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#194826 - 02/01/10 05:55 PM Re: Longterm trend -inflation [Re: Eugene]
MartinFocazio Offline

Pooh-Bah

Registered: 01/21/03
Posts: 2155
Loc: Bucks County PA
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.


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#194829 - 02/01/10 06:02 PM Re: Longterm trend -inflation [Re: MartinFocazio]
tomfaranda Offline
Enthusiast

Registered: 02/14/08
Posts: 301
Loc: Croton on Hudson, NY
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.

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#194834 - 02/01/10 07:15 PM Re: Longterm trend -inflation [Re: MartinFocazio]
Arney Offline
Pooh-Bah

Registered: 09/15/05
Posts: 2485
Loc: California
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.

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#195065 - 02/04/10 12:38 AM Re: Longterm trend -inflation [Re: Arney]
NancyRaymon Offline
Stranger

Registered: 01/29/10
Posts: 2
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
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#195075 - 02/04/10 03:27 AM Re: Longterm trend -inflation [Re: NIM]
clarktx Offline
Enthusiast

Registered: 07/01/08
Posts: 250
Loc: Houston, Texas
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...
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#195078 - 02/04/10 07:41 AM Re: Longterm trend -inflation [Re: clarktx]
LED Offline
Veteran

Registered: 09/01/05
Posts: 1474
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.

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#195085 - 02/04/10 02:26 PM Re: Longterm trend -inflation [Re: LED]
benjammin Offline
Rapscallion
Carpal Tunnel

Registered: 02/06/04
Posts: 4020
Loc: Anchorage AK
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.
_________________________
The ultimate result of shielding men from the effects of folly is to fill the world with fools.
-- Herbert Spencer, English Philosopher (1820-1903)

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#195126 - 02/05/10 01:58 AM Re: Longterm trend -inflation [Re: MartinFocazio]
NIM Offline
Member

Registered: 02/12/03
Posts: 128
"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

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#195128 - 02/05/10 03:33 AM Re: Longterm trend -inflation [Re: NIM]
thseng Offline
Old Hand

Registered: 03/24/06
Posts: 900
Loc: NW NJ
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.
_________________________
- Tom S.

"Never trust and engineer who doesn't carry a pocketknife."

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#195133 - 02/05/10 07:44 AM Re: Longterm trend -inflation [Re: NIM]
LED Offline
Veteran

Registered: 09/01/05
Posts: 1474
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.

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