people evasive on this forum

[(former)FormerSanDiegan]

Here’s a chart with inflation-adjusted wages

Late 70’s early 80’s (high-inflation period) saw a loss in wages with respect to inflation, but not horrible. From 1978 to 1981 wages declined by about 4% relative to inflation.
So, I suppose that wages didn’t fall too far behind.
The real problem then was the other big IF (keeping your job) when there was double-digit unemployment.

[img_assist|nid=3390|title=Inflation Adjusted Wages|desc=|link=node|align=left|width=466|height=315]

[(former)FormerSanDiegan]

Here’s a chart with inflation-adjusted wages

Late 70’s early 80’s (high-inflation period) saw a loss in wages with respect to inflation, but not horrible. From 1978 to 1981 wages declined by about 4% relative to inflation.
So, I suppose that wages didn’t fall too far behind.
The real problem then was the other big IF (keeping your job) when there was double-digit unemployment.

[img_assist|nid=3390|title=Inflation Adjusted Wages|desc=|link=node|align=left|width=466|height=315]

[Nancy_s soothsayer]

What if you have inflationary spiral for one year or a relatively short period and then followed by a HUGE DEFLATION for many, many years afterwards. Is that possible at all in your calculation?

[Nancy_s soothsayer]

What if you have inflationary spiral for one year or a relatively short period and then followed by a HUGE DEFLATION for many, many years afterwards. Is that possible at all in your calculation?

[no_such_reality]

Argentina provides a good example. Read the causes and you’ll see just how far on the daggers edge we are. While disruptive for the world economy, the Euro is becoming a valid competing currency.

Argentina brief background

Argentina Crisis

[no_such_reality]

Argentina provides a good example. Read the causes and you’ll see just how far on the daggers edge we are. While disruptive for the world economy, the Euro is becoming a valid competing currency.

Argentina brief background

Argentina Crisis

[bob007]

I presume high inflation is accompanied by high interest rates. (assuming some folks in government want to tame inflation)

I wouldn’t want to speculate what 10% interest rate would do to California real estate prices

[bob007]

I presume high inflation is accompanied by high interest rates. (assuming some folks in government want to tame inflation)

I wouldn’t want to speculate what 10% interest rate would do to California real estate prices

[Wiley]

I’ll take a stab.

If you do not buy a house and you have all your assets in stocks, bonds or cash aren’t you vulnerable in case inflation comes back like the 1970s ?

Thats a very open question. Depends of which one your talking about. Cash, yes your a loser. Stocks, depends on which ones. Some may do well if they are corrolated to businesses that can take advantage of inflationary items ie. energy, minerals, etc. Bonds I don’t feel are even keeping up with inflation and definitely not paying for the risk right now.

In Mozambique right now their market is doing fairly well even though they are experiencing hyper inflation. In the end the currency will be worthless (which is why they are trying to trade the currency for anything they can) so again here they will lose.

The key here is to pick which outcome we are likely to experience in my opinion. I’ll answer your last question on my belief we’ll experience stagflation (inflation in items we need ie food, energy, things and deflation in non-essential assets that have increased wildly based on debt inspired purchases, ie housing, cars, discretionary items.

So yes in nominal terms your loan amount decreases with inflation. The problem with your assumption is whether or not the assett will hold its value as well as whether or not your wage inflation will keep up your other living costs and debt servicing costs on non fixed items (normally interest rates rise in inflationary times).

If the stagflation morphs into hyperinflation or even deflation it will be tough as unemployment soars and servicing your debt becomes difficult.

There is much much more to all this. I think the majority of housing bears here inluding myself feel in the intermediate future it will pay to hold cash as the decline in debt fueled housing mania will provide a better return, purchasing later then now. I’m sure others here can say it better then I.

So where do you hide. For me precioius metals, energy, and foreign stocks.

[Wiley]

I’ll take a stab.

If you do not buy a house and you have all your assets in stocks, bonds or cash aren’t you vulnerable in case inflation comes back like the 1970s ?

Thats a very open question. Depends of which one your talking about. Cash, yes your a loser. Stocks, depends on which ones. Some may do well if they are corrolated to businesses that can take advantage of inflationary items ie. energy, minerals, etc. Bonds I don’t feel are even keeping up with inflation and definitely not paying for the risk right now.

In Mozambique right now their market is doing fairly well even though they are experiencing hyper inflation. In the end the currency will be worthless (which is why they are trying to trade the currency for anything they can) so again here they will lose.

The key here is to pick which outcome we are likely to experience in my opinion. I’ll answer your last question on my belief we’ll experience stagflation (inflation in items we need ie food, energy, things and deflation in non-essential assets that have increased wildly based on debt inspired purchases, ie housing, cars, discretionary items.

So yes in nominal terms your loan amount decreases with inflation. The problem with your assumption is whether or not the assett will hold its value as well as whether or not your wage inflation will keep up your other living costs and debt servicing costs on non fixed items (normally interest rates rise in inflationary times).

If the stagflation morphs into hyperinflation or even deflation it will be tough as unemployment soars and servicing your debt becomes difficult.

There is much much more to all this. I think the majority of housing bears here inluding myself feel in the intermediate future it will pay to hold cash as the decline in debt fueled housing mania will provide a better return, purchasing later then now. I’m sure others here can say it better then I.

So where do you hide. For me precioius metals, energy, and foreign stocks.

[Chris Scoreboard Johnston]

Chris Johnston

I doubt anyone here would accuse me of being evasive. The one thing I think many people in here are guilty of is paralysis of over analysis. Follow RE on a daily basis, when it’s values change over much larger time frames. Also, the dollar, inflation, the budget deficit, China, blah blah blah. How in the world can you ever make any investment decisions with conviction, when you are weighing that many variables at the same time.

Ironically, within this analysis, false inferences are often drawn to markets that do not even fundamentally correlate the way you are viewing them. For example, the budget deficit or the US DOllar have no strong correlation to stock market swings, so why would a report on one of them which is negative, and a subsequent market rally be surprising? They are not correlated fundmentally, so any relationship is essentially random. I know Fund Managers, and they do not sell stocks based on these goofy short term reports, only retail does ( the suckers ).

This issue of inflation and how to protect your assets is often discussed here. There is no perfect hedge in any situation, and this can be proven mathematically. As a result, you cannot put $100 dollars in a bank denominated in a foreign currency, and then borrow against it to buy Soy Milk at Trader Joes, because you think you might be net ahead after doing so due to a valuation play against the dollar.

My suggestion is to make the best investments you think you can and let inflation swings be what they will. Keep in mind if you do this, there will be periods of high and low inflation, where you will have head winds, and tail winds.

The people that assume an extended period of inflation that is longer in duration than what has historically occured, also are guilty of “it’s different this time” analysis which they often criticize with housing experts. Trying to predict the next 1929 is also an excercise in futility. Fight the trend year after year, hoping to finally be right the one time it cracks, is a good road to investment losses.

I have not considered inflation in an investment decision ever, and never will. Maybe I am just too damn stupid to figure it all out, but I need conviction in my decisions, and analyzing 25 or more components does not lead to conviction for me.

[Chris Scoreboard Johnston]

Chris Johnston

I doubt anyone here would accuse me of being evasive. The one thing I think many people in here are guilty of is paralysis of over analysis. Follow RE on a daily basis, when it’s values change over much larger time frames. Also, the dollar, inflation, the budget deficit, China, blah blah blah. How in the world can you ever make any investment decisions with conviction, when you are weighing that many variables at the same time.

Ironically, within this analysis, false inferences are often drawn to markets that do not even fundamentally correlate the way you are viewing them. For example, the budget deficit or the US DOllar have no strong correlation to stock market swings, so why would a report on one of them which is negative, and a subsequent market rally be surprising? They are not correlated fundmentally, so any relationship is essentially random. I know Fund Managers, and they do not sell stocks based on these goofy short term reports, only retail does ( the suckers ).

This issue of inflation and how to protect your assets is often discussed here. There is no perfect hedge in any situation, and this can be proven mathematically. As a result, you cannot put $100 dollars in a bank denominated in a foreign currency, and then borrow against it to buy Soy Milk at Trader Joes, because you think you might be net ahead after doing so due to a valuation play against the dollar.

My suggestion is to make the best investments you think you can and let inflation swings be what they will. Keep in mind if you do this, there will be periods of high and low inflation, where you will have head winds, and tail winds.

The people that assume an extended period of inflation that is longer in duration than what has historically occured, also are guilty of “it’s different this time” analysis which they often criticize with housing experts. Trying to predict the next 1929 is also an excercise in futility. Fight the trend year after year, hoping to finally be right the one time it cracks, is a good road to investment losses.

I have not considered inflation in an investment decision ever, and never will. Maybe I am just too damn stupid to figure it all out, but I need conviction in my decisions, and analyzing 25 or more components does not lead to conviction for me.

[Wiley]

I would say inflation concerns are the fundamental basis that drives my investment decisions. Inflation is the driver of this housing bubble, thus I chose not to invest in housing right now. To clarify I’m talking about the extreme increase in money/credit supply fueling these asset bubbles. All one has to do is take a look back through history and see how similar periods of drastic increases in money supply end.

You don’t have to be a seer and try to predict another 1929 but you can sure be open to periods where the financial fundaments look really shakey and hedge yourself appropriately.

To me its really not that complicated. We (and I mean the people and govt) are spending far more then we earn and doing so only with the assistance of foreigners. That will end and its not very different then what some of these families are facing right now with their investment decision to buy a bigger house.

[Wiley]

I would say inflation concerns are the fundamental basis that drives my investment decisions. Inflation is the driver of this housing bubble, thus I chose not to invest in housing right now. To clarify I’m talking about the extreme increase in money/credit supply fueling these asset bubbles. All one has to do is take a look back through history and see how similar periods of drastic increases in money supply end.

You don’t have to be a seer and try to predict another 1929 but you can sure be open to periods where the financial fundaments look really shakey and hedge yourself appropriately.

To me its really not that complicated. We (and I mean the people and govt) are spending far more then we earn and doing so only with the assistance of foreigners. That will end and its not very different then what some of these families are facing right now with their investment decision to buy a bigger house.

[Author]

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