[quote=AN]
Lets look at what would happen if we see a repeat of 70s/80s where you can get CD rate around 15%. If you have $1M, your yearly interest would be $150k. If you paid off your house, your yearly interest would be $66k. After just 5 years, if you must have a paid off house, you can have it completely paid off in 5 years and still have $1M in your nest egg. While with the other scenario, you only have about $770k. So you’re already $230k less well off. Going forward, you’ll be perpetually in catch up mode compare to if you didn’t pay off the house. Lets assume this inflationary scenario happen when you’re still working. Your salary would drastically increase while your debt payment stay static in nominal term. [/quote]
The stagflation of the 70/80s was particularly brutal for most investments.
I don’t think we’ll see a repeat, I think we’ll see something bizarrely different, something the central banks have no idea how to fight, nor will they even recognize it.
The seemingly impossible combination of continued deflationary threats, near zero risk premiums, stagnant economic growth while basic living commodities experience hyperinflation.
In it, we have the continued effort of our central banks printing money, maintaining near zero interest rates and driving interest rates for bank instruments and high quality corporate borrowing below the official inflationary measures. Why pay you 15% in a CD when they can get it from themselves for 0%?
Jobs and economic outputs will continue waffle between growth and contraction with a continued pressure on wages to the lowest global common denominator.
Meanwhile, continued regulatory items, water restrictions, urbanization and climate change will drive food prices to double digit yearly gains.
Oil, gas, and electricity will continue to see double digit gains as well, however, due to political desire, oil and gas is going to get hammered with carbon taxes and green energy is going to slurp tax incentives like, well, the last four years.
