Buying with monopoly money

[bearishgurl]

[quote=SD Realtor]The manager at ralphs will simply pass on his expenses. It is pretty easy to follow the commodity trail. Start at the cost of water and fuel. People who grow everything from fruits/vegetables to feed for cattle/pigs etc incur higher prices. Increasing fuel prices also impact them and the transporters who are needed for the supply chain. Cotton and other things that are grown for textiles and clothing are affected. Pretty much everything at the base is affected and as you move up the manufacturing chain additional costs are added.

The manager at Ralphs has nothing to do with it. he is simply the endpoint in the supply chain.

The other thing is that you are making an implicit assumption about inflation and that is you are accepting the statistics carte blanche. I guess personally I am more skeptical. I don’t believe the unemployment stats and I don’t believe the inflation stats. I simply look back on my on ledger for what I spend on food and clothing over the past few years and the increase is noticeable. Same with my electric and gas bills for the same home. Much more then the 1 or 2% I am being told by the govt.[/quote]

Totally agree, SDR. When I am in the Ralphs or Vons in the early morning a couple of times a week, I always see sr citizens make a beeline for the clearance table/racks to the bent cans and smashed boxes and hover over the marked-down meat section and marked-down bakery cart to see what is available. Some just sigh and leave with nothing and hit the next Vons/Ralphs to do the same thing.

I am just incredulous how a =<.50 can of green beans has turned into $1.50 overnight! Groceries have gone up a LOT in the last 18 months, even at the military commissaries. SDGE has also gone up some, although I severely limit my own usage to keep my bill manageable.

[Rich Toscano]

OK, there are assumptions in there, as in any prediction of potential outcomes. But I still feel like I provided a laundry list of things that could potentially cause inflation to rise — none of them are sure things, but they don’t have to be, because (to me anyway) we are talking about risks and probabilities. I think some of them are pretty decent probabilities, but of course, that all comes down to speculation on the future.

You are correct that we’ve increased government debt for a long time, but surely you agree that just because it hasn’t caused a problem yet, doesn’t mean it never will. (Look for instance at the increase in mortgage debt in this country — it went up and up and up, with that consistency lulling people into a false sense of security, until people realized that security was misplaced).

You are also correct that we’ve had loose monetary policy for a long time. I believe that has largely fed into inflation in asset prices rather than in consumer prices. That could continue for a while. But it surely won’t be indefinite, and it requires certain conditions — foreign CB’s buying up lots of our debt is a notable one — that cannot be depended upon to last. (For background on loose monetary policy vis. asset prices I very, very highly recommend Grantham’s “Night of the Living Fed” essay).

I think there may be some timeline confusion here. You are asking, what WILL cause inflation in the near future. Well, nothing WILL (not dependably, if you see what I mean). But some stuff might, if they happen in the near future. Those are the “hypotheticals” I outlined in the earlier comment. So just to be clear, I don’t think inflation is guaranteed in the near future. (Nor is a lack of inflation, for that matter).

I think the OP is looking farther out. For his scheme to work, inflation doesn’t have to be higher next year — it has to be higher on average over the next 30 years. So it’s really more of a long-term consideration. My opinion on the long term is that considering the relative lack of productivity in our economy, increasing competition for resources, the chance of a loss of confidence in dollars and/or ust’s, and most of all how difficult it would be to reduce our debt burden in real terms, I think inflation will be higher than most people expect. But that is, of course, speculation and my own opinion.

[Rich Toscano]

OK, there are assumptions in there, as in any prediction of potential outcomes. But I still feel like I provided a laundry list of things that could potentially cause inflation to rise — none of them are sure things, but they don’t have to be, because (to me anyway) we are talking about risks and probabilities. I think some of them are pretty decent probabilities, but of course, that all comes down to speculation on the future.

You are correct that we’ve increased government debt for a long time, but surely you agree that just because it hasn’t caused a problem yet, doesn’t mean it never will. (Look for instance at the increase in mortgage debt in this country — it went up and up and up, with that consistency lulling people into a false sense of security, until people realized that security was misplaced).

You are also correct that we’ve had loose monetary policy for a long time. I believe that has largely fed into inflation in asset prices rather than in consumer prices. That could continue for a while. But it surely won’t be indefinite, and it requires certain conditions — foreign CB’s buying up lots of our debt is a notable one — that cannot be depended upon to last. (For background on loose monetary policy vis. asset prices I very, very highly recommend Grantham’s “Night of the Living Fed” essay).

I think there may be some timeline confusion here. You are asking, what WILL cause inflation in the near future. Well, nothing WILL (not dependably, if you see what I mean). But some stuff might, if they happen in the near future. Those are the “hypotheticals” I outlined in the earlier comment. So just to be clear, I don’t think inflation is guaranteed in the near future. (Nor is a lack of inflation, for that matter).

I think the OP is looking farther out. For his scheme to work, inflation doesn’t have to be higher next year — it has to be higher on average over the next 30 years. So it’s really more of a long-term consideration. My opinion on the long term is that considering the relative lack of productivity in our economy, increasing competition for resources, the chance of a loss of confidence in dollars and/or ust’s, and most of all how difficult it would be to reduce our debt burden in real terms, I think inflation will be higher than most people expect. But that is, of course, speculation and my own opinion.

[Rich Toscano]

OK, there are assumptions in there, as in any prediction of potential outcomes. But I still feel like I provided a laundry list of things that could potentially cause inflation to rise — none of them are sure things, but they don’t have to be, because (to me anyway) we are talking about risks and probabilities. I think some of them are pretty decent probabilities, but of course, that all comes down to speculation on the future.

You are correct that we’ve increased government debt for a long time, but surely you agree that just because it hasn’t caused a problem yet, doesn’t mean it never will. (Look for instance at the increase in mortgage debt in this country — it went up and up and up, with that consistency lulling people into a false sense of security, until people realized that security was misplaced).

You are also correct that we’ve had loose monetary policy for a long time. I believe that has largely fed into inflation in asset prices rather than in consumer prices. That could continue for a while. But it surely won’t be indefinite, and it requires certain conditions — foreign CB’s buying up lots of our debt is a notable one — that cannot be depended upon to last. (For background on loose monetary policy vis. asset prices I very, very highly recommend Grantham’s “Night of the Living Fed” essay).

I think there may be some timeline confusion here. You are asking, what WILL cause inflation in the near future. Well, nothing WILL (not dependably, if you see what I mean). But some stuff might, if they happen in the near future. Those are the “hypotheticals” I outlined in the earlier comment. So just to be clear, I don’t think inflation is guaranteed in the near future. (Nor is a lack of inflation, for that matter).

I think the OP is looking farther out. For his scheme to work, inflation doesn’t have to be higher next year — it has to be higher on average over the next 30 years. So it’s really more of a long-term consideration. My opinion on the long term is that considering the relative lack of productivity in our economy, increasing competition for resources, the chance of a loss of confidence in dollars and/or ust’s, and most of all how difficult it would be to reduce our debt burden in real terms, I think inflation will be higher than most people expect. But that is, of course, speculation and my own opinion.

[Rich Toscano]

OK, there are assumptions in there, as in any prediction of potential outcomes. But I still feel like I provided a laundry list of things that could potentially cause inflation to rise — none of them are sure things, but they don’t have to be, because (to me anyway) we are talking about risks and probabilities. I think some of them are pretty decent probabilities, but of course, that all comes down to speculation on the future.

You are correct that we’ve increased government debt for a long time, but surely you agree that just because it hasn’t caused a problem yet, doesn’t mean it never will. (Look for instance at the increase in mortgage debt in this country — it went up and up and up, with that consistency lulling people into a false sense of security, until people realized that security was misplaced).

You are also correct that we’ve had loose monetary policy for a long time. I believe that has largely fed into inflation in asset prices rather than in consumer prices. That could continue for a while. But it surely won’t be indefinite, and it requires certain conditions — foreign CB’s buying up lots of our debt is a notable one — that cannot be depended upon to last. (For background on loose monetary policy vis. asset prices I very, very highly recommend Grantham’s “Night of the Living Fed” essay).

I think there may be some timeline confusion here. You are asking, what WILL cause inflation in the near future. Well, nothing WILL (not dependably, if you see what I mean). But some stuff might, if they happen in the near future. Those are the “hypotheticals” I outlined in the earlier comment. So just to be clear, I don’t think inflation is guaranteed in the near future. (Nor is a lack of inflation, for that matter).

I think the OP is looking farther out. For his scheme to work, inflation doesn’t have to be higher next year — it has to be higher on average over the next 30 years. So it’s really more of a long-term consideration. My opinion on the long term is that considering the relative lack of productivity in our economy, increasing competition for resources, the chance of a loss of confidence in dollars and/or ust’s, and most of all how difficult it would be to reduce our debt burden in real terms, I think inflation will be higher than most people expect. But that is, of course, speculation and my own opinion.

[Rich Toscano]

OK, there are assumptions in there, as in any prediction of potential outcomes. But I still feel like I provided a laundry list of things that could potentially cause inflation to rise — none of them are sure things, but they don’t have to be, because (to me anyway) we are talking about risks and probabilities. I think some of them are pretty decent probabilities, but of course, that all comes down to speculation on the future.

You are correct that we’ve increased government debt for a long time, but surely you agree that just because it hasn’t caused a problem yet, doesn’t mean it never will. (Look for instance at the increase in mortgage debt in this country — it went up and up and up, with that consistency lulling people into a false sense of security, until people realized that security was misplaced).

You are also correct that we’ve had loose monetary policy for a long time. I believe that has largely fed into inflation in asset prices rather than in consumer prices. That could continue for a while. But it surely won’t be indefinite, and it requires certain conditions — foreign CB’s buying up lots of our debt is a notable one — that cannot be depended upon to last. (For background on loose monetary policy vis. asset prices I very, very highly recommend Grantham’s “Night of the Living Fed” essay).

I think there may be some timeline confusion here. You are asking, what WILL cause inflation in the near future. Well, nothing WILL (not dependably, if you see what I mean). But some stuff might, if they happen in the near future. Those are the “hypotheticals” I outlined in the earlier comment. So just to be clear, I don’t think inflation is guaranteed in the near future. (Nor is a lack of inflation, for that matter).

I think the OP is looking farther out. For his scheme to work, inflation doesn’t have to be higher next year — it has to be higher on average over the next 30 years. So it’s really more of a long-term consideration. My opinion on the long term is that considering the relative lack of productivity in our economy, increasing competition for resources, the chance of a loss of confidence in dollars and/or ust’s, and most of all how difficult it would be to reduce our debt burden in real terms, I think inflation will be higher than most people expect. But that is, of course, speculation and my own opinion.

[SD Realtor]

PR then you do know what the situation was so I am curious as to why you are asking for specific examples?

Prices depreciating is deflation. My terminology of dollars depreciating is to be defined as dollars becoming less valuable. Hope that explanation is more thorough.

Anyways if you are convinced that we are moving in the direction where the dollar is worth less, and prices will be much higher for goods and eventually services so be it.

Going full circle I do agree with the original poster that borrowing lots of dollars now to pay for an asset that you can live in today is not a bad idea given that those dollars will be worth much less in the future. I will freely agree that the asset itself will potentially be worth less as well however I don’t believe that the asset will depreciate as much as the currency will, AND there are not many other opportunities where you can borrow money to do this, AND that the govt encourages you to do so. I think the idea has some merit and is not ideal for everyone but is a good idea for some.

[SD Realtor]

PR then you do know what the situation was so I am curious as to why you are asking for specific examples?

Prices depreciating is deflation. My terminology of dollars depreciating is to be defined as dollars becoming less valuable. Hope that explanation is more thorough.

Anyways if you are convinced that we are moving in the direction where the dollar is worth less, and prices will be much higher for goods and eventually services so be it.

Going full circle I do agree with the original poster that borrowing lots of dollars now to pay for an asset that you can live in today is not a bad idea given that those dollars will be worth much less in the future. I will freely agree that the asset itself will potentially be worth less as well however I don’t believe that the asset will depreciate as much as the currency will, AND there are not many other opportunities where you can borrow money to do this, AND that the govt encourages you to do so. I think the idea has some merit and is not ideal for everyone but is a good idea for some.

[SD Realtor]

PR then you do know what the situation was so I am curious as to why you are asking for specific examples?

Prices depreciating is deflation. My terminology of dollars depreciating is to be defined as dollars becoming less valuable. Hope that explanation is more thorough.

Anyways if you are convinced that we are moving in the direction where the dollar is worth less, and prices will be much higher for goods and eventually services so be it.

Going full circle I do agree with the original poster that borrowing lots of dollars now to pay for an asset that you can live in today is not a bad idea given that those dollars will be worth much less in the future. I will freely agree that the asset itself will potentially be worth less as well however I don’t believe that the asset will depreciate as much as the currency will, AND there are not many other opportunities where you can borrow money to do this, AND that the govt encourages you to do so. I think the idea has some merit and is not ideal for everyone but is a good idea for some.

[SD Realtor]

PR then you do know what the situation was so I am curious as to why you are asking for specific examples?

Prices depreciating is deflation. My terminology of dollars depreciating is to be defined as dollars becoming less valuable. Hope that explanation is more thorough.

Anyways if you are convinced that we are moving in the direction where the dollar is worth less, and prices will be much higher for goods and eventually services so be it.

Going full circle I do agree with the original poster that borrowing lots of dollars now to pay for an asset that you can live in today is not a bad idea given that those dollars will be worth much less in the future. I will freely agree that the asset itself will potentially be worth less as well however I don’t believe that the asset will depreciate as much as the currency will, AND there are not many other opportunities where you can borrow money to do this, AND that the govt encourages you to do so. I think the idea has some merit and is not ideal for everyone but is a good idea for some.

[SD Realtor]

PR then you do know what the situation was so I am curious as to why you are asking for specific examples?

Prices depreciating is deflation. My terminology of dollars depreciating is to be defined as dollars becoming less valuable. Hope that explanation is more thorough.

Anyways if you are convinced that we are moving in the direction where the dollar is worth less, and prices will be much higher for goods and eventually services so be it.

Going full circle I do agree with the original poster that borrowing lots of dollars now to pay for an asset that you can live in today is not a bad idea given that those dollars will be worth much less in the future. I will freely agree that the asset itself will potentially be worth less as well however I don’t believe that the asset will depreciate as much as the currency will, AND there are not many other opportunities where you can borrow money to do this, AND that the govt encourages you to do so. I think the idea has some merit and is not ideal for everyone but is a good idea for some.

[(former)FormerSanDiegan]

[quote=sdrealtor][quote=deadzone]It may be true that high interest rates have not historically led to housing downturns. However, the current situation is unlike any in history. Due to the number of I/O ARM loans outstanding (reset chart), as we’ve discussed ad-nauseum, higher interest rates right now would abolutely DESTROY the housing market.[/quote]

I love it! So this times its different.

The bear is using the mantra the bears attacked the bulls with a few years ago as being ridiculous. It was ridiculous then and still is.[/quote]

I am waiting to hear the words “permanently lower plateau” for home prices.

[(former)FormerSanDiegan]

[quote=sdrealtor][quote=deadzone]It may be true that high interest rates have not historically led to housing downturns. However, the current situation is unlike any in history. Due to the number of I/O ARM loans outstanding (reset chart), as we’ve discussed ad-nauseum, higher interest rates right now would abolutely DESTROY the housing market.[/quote]

I love it! So this times its different.

The bear is using the mantra the bears attacked the bulls with a few years ago as being ridiculous. It was ridiculous then and still is.[/quote]

I am waiting to hear the words “permanently lower plateau” for home prices.

[(former)FormerSanDiegan]

[quote=sdrealtor][quote=deadzone]It may be true that high interest rates have not historically led to housing downturns. However, the current situation is unlike any in history. Due to the number of I/O ARM loans outstanding (reset chart), as we’ve discussed ad-nauseum, higher interest rates right now would abolutely DESTROY the housing market.[/quote]

I love it! So this times its different.

The bear is using the mantra the bears attacked the bulls with a few years ago as being ridiculous. It was ridiculous then and still is.[/quote]

I am waiting to hear the words “permanently lower plateau” for home prices.

[(former)FormerSanDiegan]

[quote=sdrealtor][quote=deadzone]It may be true that high interest rates have not historically led to housing downturns. However, the current situation is unlike any in history. Due to the number of I/O ARM loans outstanding (reset chart), as we’ve discussed ad-nauseum, higher interest rates right now would abolutely DESTROY the housing market.[/quote]

I love it! So this times its different.

The bear is using the mantra the bears attacked the bulls with a few years ago as being ridiculous. It was ridiculous then and still is.[/quote]

I am waiting to hear the words “permanently lower plateau” for home prices.

[Author]

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