Rates don't have a natural level but inflation of 2% is natural? Who decided that it's the natural number? Who decides how to calculate inflation and the so-called core inflation? Maybe we need a transitioning period of even lower inflation to offset the insane amount of inflation that we've already seen? Inflation, in the US, is also still at around 3.3% last I checked.
Low rates have caused a huge housing price hike around the world, and the 0% rates have only stayed so long because of pressure from Trump (at the time) and others - including those nice claims of "transitory" inflation. Now that the damage is done, I'm not sure what the solution will be - but pumping more free money doesn't seem like the correct solution to me.
What people tend to forget is that inflation is like cancer...its cumulative. Its also an illusion for most.Ideally we should be aiming for deflation, at least to undo the high inflation of the past 5 years and get back to 2019 levels. Just because the rate is back to normal now does not mean the damage is not already done. Everything is still way too expensive. Need to undo the damage.
So fix it. Raise marginal income tax rates to make paying employees more a better deal than rapacious profit taking.What people tend to forget is that inflation is like cancer...its cumulative. Its also an illusion for most.
You think you are "getting ahead" with a measly raise at or below the inflation rate, look back at 10 years and wonder how you got by on what you made back then.
YOU FOOL! You are making the same amount of money you were making 10 years ago, you gained NOTHING!
Nope, idiots save in cash.Amen. Zero interest rate policy only helps millionaires and billionaires, not your every day Joe. The average Joe is a saver with a bank account in CD's and checking. Pay him 5% instead of letting fat cats speculate on leveraged bond bets.
Average income growth in the years 2013-2021 corrected for inflation.What people tend to forget is that inflation is like cancer...its cumulative. Its also an illusion for most.
You think you are "getting ahead" with a measly raise at or below the inflation rate, look back at 10 years and wonder how you got by on what you made back then.
YOU FOOL! You are making the same amount of money you were making 10 years ago, you gained NOTHING!
So fix it. Raise marginal income tax rates to make paying employees more a better deal than rapacious profit taking.
What people tend to forget is that inflation is like cancer...its cumulative. Its also an illusion for most.
You think you are "getting ahead" with a measly raise at or below the inflation rate, look back at 10 years and wonder how you got by on what you made back then.
YOU FOOL! You are making the same amount of money you were making 10 years ago, you gained NOTHING!
You wouldn't be paying more in taxes. Company owners would be paying more at the high end. They have a choice of where their money goes. If they pay their employees better, they get lower taxes. They pay their employees less, they pay higher taxes. Back when we had very high marginal tax rates on the highest incomes, owners decided that paying their employees was a better deal than paying taxes. This isn't hypothetical, it is a historical fact.How would INCREASING costs of living (taxes are a big cost of living) make things better?
You wouldn't be paying more in taxes. Company owners would be paying more at the high end. They have a choice of where their money goes. If they pay their employees better, they get lower taxes. They pay their employees less, they pay higher taxes. Back when we had very high marginal tax rates on the highest incomes, owners decided that paying their employees was a better deal than paying taxes. This isn't hypothetical, it is a historical fact.
First, here is an 90 year, inflation adjusted plot of the SP500Exactly, and same goes with investing, you're not really getting ahead you're just basically staying the same. The dollar is being devalued at a rapid rate so our buying power is less and less.
The reason you want a bit of inflation is that, you know your buying power will lessen over time, so there is an incentive to spend your money now. If you have deflation there is an incentive to stop spending, as you will be able to buy more in the future for the same amount and therefore the economy will grind to a hold.For anyone interested, the reason we have a fiat monetary system is because it's infinitely easier to adjust the amount of money in the system based on economic activity that a system based on physical assets like gold.
So for example, let's say that one year you have 5T in domestic economic transactions but the next year you only have 3T. What is the effect of having that extra 2T floating around - inflation. Deflation is the same but in reverse.
The reason the fed sets a 2% inflation target is because adjusting the money supply to economic needs and activity is still more an art than science. As the kind and amount of data available to the fed improves, they'll be able to pare that down.
The target gives them some wiggle room in case they over shoot. For reasons I can't recall at the moment, a slightly inflationary environment is easier to manage than deflation. If you ever hear the term 'deflationary spiral.' that's what they're trying to avoid.
Exactly, cash is for stability long and short term. Stocks are for long term investments.First, here is an 90 year, inflation adjusted plot of the SP500
The point is equities have always and will always grow much more quickly than pretty any other investment vehicle. I think it tends to be around 12% - but ONLY if you buy and hold. That's how a lot of people shafted back in 2008-9 - they got scared bailed out of the market like they were being chased by a bear.
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Second, the Dollar Index shows you the value of USD as compared with a basket of currencies - mostly other industrialized economies. So you can see there that it has remained very close to constant.
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eyeballing that chart I would say that's plus or minus around a third. So I'm using the term 'constant' a bit more casually that I should.
Treasuries took a yield hit today. So, it looks like they are 4.39% right now. I'm not really confident in an investment that long term for that low of a yield. I would think most people who want 30 year investments want something closer to a 6% to 10% return to really have their money work for them. In other words, if you really want stability, then you likely are close to retirement (or in retirement) and at that point 30 years seems too long of a time frame.If you're an investor that's looking something stable and that is almost assured of increasing in nominal value, 30 yr treasuries are around 4.6%
The September rate cut looks likely so once the fed switches gears the price of those bonds will increase. So it's very much better than a bank CD.
Personally, I don't think the fed will go much below 3%. With inflation stabilizing around 2% that's real return of 1%. But with every cut, your bonds are increasing in value.
The public sector wage increases probably skews this data though. Talk to most people and they will tell you they feel the squeeze much more now than they did before. There is just not much money left over once the COL are accounted for. Or if you need a new car good luck! The prices are outrageous now. Or pretty much any major house project.
Also, think about retired people or self employed people. Same thing, they are feeling it even more.
In Denmark they simply stopped making they coins that were worthless. When I was a kid you could have a "5 øre" (0,7 penny) now 50 øre is the smallest coin.Exactly, and same goes with investing, you're not really getting ahead you're just basically staying the same. The dollar is being devalued at a rapid rate so our buying power is less and less.
In fact over the years they stopped using certain minerals to make coins with because the coins are worth less than the minerals used. That's why newer coins are magnetic and older ones are not. It's also why they stopped making pennies altogether, it cost more to make a penny in materials than what a penny is worth. This is a pretty solid indication that our money is losing it's value.
The only people who really benefit from inflation are the ruling class and the ultra rich.
Setting marginal rates is a joke with all the loopholes. We need a consumption tax and cut government spending by 50%.So fix it. Raise marginal income tax rates to make paying employees more a better deal than rapacious profit taking.