Where will inflation stop?

In reply to z31maniac :

I'm maxing out my 401k and Roth right now, and am considering opening a taxable brokerage account, but I've been keeping my emergency fund and travel fund in a savings account with a pathetic rate.  Part of that is what went into CDs.  Although with the market as of late, the CDs might outpace it.

This is getting into stuff that should go in the investment thread, but I am also looking into ETFs that cover dividend stocks.

eastsideTim said:

In reply to z31maniac :

I'm maxing out my 401k and Roth right now, and am considering opening a taxable brokerage account, but I've been keeping my emergency fund and travel fund in a savings account with a pathetic rate.  Part of that is what went into CDs.  Although with the market as of late, the CDs might outpace it.

This is getting into stuff that should go in the investment thread, but I am also looking into ETFs that cover dividend stocks.

That doesn't sound bad. I don't know if what I'm doing is the absolute best thing, but we basically put all extra into the retirement accounts, if we need something we do it on credit, pay it off, then back to throwing all extra into retirement. 

z31maniac said:

Tom_Spangler (Forum Supporter) said:

In reply to porschenut :

I agree completely with your assessment. The only thing I'll add is that not only were folks staying home during Covid, the government (in a completely bipartisan effort) was dumping massive amounts of money into the economy. When you create a bunch of new dollars but the amount of stuff they can buy is the same (or even less because of supply chain issues), that's a perfect recipe for inflation.

Right? Who would have thought throwing $5 Trillion into the economy in less than two years would cause inflation? Especially since a lot of it went to people who didn't need it. I didn't get any stimulus checks, but my fiance did. So she started collecting old 60s Corningware and stuff like that. 

 

And this was not a uniquely American approach either. This was happening in most developed countries at the same time. If you go to twitter and search 'inflation', you'll see posts about high inflation all over the globe (US, Canada, UK, Germany, Poland, India, even Bangladesh came up). Housing, food and energy prices are high all over.

The inflation is on track to what I expected post pandemic and with Russia creating uncertainty. I am not stressed at all. I do understand that someone that wanted to retire soon would be or someone of lower locality adjusted income than me. Still this wasn't a surprise event.

The USA Government has done a good to great job managing things that they can from stabilizing lower income folks with the stimulus checks to the interest rate hikes which were a little late but given the uncertainty were decently timed. While there is great fear of a recession, I understood it will to some degree certainly happen based on early 2020 financial analysis I read:

• First the pandemic related market supply impacts are not predictable. If instead of a pandemic it was the russian invasion of ukraine that started in 2019 then most global supply would be rather stable. 
• Second social changes in what people are willing to do for work has resulted in high workforce exchange or turnover. This instability creates a perceived loss in value of services purchased while increasing pay for workers. (and yes probably many business owners are either building a bigger emergency savings via profit or just greedflating their prices)
• Third while the economy has been booming post pandemic (demand for many things is high and money is ready to spend) it is still rather spotty because of the bullet 1. I say that now but maybe analysis 2 years from now will show that this inflation/recession cycle was just as spotty in terms of impact across all business sectors as past cycles.
• Fourth the gen z/millenial run for housing was shocking. I was talking to a HUD real estate specialist and he stated the reseach indicated a mild shift of that generation to single family homes but less so than prior generations. It is likely the pandemic social impacts and stimulus funds shifted a lot of that group to exit apartments more aggressively. I think this is an area that could handle a lower interest rate as supply has not started to catch up to demand since 2007-8. 
• Finally some thoughts: I have been told by several contractors that server farm and shipping/warehousing companies like Amazon/AWS basically gobbled up and stored lots of construction material or locked producers into contracts as their business spiked from 2019 on. Other contractors explained that responses on delays by their sources for roofing materials and plastic laboratory casework are pointing to the refinery fire in Texas and being locked out of other refineries because of the prior mentioned Amazon like contracts already locking them in. While the USA seems just over it regarding the pandemic in China it seems to be part political and part real pandemic infection increases that has resulted in increased instability of global goods. 

Should economic controls of the Federal Government and the FED policy be shifted a bit...probably yes a little. Should we make major shifts in policy based on a once in 100 years pandemic? I don't know. Maybe yes if we see how modern global economics required different levers to control the economy. 

I think a 0.50 % VAT on any non food item would be a great ADDITION to our tax system. Lock that in. Then have the revenue data analyzed over the next 4 years. 

Got 4% a month ago on 6 month but 12 month also had it.  Wait till the next fed meeting when they raise prime.  Several on line brokers, j edwards, etc have great selection.

8% inflation is a formula based on metrics that don't apply to me.  Our gas bill dropped when we went from a 15mpg truck to a prius for 90% of travel.  This winter heat will hurt but we will drop the temp in the house and deal with it.  Food has increased but with smart shopping it is not as bad as one might think.  There are always some talkingheads that put out scary numbers, but if something gets too expensive we look at options.  Not eating eggs as much or steak, don't go to restaurants but we eat out at costco where pizza is still 2 bucks and a dog with soda under 2.  

In reply to STM317 :

Oh, one more thing.  Yes the govt handouts during COVID did not help what we are dealing with but so many people really needed that money.  This happens.  Who remembers when Bush was giving out 500 dollar advancements on tax returns to help during a pinch.  I do because gas prices spiked right after and ate most of my check.  But it helped many then also.  Better to err on the side of caution.

Stimulus checks (they're not called safety net checks for a reason) help those most in need, but those same people are also most impacted by high inflation caused in part by that stimulus. The gain that comes from a couple thousand bucks in one time payments eventually gets erased when necessary goods are 10-20% higher from that point on. I'd be interested in some research on whether those most at risk are better off now or not as a result of the stimulus.

I think I might pick up two of those maxed out 9% I-Bonds. 

z31maniac said:

eastsideTim said:

In reply to z31maniac :

I'm maxing out my 401k and Roth right now, and am considering opening a taxable brokerage account, but I've been keeping my emergency fund and travel fund in a savings account with a pathetic rate.  Part of that is what went into CDs.  Although with the market as of late, the CDs might outpace it.

This is getting into stuff that should go in the investment thread, but I am also looking into ETFs that cover dividend stocks.

That doesn't sound bad. I don't know if what I'm doing is the absolute best thing, but we basically put all extra into the retirement accounts, if we need something we do it on credit, pay it off, then back to throwing all extra into retirement. 

I had a well timed financial transaction in 2001. While it wasn't the best thing to do at the time it was needed. I took out a loan from my 401k for mortgage downpayment. Boooooo bad idea folks tell me. But it was a couple months prior to the Sept 11 attacks. The market crashed and I bought all my shares back over the next year or two. So got a huge 401k boost from that. So present day I already increased retirement account investments as the market continues to fall the better I feel about that money going in there. 

GameboyRMH said:

AnthonyGS (Forum Supporter) said:

 

And gas prices were high before Ukraine / Russia was a thing.  Check graphs if you doubt it.  That's another lie being told to keep you from reality. 
 

 

The gas prices were driven up before the war...in anticipation of the war. It wasn't a coincidence, it's just that you can't prevent the market from acting on speculation.

That is one of many reasons fuel prices rise so quickly.  There are many other reasons but no one wants to discuss those.

porschenut said:

Got 4% a month ago on 6 month but 12 month also had it.  Wait till the next fed meeting when they raise prime.  Several on line brokers, j edwards, etc have great selection.

8% inflation is a formula based on metrics that don't apply to me.  Our gas bill dropped when we went from a 15mpg truck to a prius for 90% of travel.  This winter heat will hurt but we will drop the temp in the house and deal with it.  Food has increased but with smart shopping it is not as bad as one might think.  There are always some talkingheads that put out scary numbers, but if something gets too expensive we look at options.  Not eating eggs as much or steak, don't go to restaurants but we eat out at costco where pizza is still 2 bucks and a dog with soda under 2.  

You're saying that inflation doesn't impact you, while also saying inflation changes your buying/eating habits. That's a bit contradictory, right?

ProDarwin said:

In reply to STM317 :

This is a chart which all by itself says America is worse then some other developed countries.  
    However if you look at American exports  they tend to go down when America does well dealing with inflation.  And go up when we have higher inflation.   
It's about the relative strength of the dollar to that of our trading partners.  
      Conversely America tends to import less with the weak dollar.  helping our balance of payments.   
   Manufacturing tends to increase with a weak dollar and decrease with a strong dollar. 
  So inflation isn't all bad and controlling inflation isn't all good.  It really depends on the individual.  
Fixed Debt  ( like mortgage) is paid easier with inflation.  Adjustable rate debt such as credit card and some mortgages   Gets harder to pay with inflation.    
 In rural areas inflation tends to hit harder.  ( crop prices tend to be the prime mover of wages in rural areas). Unlike Urban areas where it's easier to get raises during inflation periods.  
    In todays tight labor markets jobs are both going away and pay is increasing for those remaining.  

In reply to z31maniac :

No of course it affects me but not at an 8% level.  Things cost more we just buy less or cheaper things.  And avoid expenses when we can.  It is how one gets through inflation when on a fixed income.

STM317 said:

Stimulus checks (they're not called safety net checks for a reason) help those most in need, but those same people are also most impacted by high inflation caused in part by that stimulus. The gain that comes from a couple thousand bucks in one time payments eventually gets erased when necessary goods are 10-20% higher from that point on. I'd be interested in some research on whether those most at risk are better off now or not as a result of the stimulus.

I would be interested in that analysis. What I saw in my local sphere of people:

• Some said it was key to keeping them in their apartments.
• A couple said they were stable and the stimulus wasn't enough to afford daycare for one of the spouses to go back to work so they saved it until things started to open back up and then bought household goods with it or in one case help to get a new car.
• Most said it was extra funds that were used to improve school from home equipment and stuffed into retirement.
• One used it to travel internationally for fun during 2021.

AnthonyGS (Forum Supporter) said:

aircooled said:

It seems like food prices are a prime driver.  It seems like many of the food increases are well beyond the stated inflation.  It's also something that is unlikely to be affected by the interest rate hikes (unlikely most will cut down on food purchases!)

https://www.forbes.com/advisor/personal-finance/why-are-food-prices-still-rising/

Eggs up 40%!  (having chickens is certainly helpful here)

General reasons stated in the article are: 

  - Disruption due to COVID (you would think this would be clearing up by now)

  - Ukraine, both as a source of fertilizer, and the destruction of crops which will drive up world food demand / prices.

Of course, if the Ukraine war ended tomorrow, it could still take quite a while to return to normal.  So... don't expect anything to change a lot anytime soon.

Prices do not drive inflation.  Inflation drives prices!  Again, the correct definition of inflation is here in a round a bout way.  Use it to understand the issue. If you can't understand, you can't figure out who can help you fix it.    

Prices don't drive inflation completely.  I spent most of my career involved in the cost/price tasks.  Inflation can have an effect on cost.  Price is driven by margin, opportunity cost, total profit per sale.  Inflation is an excuse to raise prices and for many a calculated risk.  When the competition uses the excuse those who hold the line can see increased volume which means more dollars in the bank even though the profit percentage may go down.  

Looking at what the oil companies have been doing for decades I would say greed drives inflation.

AnthonyGS (Forum Supporter) said:

aircooled said:

It seems like food prices are a prime driver.  It seems like many of the food increases are well beyond the stated inflation.  It's also something that is unlikely to be affected by the interest rate hikes (unlikely most will cut down on food purchases!)

https://www.forbes.com/advisor/personal-finance/why-are-food-prices-still-rising/

Eggs up 40%!  (having chickens is certainly helpful here)

General reasons stated in the article are: 

  - Disruption due to COVID (you would think this would be clearing up by now)

  - Ukraine, both as a source of fertilizer, and the destruction of crops which will drive up world food demand / prices.

Of course, if the Ukraine war ended tomorrow, it could still take quite a while to return to normal.  So... don't expect anything to change a lot anytime soon.

Prices do not drive inflation.  Inflation drives prices!  Again, the correct definition of inflation is here in a round a bout way.  Use it to understand the issue. If you can't understand, you can't figure out who can help you fix it.    

So what is the correct definition of inflation? You keep throwing that about without offering "the definition."

porschenut said:

AnthonyGS (Forum Supporter) said:

aircooled said:

It seems like food prices are a prime driver.  It seems like many of the food increases are well beyond the stated inflation.  It's also something that is unlikely to be affected by the interest rate hikes (unlikely most will cut down on food purchases!)

https://www.forbes.com/advisor/personal-finance/why-are-food-prices-still-rising/

Eggs up 40%!  (having chickens is certainly helpful here)

General reasons stated in the article are: 

  - Disruption due to COVID (you would think this would be clearing up by now)

  - Ukraine, both as a source of fertilizer, and the destruction of crops which will drive up world food demand / prices.

Of course, if the Ukraine war ended tomorrow, it could still take quite a while to return to normal.  So... don't expect anything to change a lot anytime soon.

Prices do not drive inflation.  Inflation drives prices!  Again, the correct definition of inflation is here in a round a bout way.  Use it to understand the issue. If you can't understand, you can't figure out who can help you fix it.    

Prices don't drive inflation completely.  I spent most of my career involved in the cost/price tasks.  Inflation can have an effect on cost.  Price is driven by margin, opportunity cost, total profit per sale.  Inflation is an excuse to raise prices and for many a calculated risk.  When the competition uses the excuse those who hold the line can see increased volume which means more dollars in the bank even though the profit percentage may go down.  

Looking at what the oil companies have been doing for decades I would say greed drives inflation.

You are just plain wrong just like most economists and financial types.  Inflation drives prices period.  Define inflation in 8 words or less.  

Once we know what inflation is then we can talk about something really cool, where money comes from.  We might get there, today, tonight, next week, next month or never.  

This is starting to sound like the "If you don't know why I'm mad at you, I'm not telling you" BS.

Advan046 said:

STM317 said:

Stimulus checks (they're not called safety net checks for a reason) help those most in need, but those same people are also most impacted by high inflation caused in part by that stimulus. The gain that comes from a couple thousand bucks in one time payments eventually gets erased when necessary goods are 10-20% higher from that point on. I'd be interested in some research on whether those most at risk are better off now or not as a result of the stimulus.

I would be interested in that analysis. What I saw in my local sphere of people:

• Some said it was key to keeping them in their apartments.
• A couple said they were stable and the stimulus wasn't enough to afford daycare for one of the spouses to go back to work so they saved it until things started to open back up and then bought household goods with it or in one case help to get a new car.
• Most said it was extra funds that were used to improve school from home equipment and stuffed into retirement.
• One used it to travel internationally for fun during 2021.

Not everyone got those stimulus checks. Above a certain level of income we weren't eligible.  
That's as it should be.  

z31maniac said:

 

So what is the correct definition of inflation? You keep throwing that about without offering "the definition."

Too many dollars chasing too few goods and services.

I just want to know the true definition of inflation