Inflation in the US - Where are we headed? Right now inflation is very low.

What's your opinion. Please keep to the topic rather than wander into political waters (i.e.: No finger pointing...).

Do you foresee a significant increase in inflation (in the US) over the next 5 years?

I'm not an economist, I just play one on TV :notme:

My completely uninformed guess is that inflation will remain stable or retract over the next 8-12 months until the recovery begins to take hold, but who the heck can forsee what will happen over five years with so many wild cards that have been thrown into the mix with the all the stimulus programs? My guess (and fervent hope!) is that the rescue/stimulus programs first called for by President Bush and being worked through now by President Obama will pull us out of this downturn without undue inflationary pressure. Isn't that what we have a Federal Reserve Chairman for?

I'll try not to be political. Facts are facts.

Our government is printing money at an incredible pace. It is a case of simple supply and demand. There is more money floating around for pretty much the same amount of goods available. Therefore it is going to take more money to buy a given good or service. Interest rates are also going to go up. Classic stagflation.


Actually this is not the first time I have said as much here.

I'll try not to be political. Facts are facts.

Our government is printing money at an incredible pace. It is a case of simple supply and demand. There is more money floating around for pretty much the same amount of goods available. Therefore it is going to take more money to buy a given good or service. Interest rates are also going to go up. Classic stagflation.


Actually this is not the first time I have said as much here.Well, I wonder about that. Since there was so much wealth generated virtually (stock market and real estate bubble) that vanished with the bubble's burst, how much different is it to replenish that with currency - what is the practical effect?

Well, I wonder about that. Since there was so much wealth generated virtually (stock market and real estate bubble) that vanished with the bubble's burst, how much different is it to replenish that with currency - what is the practical effect?

A lot of that wealth was an illusion. "Bad" loans that did not have a strong basis, naked shorts, and other financial instruments based not on equity or debt, but essentially side bets (derivatives, etc.) are at the root of the problem. The rest of the losses ("real" losses from equity and debt-based instruments) are essentially a result of the failure of the vapors.

The market has contracted. I believe we can all agree on that point. Now, on top of that, we have a massive infusion of "funny money", which has not been earned, and has no basis other than the paper it is printed on. Or, more correctly, the electrons on a computer chip somewhere. The dollars in my account, and your account, undoubtedly represent some good or service provided, and the figures in our accounts represent the value derived thereof. Not so with the funny money. None of it was earned for any valuable good or service. If we freeze time right now, and add up all of the goods and services available, and divide it by all of the dollars available, we get one figure. If we throw more money into the equation, make more money available, without adding anything of value, what happens?

x/y goes to

x/(y+z)

Which is larger?

A lot of that wealth was an illusion. "Bad" loans that did not have a strong basis, naked shorts, and other financial instruments based not on equity or debt, but essentially side bets (derivatives, etc.) are at the root of the problem. The rest of the losses ("real" losses from equity and debt-based instruments) are essentially a result of the failure of the vapors.

The market has contracted. I believe we can all agree on that point. Now, on top of that, we have a massive infusion of "funny money", which has not been earned, and has no basis other than the paper it is printed on. Or, more correctly, the electrons on a computer chip somewhere. The dollars in my account, and your account, undoubtedly represent some good or service provided, and the figures in our accounts represent the value derived thereof. Not so with the funny money. None of it was earned for any valuable good or service. If we freeze time right now, and add up all of the goods and services available, and divide it by all of the dollars available, we get one figure. If we throw more money into the equation, make more money available, without adding anything of value, what happens?

x/y goes to

x/(y+z)

Which is larger?

Life is full of challenge and there's nothing you can do to make it go away, there's no escape and you'll have to deal with it. You can't prevent economic recession, sickness, accidents, and other unexpected events.

A lot of that wealth was an illusion. "Bad" loans that did not have a strong basis, naked shorts, and other financial instruments based not on equity or debt, but essentially side bets (derivatives, etc.) are at the root of the problem.

There is such thing as 'good debt'. It is using other people's money to make you earn more money or improve financial condition.

Life is full of challenge and there's nothing you can do to make it go away, there's no escape and you'll have to deal with it. You can't prevent economic recession, sickness, accidents, and other unexpected events.

I was asked to refrain from getting political...

I was asked to refrain from getting political...

Tell them do not put all their eggs in one basket. Diversify. ;)

There is such thing as 'good debt'. It is using other people's money to make you earn more money or improve financial condition. The problem comes when someone (or a company) borrows money and their business (or what ever they borrowed the money for) fails to return a profit and the person (or company) can not repay the debt.

You can't prevent economic recession

This statement is very true. Most folks have never studied economics as my own father did (he had his Piled Higher and Deeper work completed - just never submitted), so this stuff is in my blood - I understand things that most folks don't.

Economies have a life of their own - going thru periods of growth and contraction - it is our reaction to those "normal" behaviors that dictate how severe the highs and lows will be.

Many economist were not concerned with inflation under current conditions, but deflation, or negative inflation. This can be a much more difficult to control once the spiraling effect begins.

Wikipedia has a relatively decent article on it here
http://en.wikipedia.org/wiki/Deflation

There is such thing as 'good debt'. It is using other people's money to make you earn more money or improve financial condition.

Certainly there is. A corporation, for instance, can either borrow from a bank or sell bonds, both a form of borrowing, and, except for certain auto companies, the debt is usually backed by assets. Or, they can issue and sell stock, or equity. This is what makes the world go 'round.

Notice that these have something of value on both sides of the equation. For things like derivatives, naked shorts, short selling, etc., there is not really anything there except a bet. While commodity speculation can help to stabilize the market, the amount of leverage and lack of anything of real value for derivatives, etc. distorts things.

The problem comes when someone (or a company) borrows money and their business (or what ever they borrowed the money for) fails to return a profit and the person (or company) can not repay the debt.

That’s why is said that do not put all your eggs in one basket. If you put all your money in one stock, fund or business and it fails, you lose big time. Spread out your funds into several investments that have different level of risks to reduce your chances of losing money.

Certainly there is. A corporation, for instance, can either borrow from a bank or sell bonds, both a form of borrowing, and, except for certain auto companies, the debt is usually backed by assets. Or, they can issue and sell stock, or equity. This is what makes the world go 'round.

Notice that these have something of value on both sides of the equation. For things like derivatives, naked shorts, short selling, etc., there is not really anything there except a bet. While commodity speculation can help to stabilize the market, the amount of leverage and lack of anything of real value for derivatives, etc. distorts things.

The important thing to consider is the effects of inflation on the buying power of your money. I guess the worth of your car is the same as the worth of a toy car 30 years from now.

Always try to beat inflation. ‘Diversify’ is the key term. Now, the question is “where to invest your money?”

I guess the worth of your car is the same as the worth of a toy car 30 years from now.



??? Actually the price of a toy car, with compound interest, could likely buy a used car like mine in 30 years. Keep in mind I am driving a '98 Intrepid, though.:D

Oh, I feel sleepy. Before I go to bed let me post options where to invest your money. The market is flooded with hundreds of products and opportunities that can confused us.
1) Try time deposit accounts, the most popular investment among ordinary people (make sure you canvass interest rates before you open a time deposit account, because banks offer different rates).
2) Pre-need plans (select stable companies with good track record).
3) Investment-linked life insurance
4) Government securities
5) Private securities
6) Mutual funds
7) Unit investment trust funds
8) Stocks (If you are fearless investor and eat risk for breakfast you may try investing in stocks)
9) Real state
10) Business (this is risky but you can earn big profit if it is successful. It can even become your ticket to achieve enormous wealth).

AND MANY MORE!!!

Don’t let your money ‘sleep’. Make it grow. I hope you can make a smart investment decision.

Lastly, the fastest way to become rish is to marry a rich pal.:lmao:

Many economist were not concerned with inflation under current conditions, but deflation, or negative inflation. This can be a much more difficult to control once the spiraling effect begins.



Carol, here is an article that I think disagrees with this. More money chasing the same goods = inflation.

From the WSJ, today's opinion page.

http://online.wsj.com/article/SB124458888993599879.html

Carol, here is an article that I think disagrees with this. More money chasing the same goods = inflation.

From the WSJ, today's opinion page.


Well - there is one thing for sure - there is no shortage of opinions on where inflation will go.

Personally - I see the current situation as adding fuel to the fire - I see the Feds as holding the handle to the faucet - and leaving the it wide open (ultra low interest rates) just aids in perpetuating the problem.

Just my :2cents:.

Well - there is one thing for sure - there is no shortage of opinions on where inflation will go.

Personally - I see the current situation as adding fuel to the fire - I see the Feds as holding the handle to the faucet - and leaving the it wide open (ultra low interest rates) just aids in perpetuating the problem.

Just my :2cents:.

Ah, but interest rates are at or near the highest they have been in 6 months. I should know. I had 4.75 locked in on a refi, but found out last week that because of a lack of comparable property sold in my area my appraisal has been nixed. Now I am likely going to be looking at 5.5% minimum with another lender.

:mad::mad::mad:

Ah, but interest rates are at or near the highest they have been in 6 months. I should know. I had 4.75 locked in on a refi, but found out last week that because of a lack of comparable property sold in my area my appraisal has been nixed. Now I am likely going to be looking at 5.5% minimum with another lender.

:mad::mad::mad:

And again - rates are still at all time lows because the spiket has been left open.

I bought my first house in 1990 with and 8% interest rate - refied a few years later to 7.5%. Bought my second home in 2000 at 7.25% and refied to 6%.

When my parents sold their home in 1982 - they did a seller finance at 11.5% because the going rate was at about 15%. This was at a time when the Feds policy was to raise rates to control inflation.

Economies - a life of their own.

And again - rates are still at all time lows because the spiket has been left open.

I bought my first house in 1990 with and 8% interest rate - refied a few years later to 7.5%. Bought my second home in 2000 at 7.25% and refied to 6%.

When my parents sold their home in 1982 - they did a seller finance at 11.5% because the going rate was at about 15%. This was at a time when the Feds policy was to raise rates to control inflation.

Economies - a life of their own.

Inflation rate does not remain the same through the years. During extremely bad economic conditions, inflation can go away, way up like what had happened in Zimbabwe the so-called hyperinflation.

And again - rates are still at all time lows because the spiket has been left open.

I bought my first house in 1990 with and 8% interest rate - refied a few years later to 7.5%. Bought my second home in 2000 at 7.25% and refied to 6%.

When my parents sold their home in 1982 - they did a seller finance at 11.5% because the going rate was at about 15%. This was at a time when the Feds policy was to raise rates to control inflation.

Economies - a life of their own.

Oh, I will agree that they are low right now compared to what they are going to be real soon. I have already explained why I think so. You mentioned deflation. Do you think that we will see deflation in the near future? If so, how and why? What mechanisms will be at work?

One of the nice things about economics is that we can have an intellectual discussion with little chance of a shouting match erupting (not that you would Carol!). This is unlike things like, um, politics.

Carol and Craig,

I enjoy this conversation! Great points and excellent insights from you both! :applause::applause:

Stijloor.

You mentioned deflation. Do you think that we will see deflation in the near future? If so, how and why? What mechanisms will be at work?


Ooohh, Craig - that is a question for those that have a working crystal ball:lmao::lmao::lmao:.

I really don't know if we will see deflation or inflation. I do believe we still have a very, very long road on this economic recovery. And I think it is still far into the future. And as with most economic conditions, especially recesive situations - things aren't real clear until long after it is over.

So - how is that for not answering your question :biglaugh:.

Ooohh, Craig - that is a question for those that have a working crystal ball:lmao::lmao::lmao:.

I really don't know if we will see deflation or inflation. I do believe we still have a very, very long road on this economic recovery. And I think it is still far into the future. And as with most economic conditions, especially recesive situations - things aren't real clear until long after it is over.

So - how is that for not answering your question :biglaugh:.

Well, I was hoping to see what your thought processes were. I wouldn't agree right now, but, hey, I've had my mind changed here before.

Anyway, FANTASTIC weekend to you all!:bigwave:

What is interesting is back in the old days it was common to lower prices during tough times to keep volume up and cover fixed costs. Now, they keep the prices the same and lessen the quantity per purchase, or simply raise prices to cover any loss of sales from either the effect of higher prices or the lesser expendable income. That makes predictions of inflation or deflation based on a historical perspective difficult.

Now that credit cards are up to 30% interest rates, wouldn't it be interesting to bring back the credit interest tax deduction? Remember that?