation.

Consumer confidence tanked last month and home sales in January were the lowest in a half-century. GDP at the end of 2009 finally went into positive territory in a significant way but in the 4th quarter that was mostly a consequence of replenishing inventories that had been drawn down in the previous quarters.

A rocky road ahead for America's workforce, probably for at least a few years. The last economic bubble is still deflating.

Deflation does seem the greater near-term threat to the economy. Inflation will surely shoot up at some point in the next several years.

If the government would exercise even a modicum of restraint when the economy next begins a sustained expansion then we could begin to get a handle on the deficits.

Posted by: Am_Fear_Liath_Mor

Re: Longterm trend -inflation - 03/04/10 03:57 PM


Quote:
And that worsens the unemployment situation.


The public need to be educated on this one and the root cause eliminated to improve employment prospects for everyone.

I am really surprised that the recent Senator that held up the extension of unemployment benefits for nearly one million Americans after they had run out after 6 months hadn't taken note of the following;

http://www.youtube.com/watch?v=DK1nwC59-JQ

Sometimes the unemployed just need a little nudge to solve the unemployment situation. wink

http://www.youtube.com/watch?v=LVfvYiWcA-E&NR=1

Posted by: Art_in_FL

Re: Longterm trend -inflation - 03/05/10 03:28 AM

A bit on the role and benefits of unemployment insurance.

http://moneywatch.bnet.com/economic-news...d-benefits/513/
Posted by: Dagny

Re: Longterm trend -inflation - 03/05/10 04:21 AM

There are two fundamental aspects to the unemployment equation: jobs lost and job creation.

What's striking about this recession, compared to other recessions, is the dearth of job creation since the end of 2008. In the 1st Quarter of 2009, 50,000 fewer jobs were lost than in the 4th Quarter of 2008. But the unemployment rate shot up because there were 1 million fewer jobs created in 1stQ 2009 than 4thQ 2008. Half a million fewer jobs were lost in the 2nd Quarter of 2009 than in Q4 2008. But there were also over 300,000 fewer gross jobs created in Q2 2009 than in Q4 2008.

The job loss figures are dramatically improved from where they were a year ago when we were losing 600,000+ jobs a month. We're now teetering around the point where we should go into positive territory in the next few months, maybe next month. But the expectation for Friday's release of the initial monthly employment figures for February is that the number will again be negative. Though not as horrible as last summer or spring. We'll know in a few hours. And then the numbers will be revised again in a few weeks.

Lack of job creation is the problem. It's nowhere near where it needs to be. We can speculate about why. Credit is still relatively tight but, moreover, there's an aversion to debt. Companies have been hoarding cash for the past year. Employers have varying views of future trends in consumer spending, taxation and regulatory burdens and other factors that affect costs.

Two million unemployed have given up looking since last May so they aren't factored into the current unemployment rate, which would be well over 11% if the labor participation rate hadn't dropped 2% in the recession.

The officially unemployed have now been out of work -- on average -- for over six months. That shatters the records since this particular data first started being collected in the late 1940s. In normal times, unemployed persons are out of the workforce for an average of 8 weeks before they find a new job.

Our economy needs to generate, on average, over 150,000 jobs each month just to absorb the constant new entrants into the workforce. We're going to need 10 million new jobs to get back anywhere near full employment. Nearly all of that has got to be private sector. We'll need three or four years of 4% or more GDP growth to accomplish that.

Even when the economy is considered to be very strong, there's a lot of churn in jobs. Millions of jobs are lost, in good times. Some businesses fail, others layoff. People quit. But there is nearly always a lot of job creation going on. Mostly in small businesses and young businesses. Nearly all the net new job creation in the past 25 years was by businesses less than five years old.

Employment figures are always a lagging indicator. The Fed released the latest "beige book" and there are signs of modest improvement in 9 of the Fed's 12 regions. Manufacturing figures are indicating growth. But until job creation is bringing millions of people back into the workforce, there will be significant downward pressure on prices.

I'm the eternal optimist when it comes to this country. It's going to be a slow slog but we'll come out of this, eventually.

I dare not say much more lest I teeter on the political.

The unemployment rates for more educated and skilled workers are significantly lower than the overall unemployment rate. So if you can burnish your pedigree and skills, now would be a very good time to do so.
Posted by: Russ

Re: Longterm trend -inflation - 03/05/10 01:07 PM

Originally Posted By: Dagny
. . .I dare not say much more lest I teeter on the political.. . .

There is a point where a survival discussion does need to go political, but we don't need to name names. The subject of inflation is tied to monetary policy and that is political.

Jobs were created, but they were/are in the public sector and consume funds rather than create wealth. Jobs which will actually be a positive for the GDP were not created. Until the private sector has the confidence to take risk and lose the aversion to taking on debt, we are going to stagnate. We may not be able to recover until a number of personalities change in DC. Dagny needs new neighbors.

Edit:
Just a few quick headlines from Drudge at this moment in time:
9.7%... 36,000 JOBS LOST IN FEB...
Unemployment Rate Including Discouraged Workers Rose To 16.8%...
Federal pay ahead of private industry...

The last article is well worth the read.

Posted by: Susan

Re: Longterm trend -inflation - 03/06/10 02:10 AM

"Until the private sector has the confidence to take risk and lose the aversion to taking on debt, we are going to stagnate."

The private sector has no control over how our economy is being handled. With the number of private businesses that have failed in the last year, expecting others to put themselves in the same condition is ridiculous. Loans require collateral. Small businesses do not control a manipulated economy -- our economy controls the businesses.

The people who have brought this country to its knees haven't changed a single thing.

Sue
Posted by: Russ

Re: Longterm trend -inflation - 03/06/10 02:07 PM

Very good tutorial on money at Money As Debt on YouTube. Part 1 is an intro to banking through a (fictional) story. Part 2 gets into why money is in fact debt. Worth the time to watch.

---------------------------------------------------
"Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves."
Money and Wealth in the New Millennium, by Norm Franz.
Posted by: Byrd_Huntr

Re: Longterm trend -inflation - 03/06/10 04:14 PM

Originally Posted By: Susan
"Until the private sector has the confidence to take risk and lose the aversion to taking on debt, we are going to stagnate."

The private sector has no control over how our economy is being handled. With the number of private businesses that have failed in the last year, expecting others to put themselves in the same condition is ridiculous. Loans require collateral. Small businesses do not control a manipulated economy -- our economy controls the businesses.

The people who have brought this country to its knees haven't changed a single thing.

Sue


This is all by design...... recommend reading 'Cloward and Piven' as it is the map for where the progressives are trying to take us. Why are these politicians saying one thing and doing another (more so than usual)? Read Saul Alinski...the ends justify the means to these people. The progressives and 'elites' have tried this before and failed. Our Constitution is again under attack by the people who swore to uphold it, but I still have faith in the exceptionalism and pioneer spirit of the American people.
Posted by: LED

Re: Longterm trend -inflation - 03/07/10 01:21 AM

Originally Posted By: Byrd_Huntr
but I still have faith in the exceptionalism and pioneer spirit of the American people.


I hear phrases similar to this bandied about on a daily basis. It always goes something like, "things are bad but american resilience and determination will lead us out.. blah blah blah" Personally I don't buy it. How exceptional and resilient can we be when we've had everything a nation could ask for and still ran the country into the ground over a period of 60+ years? I'm not knocking your comment and this isn't directed at you Byrd_Huntr, but maybe its partly because we think we're so special and capable that we're in this mess to begin with.
Posted by: Susan

Re: Longterm trend -inflation - 03/07/10 01:49 AM

We're Americans, it can't happen to us.

Well, it can't happen twice.

Well, we might go into a little recession, but not a depression.

Yes, it is a little worse than we anticipated, but I'm sure we're over the worst of it now.

Oh, it does look kinda bad, but it can't get too bad, this is America.

Twenty percent unemployment... that's only a fifth of the workforce.

What do you mean Boeing is outsourcing? *I* work for Boeing!

I thought I'd get more than this for unemployment...

Yeah, we're on food stamps, but I make my wife do the grocery shopping.

We can't make it on just the wife's paycheck, so we're putting the house up for sale. Big yard sale this weekend.

We can't sell the house, so we're just going to have to walk away from it. Twenty years of payments down the tubes! Yeah, we're moving the fifth wheel into the inlaw's back yard, gonna live in that. Same school district, anyway.

How could this happen??? This isn't supposed to happen!!! This is AMERICA!
Posted by: Blast

Re: Longterm trend -inflation - 03/07/10 04:11 AM

Oh good grief, it was such a nice day...

Folks you've already been warned once, we've drifted too far away from the preparedness aspects of future possible economic issues. This forum isn't the place assigning blame for problems, it's for how to survive those problems. I'm locking this thread.

-Blast