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#193997 - 01/20/10 01:00 PM Re: Longterm trend -inflation [Re: Blast]
unimogbert Offline
Old Hand

Registered: 08/10/06
Posts: 854
Loc: Colorado
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)

#194017 - 01/20/10 08:00 PM Re: Longterm trend -inflation [Re: unimogbert]
Eugene Offline
Carpal Tunnel

Registered: 12/26/02
Posts: 2822
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.

#194019 - 01/20/10 08:06 PM Re: Longterm trend -inflation [Re: unimogbert]
benjammin Offline
Carpal Tunnel

Registered: 02/06/04
Posts: 4018
Loc: Anchorage AK
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.
The ultimate result of shielding men from the effects of folly is to fill the world with fools.
-- Herbert Spencer, English Philosopher (1820-1903)

#194292 - 01/26/10 02:52 AM Re: Longterm trend -inflation [Re: hikermor]
ki4buc Offline
Old Hand

Registered: 11/10/03
Posts: 710
Loc: Augusta, GA
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...

#194293 - 01/26/10 02:55 AM Re: Longterm trend -inflation [Re: ki4buc]
Russ Offline
Carpal Tunnel

Registered: 06/02/06
Posts: 4741
Avatar cost $11.50 and that was the senior rate. . .

#194354 - 01/27/10 02:53 AM Re: Longterm trend -inflation [Re: benjammin]
Susan Offline

Registered: 01/21/04
Posts: 5163
Loc: W. WA
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....


#194369 - 01/27/10 06:45 AM Re: Longterm trend -inflation [Re: Susan]
Art_in_FL Offline

Registered: 09/01/07
Posts: 2432
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.


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:

#194399 - 01/27/10 06:11 PM Re: Longterm trend -inflation [Re: Susan]
benjammin Offline
Carpal Tunnel

Registered: 02/06/04
Posts: 4018
Loc: Anchorage AK
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.
The ultimate result of shielding men from the effects of folly is to fill the world with fools.
-- Herbert Spencer, English Philosopher (1820-1903)

#194771 - 02/01/10 02:53 AM Re: Longterm trend -inflation [Re: NIM]
Pete Offline

Registered: 02/20/09
Posts: 1344
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.


#194825 - 02/01/10 05:51 PM Re: Longterm trend -inflation [Re: NIM]
MartinFocazio Offline


Registered: 01/21/03
Posts: 2148
Loc: Bucks County PA
Originally Posted By: NIM

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.

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