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View Full Version : Economics What will inflation be at a year and a half from now?


banyon
03-28-2009, 09:14 PM
It seems that there are a lot of folks on this forum lately who see some impending catastrophe and doom. Some see massive inflation, hyperinflation, deflation, civil unrest. They opinions seem pretty much all over the place. Some probably because their politician of choice didn't get elected, others becaue they just like to b*tch, but others because they have real reasons and ideas about why things will get worse before they get better.

I am interested in the people with real reasons of course. If people really think this, then what are they doing about it? Personally. If you have money, do you have some strategy with what to do with it? Bury it in paint cans in your yard and load up on ammunition? I'm hoping for something a little more complex.

Personally, I am thinking that with all of the money that the Fed and the Treasury are flooding the market with, there's just no way that we won't see double digit (or much worse like 30%) inflation in the next year when all of this money handed to the banks starts circulating. I was trying to buy some stocks at the bottom, but even if the market gained back 50% of the ground it lost and inflation ate it all away, then it would not seem like a very good strategy. I am considering buying some gold, but not in an ETF, those seem sketchy.

On the other hand, if inflation is sure to come, then it would be great for paying off my student loans. All of their interest and principal will be eaten away, especially since I consolidated at the bottom. It would also be a good time to buy a house. Lock in payments denominated at one amount and then inflation devalues the mortgage.

What plans do you have, if any?

KC native
03-28-2009, 09:23 PM
Inflation all depends on when the Fed raises rates and how they take the extra money out of the system. Right now they are battling deflation (not very successfully either) but are conscious of the threat for inflation in 12-18 months. The ability to raise rates is also extremely dependent on how quickly the economy turns around so most inflation predictions that you will see right now will probably be really off.

Right now TIPS (treasury inflation protected securities) are a great deal. They were awesomely cheap in November and have had a major correction lately so they're not as cheap as they were but there is still a lot of value there. The easiest way to take advantage of this is to look for Real Return mutual funds (PIMCO's fund is a good one). They're mostly TIPS and then invest in some combination of REITs, commodities, and other bonds. Make sure you go to morningstar.com to check out their portfolios before investing (In other words, do your own due diligence).

BucEyedPea
03-28-2009, 09:31 PM
I dunno. Cheap imports may hide part of it. I think inflation will be in consumer goods more than housing.

banyon
03-28-2009, 09:36 PM
Inflation all depends on when the Fed raises rates and how they take the extra money out of the system. Right now they are battling deflation (not very successfully either) but are conscious of the threat for inflation in 12-18 months. The ability to raise rates is also extremely dependent on how quickly the economy turns around so most inflation predictions that you will see right now will probably be really off.

Right now TIPS (treasury inflation protected securities) are a great deal. They were awesomely cheap in November and have had a major correction lately so they're not as cheap as they were but there is still a lot of value there. The easiest way to take advantage of this is to look for Real Return mutual funds (PIMCO's fund is a good one). They're mostly TIPS and then invest in some combination of REITs, commodities, and other bonds. Make sure you go to morningstar.com to check out their portfolios before investing (In other words, do your own due diligence).

Are you buying those?


One problem I might see with those is that the government gets to say what the rate of inflation really is, which hasn't been very accurate for a while now.

KC native
03-28-2009, 10:37 PM
Are you buying those?


One problem I might see with those is that the government gets to say what the rate of inflation really is, which hasn't been very accurate for a while now.

In the accounts we manage, yes.

Yea, they mess around with CPI but that's why the Real Return funds are good because they're usually 60-70% TIPS and with the remainder they invest in other bonds, commodities, and REITs. Most of them have a goal to beat CPI every year.

wild1
03-28-2009, 10:44 PM
it will be more along the lines of 3, 4 years from now what inflation will be like once the massive spending goes out and all this money they are printing out of thin air begins circulating. from what i understood most of the spending was down the road... one of the reasons why the intent of the agenda was in question to begin with.

banyon
03-28-2009, 10:47 PM
In the accounts we manage, yes.

Yea, they mess around with CPI but that's why the Real Return funds are good because they're usually 60-70% TIPS and with the remainder they invest in other bonds, commodities, and REITs. Most of them have a goal to beat CPI every year.

I guess I was thinking more along the lines that a government in hyperinflation that's already nationalizing banks, fixing prices and wages probably wouldn't have too much compunction about revisiting the terms of those securities.

KC native
03-29-2009, 12:25 AM
I guess I was thinking more along the lines that a government in hyperinflation that's already nationalizing banks, fixing prices and wages probably wouldn't have too much compunction about revisiting the terms of those securities.

We won't see hyper-inflation. The Fed has many ways to choke off inflation since they have put so much money into the system. We might see 12-15% for a year or two but since rates are so low it wouldn't take much of a raise to get that under control.

BucEyedPea
03-29-2009, 02:04 AM
it will be more along the lines of 3, 4 years from now what inflation will be like once the massive spending goes out and all this money they are printing out of thin air begins circulating. from what i understood most of the spending was down the road... one of the reasons why the intent of the agenda was in question to begin with.

3-5 years is my understanding...and it just may be Wiemar Republic with the end of the dollar.

Mr. Flopnuts
03-29-2009, 02:13 AM
Have we hit 10k a head yet with this stimulus? I know we're close.

HonestChieffan
03-29-2009, 07:00 AM
18 months? Maybe no change at all in that short a period. The causes for the inflation won't have even alll been in place or spent in that short a period.

Hydrae
03-29-2009, 08:00 AM
3-5 years is my understanding...and it just may be Wiemar Republic with the end of the dollar.

Just in time for 12/21/2012. :)

patteeu
03-29-2009, 09:49 AM
I would have probably selected "Major inflation 10-19%" but since that wasn't an option, I decided that "Major inflation 15-25%" was closer to my guess than "Significant, but not too much 7-12%" mainly because I didn't like the sound of the "not too much" part of the latter option. BTW, what happened to 13% and 14%?

patteeu
03-29-2009, 09:52 AM
Reading further down the poll, I probably should have picked "I don't know", because I haven't the foggiest idea really.

banyon
03-29-2009, 10:19 AM
I would have probably selected "Major inflation 10-19%" but since that wasn't an option, I decided that "Major inflation 15-25%" was closer to my guess than "Significant, but not too much 7-12%" mainly because I didn't like the sound of the "not too much" part of the latter option. BTW, what happened to 13% and 14%?

I was just trying to hit some ranges with the numbers, not cover everything.

Quit nit picking you bastard! :cuss:


:D

banyon
03-29-2009, 10:20 AM
We won't see hyper-inflation. The Fed has many ways to choke off inflation since they have put so much money into the system. We might see 12-15% for a year or two but since rates are so low it wouldn't take much of a raise to get that under control.

They've already cut rates to basically zero. What are they going to do now, go negative? Pay people to take their debt money?

HonestChieffan
03-29-2009, 10:23 AM
They've already cut rates to basically zero. What are they going to do now, go negative? Pay people to take their debt money?

You dont understand the relationship between inflation and the feds rates?

mlyonsd
03-29-2009, 10:27 AM
I think I'll pick under 5% since things will get to the point government will step in and tell businesses it's against the law to raise prices.

BucEyedPea
03-29-2009, 10:28 AM
Originally Posted by banyon View Post
They've already cut rates to basically zero. What are they going to do now, go negative?
They're doing that.

banyon
03-29-2009, 10:36 AM
You dont understand the relationship between inflation and the feds rates?

Sure, did you have a point to make?

banyon
03-29-2009, 10:36 AM
They're doing that.

where?

***SPRAYER
03-29-2009, 11:06 AM
http://www.dotpenn.com/images/stories/articles/2009-03/self_absorbed_ass.jpg

HonestChieffan
03-29-2009, 11:08 AM
Sure, did you have a point to make?

Your earlier statement would indicate you do not understand the relationship of rates to inflation. Thats the point and you made it.

BucEyedPea
03-29-2009, 11:17 AM
Negative Interest Rates


http://www.newyorkfed.org/research/current_issues/ci10-5.html

Stewie
03-29-2009, 11:29 AM
Which set of data are we using to measure inflation? The "official" gov't data which is manipulated because it's in the government's best interest to do so, or something like shadowstats that calculates inflation w/o the gimmicks and is more accurate?

banyon
03-29-2009, 11:41 AM
Your earlier statement would indicate you do not understand the relationship of rates to inflation. Thats the point and you made it.

How does it "show" that? What do you think we are missing here?

Did you even understand what my post is about, or are we going to do your usual 5 thread pages of evading questions, ignoring post content, and cutting and pasting the first thing you Googled?

banyon
03-29-2009, 11:48 AM
Which set of data are we using to measure inflation? The "official" gov't data which is manipulated because it's in the government's best interest to do so, or something like shadowstats that calculates inflation w/o the gimmicks and is more accurate?

Whichever you like. My answer was supposed to be closer to the true number, but if someone wants to believe the gov't number that's fine by me too.

banyon
03-29-2009, 11:51 AM
Negative Interest Rates


http://www.newyorkfed.org/research/current_issues/ci10-5.html

I didn't know that had happened in the past. Looks like a pretty minor instance though.

KC native
03-29-2009, 11:58 AM
They've already cut rates to basically zero. What are they going to do now, go negative? Pay people to take their debt money?

No, it means that they won't have to raise rates much to quell inflation when it does start to show up.

KC native
03-29-2009, 12:00 PM
I didn't know that had happened in the past. Looks like a pretty minor instance though.

It is because those repo's that they are covering isn't the Fed's action. This was done between banks and IB's.

Stewie
03-29-2009, 12:00 PM
Whichever you like. My answer was supposed to be closer to the true number, but if someone wants to believe the gov't number that's fine by me too.

Cool. Using "real" numbers I'm saying 15-25% in 1-1/2 years. Most advisors I read say late 2011-2012 is the timeframe to watch for inflation to really take off. I think this is based on the fact that bailouts are no where near being done.

banyon
03-29-2009, 12:05 PM
People are giving rates, but are people doing anything about it personally? (besides KC Native who addressed this)

Do people just not have disposable income?

banyon
03-29-2009, 12:16 PM
No, it means that they won't have to raise rates much to quell inflation when it does start to show up.

I guess I didn't think they were through trying to stimulate the economy through rate cuts.

But in any event, I'm not sure it exactly works like it has classically due to the fact that we have outsourced so much debt and the production of most consumer goods.

Devaluing the dollar means that we will have to raise rates to get more takers internationally, and if the devaluation shifts our role as the reserve currency, then i think it's on, as it will take more dollars to buy any consumer good produced abroad (which is about all of them these days).

I think the Fed might've played itself out of its ability to halt inflation by raising rates.

Hydrae
03-29-2009, 12:20 PM
Do people just not have disposable income?

Sadly, this at this time.

KC native
03-29-2009, 12:25 PM
I guess I didn't think they were through trying to stimulate the economy through rate cuts.

But in any event, I'm not sure it exactly works like it has classically due to the fact that we have outsourced so much debt and the production of most consumer goods.

Devaluing the dollar means that we will have to raise rates to get more takers internationally, and if the devaluation shifts our role as the reserve currency, then i think it's on, as it will take more dollars to buy any consumer good produced abroad (which is about all of them these days).

I think the Fed might've played itself out of its ability to halt inflation by raising rates.

The thing you also have to remember is that they have many arrows in their quiver to kill inflation. They can raise rates, increase reserve requirements, discontinue the recent liquidity programs they have instituted.

I'm not saying that the Fed will start to fight inflation at the perfect or even right time but I do think we won't see anything above 15% inflation for more than a year.

HonestChieffan
03-29-2009, 12:27 PM
People are giving rates, but are people doing anything about it personally? (besides KC Native who addressed this)

Do people just not have disposable income?

Im giving money to the candidates running against incumbants so we can re order congress and repeal and halt a lot of the Obama spending crap so we dont have to deal with high inflation.

banyon
03-29-2009, 12:33 PM
Im giving money to the candidates running against incumbants so we can re order congress and repeal and halt a lot of the Obama spending crap so we dont have to deal with high inflation.

Really? How much? To whom? Who has declared their candidacy so absurdly early?

HonestChieffan
03-29-2009, 12:44 PM
Is this early? How will the incumbants change between now and the election that can move to fix the problems they have generated?

banyon
03-29-2009, 12:51 PM
Is this early? How will the incumbants change between now and the election that can move to fix the problems they have generated?

So, you're giving away money, but you don't know who you're giving it to?

Stewie
03-29-2009, 12:58 PM
The thing you also have to remember is that they have many arrows in their quiver to kill inflation. They can raise rates, increase reserve requirements, discontinue the recent liquidity programs they have instituted.

I'm not saying that the Fed will start to fight inflation at the perfect or even right time but I do think we won't see anything above 15% inflation for more than a year.

I respectfully disagree about "many arrows." They cannot raise rates or discontinue the liquidity for a long time, it will kill any recovery. Besides, the only way out of this mess is to inflate away the trillion$ in debt that can never be repaid with current dollars. They won't come out and say it and they never will. Watch the Fed's actions, don't listen to their words.

HonestChieffan
03-29-2009, 12:58 PM
So, you're giving away money, but you don't know who you're giving it to?


I know and they know. I dont give a damn if you know.

banyon
03-29-2009, 01:15 PM
I know and they know. I dont give a damn if you know.

Sure ya do. ;)

Hydrae
03-29-2009, 01:20 PM
Im giving money to the candidates running against incumbants so we can re order congress and repeal and halt a lot of the Obama spending crap so we dont have to deal with high inflation.

www.goooh.com

:thumb:

HonestChieffan
03-29-2009, 01:22 PM
hydrae, dont confuse Banyon. Hes on a roll today.

banyon
03-29-2009, 01:31 PM
hydrae, dont confuse Banyon. Hes on a roll today.

So who were the candidates? What was it you were going to teach us about inflation? Did you ever find that language in the bill in the other thread about the GNP tax? Why can't people who weren't in Vietnam understand why we should or shouldn't fight wars today?

Any other questions today you want to evade or pretend weren't asked?

Saul Good
03-29-2009, 01:47 PM
18 months? Maybe no change at all in that short a period. The causes for the inflation won't have even alll been in place or spent in that short a period.

I think that you are forgetting to take into account the swift action of passing the bill on a Friday instead of waiting until the following Tuesday. The effects will now be felt in 17 months and 27 days.

HonestChieffan
03-29-2009, 01:59 PM
I think that you are forgetting to take into account the swift action of passing the bill on a Friday instead of waiting until the following Tuesday. The effects will now be felt in 17 months and 27 days.


Perhaps you are onto something.