Where will inflation stop?

frenchyd said:

In reply to RX Reven' :

Thank you.  I've still managed to do well. I'm content doing what I am. I think staying at it at my age is helping me to be strong and healthy. 
So I'm not saying I got cheated.
    I'm concerned about those coming behind.  Unworthy legacy's accepted and simply use college as a excuse to party.
    Not that only legacy's, connected, or able to offer an endowment  are the only ones to waste space in college. It's just that the space they occupy should go to someone who can actually use that space wisely.  

This may exist in real life. There may even be a handful of this type in every college and university in the country.

But it is absolutely NOT a significant or even noticeable issue.  You are talking about the literal 1%.

In reply to Duke :

My brother and I are the first 2 in the family to get college degrees. Both our parents received scholarships and didnt go. My dad started working as a day laborer, working his way up to C-suite in his industry, our mother worked random jobs until I was about 15. We were told we HAD to go to college, so we went. We used it as an excuse to party and thats about all we did and did just enough work to maintain a ~3.5 GPA. I worked full time to pay my own tuition minus an academic scholarship. 10 years later I will say it was largely the biggest waste of time and money of my life. I do not use my degree in my career and most of what I learned that may be useful could be quickly learned by a critical thinker and a google search. The things I attribute most of the success in my life to is that my parents instilled in me a good work ethic, a sense of curiousity, fiscal responsibility, and a strong sense of personal responsibility.

What Im saying is I dont give a E36 M3 if a large percentage of college acceptances are unworthy entitled people because it isnt the indicator of success it used to be.

My wife and I decided we will not be saving for our childs college education, instead we have started a fund that he will get when he turns 18 to allow him to enter the real estate market. If he wants to go to school he can get a scholarship or pay for it himself like we did, but the single largest indicator of wealth in the US is home ownership, and its becoming increasing difficult to achieve.

(Yes I understand that certain lucrative careers require a degree, largely applied sciences, but that isnt the majority of college degrees. Just look at all the millenials complaining they cant pay off their student loans with their chosen career paths.)

Duke said:

In reply to frenchyd :

Have you ever read anything I've ever written here?

If so, why would you assume I blame it on one particular flavor of politicians?

National debt and heavy inflation are largely - not entirely, but largely - caused by the same thing: excessive government spending.

Address that fundamental issue and you address both problems at once.  All three problems, if you count high taxes as a problem.

And before the inevitable condescending, uh, person comes in to tell me about roads and libraries and fire trucks, I am NOT a "taxation is theft" Libertarian.

Generating inflation is not the way to successfully reduce national debt.  Unless you think burning it down is a great way to reduce the clutter in your garage.

 

Inflation does come as you say from excessive spending relative to income. 
     Sometimes that is required. Such as wartime.   ( in my life we've been at war an awful lot).  Never-the-less we could pay that off by raising taxes.  Something politicians find difficult or impossible  to do.   Those who can afford the additional taxes are also those who typically pay the big money to politicians  to avoid paying taxes. 
         The alternative is inflation.  Look at any post war period and there is significant inflation.    
      Dealing with inflation for most of us means figuring out how to get a pay raise.  Retired people indirectly get a pay raise as the value of our investments inflated along with inflation.  ( sharp investors realize how to capitalize on inflation)  even fixed income retires living on Social security  get raises to reflect inflation.  
    The only losers are those who put money in the mattress or a banks savings account. 

Opti said:

In reply to Duke :

My brother and I are the first 2 in the family to get college degrees. Both our parents received scholarships and didnt go. My dad started working as a day laborer, working his way up to C-suite in his industry, our mother worked random jobs until I was about 15. We were told we HAD to go to college, so we went. We used it as an excuse to party and thats about all we did and did just enough work to maintain a ~3.5 GPA. I worked full time to pay my own tuition minus an academic scholarship. 10 years later I will say it was largely the biggest waste of time and money of my life. I do not use my degree in my career and most of what I learned that may be useful could be quickly learned by a critical thinker and a google search. The things I attribute most of the success in my life to is that my parents instilled in me a good work ethic, a sense of curiousity, fiscal responsibility, and a strong sense of personal responsibility.

What Im saying is I dont give a E36 M3 if a large percentage of college acceptances are unworthy entitled people because it isnt the indicator of success it used to be.

My wife and I decided we will not be saving for our childs college education, instead we have started a fund that he will get when he turns 18 to allow him to enter the real estate market. If he wants to go to school he can get a scholarship or pay for it himself like we did, but the single largest indicator of wealth in the US is home ownership, and its becoming increasing difficult to achieve.

(Yes I understand that certain lucrative careers require a degree, largely applied sciences, but that isnt the majority of college degrees. Just look at all the millenials complaining they cant pay off their student loans with their chosen career paths.)

You are making a lot of sense.   There are plenty of ways to succeed without that degree.   
  My degrees were to simply meet those requirements.  Get the interview.  
  I quickly learned that earning a living as a mechanic wouldn't allow me to achieve the things I wanted.  In those days the trades  were the same. Body worn out by your 50's and no future without the degree. 
          Something those advocating a career in the trades still need to consider.  Laying 300 bricks or 80 blocks an hour takes its toll  on your body.  As does the required number of feet of wiring or bd ft of lumber. 
   While they may let those standards slide now due to lack of applicants for jobs.  Once that changes back you don't want to be climbing those ladders and scaffolding in your sixties  with worn out joints and damaged muscles.  
   Sorry, I digress.  
 

In reply to frenchyd :

I always think of inflation as being like a train.

Older people like you and I that have already acquired our things are onboard the train so it make little difference to us whether the train is going three miles per hour or seven miles per hour (3% inflation or 7% inflation).

The people that get hurt are the young ones that haven't acquired their things yet...by analogy they're running behind the train trying to catch up and jump onboard.

Raising taxes in any way inevitably makes it's way to the young people that are trying to acquire things.

If we increase corporate taxes for example, they'll just pass them straight through to their customers (again, the young people).

I own shares in those corporations (i.e. I'm onboard the train) which gives me a strong hedge against inflation as my portfolio will increase almost perfectly in sync with the increased prices I'm paying.

What's the saying..."if you think things are expensive now, just wait until they're free".

In reply to RX Reven' :

The train analogy is a good one, but keep in mind when we were young, we were not on the train, and different older people were. We figured it out, and caught up to the train, just like the people behind us will. 

RX Reven' said:

In reply to frenchyd :

I always think of inflation as being like a train.

Older people like you and I that have already acquired our things are onboard the train so it make little difference to us whether the train is going three miles per hour or seven miles per hour (3% inflation or 7% inflation).

The people that get hurt are the young ones that haven't acquired their things yet...by analogy they're running behind the train trying to catch up and jump onboard.

Raising taxes in any way inevitably makes it's way to the young people that are trying to acquire things.

If we increase corporate taxes for example, they'll just pass them straight through to their customers (again, the young people).

I own shares in those corporations (i.e. I'm onboard the train) which gives me a strong hedge against inflation as my portfolio will increase almost perfectly in sync with the increased prices I'm paying.

What's the saying..."if you think things are expensive now, just wait until they're free".

Excellent analogy.  When I was fresh out of the Navy I bought my first house on the lake for $27,800. Last time that sold, it sold for $1.200,000.    
 How in the heck would someone fresh out of the service be able to afford that?  
    The rent I was paying was higher than the monthly payment. 

     Today it would be difficult to buy a new car for $27,800.   But the people in that house in a few years will brag, "We only paid 1.2 million".  
       

In reply to frenchyd :

Inflation does come as you say from excessive spending relative to income. 
     Sometimes that is required. Such as wartime.   ( in my life we've been at war an awful lot).  Never-the-less we could pay that off by raising taxes.  Something politicians find difficult or impossible  to do.   Those who can afford the additional taxes are also those who typically pay the big money to politicians  to avoid paying taxes. 
         The alternative is inflation.  Look at any post war period and there is significant inflation.    
      Dealing with inflation for most of us means figuring out how to get a pay raise.  Retired people indirectly get a pay raise as the value of our investments inflated along with inflation.  ( sharp investors realize how to capitalize on inflation)  even fixed income retires living on Social security  get raises to reflect inflation.  
    The only losers are those who put money in the mattress or a banks savings account. 
 

You have said dozens of times in countless threads that inflation is a tool to pay off war debt. Once again, you are confusing corelation with causation, again. There is NOTHING to back up that inflation is intended to relieve debt. Nothing you say adds up or matches actual data or history, yet you keep saying it. Yet another unproven Frenchyd theory with no effort to confirm it. Since you have used WWII as an example frequently, let's look at the actual numbers...

Inflation in 1945 was 2.3%.  

One year later, in December 1946, it soared to 18%.

It peaked in March 1947 at 20%.

By December 1947, it decreased to 9%.

By December 1948, it was down to 3%.

And by December 1949, it was -2.1%.

So, the post war inflation lasted less than four years. The war debt took another 30 years to pay off. 
 

What actually did happen that led directly to inflation post war? Demand went up. Supply was down as many factories had been switched over to producing goods for the war. Wartime price restrictions were lifted. 
 

The inflation wasn't part of some planned government scheme to erase war debt. It was just basic economics. 

Steve_Jones said:

In reply to RX Reven' :

The train analogy is a good one, but keep in mind when we were young, we were not on the train, and different older people were. We figured it out, and caught up to the train, just like the people behind us will. 

Slight correction:  You don't catch up to the train, it's infinitely long, you just jump on to the part that is passing you at the time, and it always keeps moving.

Depending on how you want to work the analogy, the train may stop, and may reverse at times, but you can only ever jump on it from where you are standing.

Boost_Crazy said:

In reply to frenchyd :

 

....So, the post war inflation lasted less than four years. The war debt took another 30 years to pay off...

I think it' reasonable to say WWII debt was never really paid off.  I mean technically, maybe, but it's kind of like saying you paid off your car debt by taking out a house lone, you just moved the debt around.  The US debt certainly never went to debt after WWII.

WWII debt is inconsequential now, because of inflation (as noted, not a recommended intentional way to solve debt)

frenchyd said:

RX Reven' said:

In reply to frenchyd :

I always think of inflation as being like a train.

Older people like you and I that have already acquired our things are onboard the train so it make little difference to us whether the train is going three miles per hour or seven miles per hour (3% inflation or 7% inflation).

The people that get hurt are the young ones that haven't acquired their things yet...by analogy they're running behind the train trying to catch up and jump onboard.

Raising taxes in any way inevitably makes it's way to the young people that are trying to acquire things.

If we increase corporate taxes for example, they'll just pass them straight through to their customers (again, the young people).

I own shares in those corporations (i.e. I'm onboard the train) which gives me a strong hedge against inflation as my portfolio will increase almost perfectly in sync with the increased prices I'm paying.

What's the saying..."if you think things are expensive now, just wait until they're free".

Excellent analogy.  When I was fresh out of the Navy I bought my first house on the lake for $27,800. Last time that sold, it sold for $1.200,000.    
 How in the heck would someone fresh out of the service be able to afford that?  
    The rent I was paying was higher than the monthly payment. 

     Today it would be difficult to buy a new car for $27,800.   But the people in that house in a few years will brag, "We only paid 1.2 million".  
       

$27,800 in what year dollars? Assuming 1970, that's $215k today. Someone can afford that. When you bought, the area was not as desirable as it is today, you lucked out. Compare apples to apples though, you bought a $200k house in a regular neighborhood, and that can be done Today. I know you like to twist facts to whatever suits you, but you didn't buy a $27,800 house in Todays money and you know it. 

Somebody, quick, get a conveyor belt and an ultralight installed on the analogy train. 

In reply to frenchyd :

Excellent analogy.  When I was fresh out of the Navy I bought my first house on the lake for $27,800. Last time that sold, it sold for $1.200,000.    
 How in the heck would someone fresh out of the service be able to afford that?  
    The rent I was paying was higher than the monthly payment. 

     Today it would be difficult to buy a new car for $27,800.   But the people in that house in a few years will brag, "We only paid 1.2 million".  
 

 The house you bought years ago may appear to be the same house that sold for $1.2 million. It's not. The house you bought was not in a desirable location at the time. The one that sold for 1.2 million was. I don't know the particulars- but I'm assuming that there has been some development in the area between then and now. More access, more amenities, businesses bringing higher paying jobs. There are still plenty of houses like you bought years ago that are affordable today. Houses in currently undesirable locations the will be "discovered" and increases dramatically in value. Your error is that you are assuming that your sample of 1 is typical. Most similar homes will not experience the same result. 
 

This is the same fallacy that is popular in many cities across the nation. "It was easy for my parents to buy a house here, my kids won't be able to afford it." The parents moved into a town of 20k with limited jobs and amenities. But over 40 years, the town grew and attracted higher paying employers. If the grandkids want a similar experience to the grandparents, they won't find it in the same city. They need to go find the next up and coming town of 20k. 

Boost_Crazy said:

In reply to frenchyd :

Inflation does come as you say from excessive spending relative to income. 
     Sometimes that is required. Such as wartime.   ( in my life we've been at war an awful lot).  Never-the-less we could pay that off by raising taxes.  Something politicians find difficult or impossible  to do.   Those who can afford the additional taxes are also those who typically pay the big money to politicians  to avoid paying taxes. 
         The alternative is inflation.  Look at any post war period and there is significant inflation.    
      Dealing with inflation for most of us means figuring out how to get a pay raise.  Retired people indirectly get a pay raise as the value of our investments inflated along with inflation.  ( sharp investors realize how to capitalize on inflation)  even fixed income retires living on Social security  get raises to reflect inflation.  
    The only losers are those who put money in the mattress or a banks savings account. 
 

You have said dozens of times in countless threads that inflation is a tool to pay off war debt. Once again, you are confusing corelation with causation, again. There is NOTHING to back up that inflation is intended to relieve debt. Nothing you say adds up or matches actual data or history, yet you keep saying it. Yet another unproven Frenchyd theory with no effort to confirm it. Since you have used WWII as an example frequently, let's look at the actual numbers...

Inflation in 1945 was 2.3%.  

One year later, in December 1946, it soared to 18%.

It peaked in March 1947 at 20%.

By December 1947, it decreased to 9%.

By December 1948, it was down to 3%.

And by December 1949, it was -2.1%.

So, the post war inflation lasted less than four years. The war debt took another 30 years to pay off. 
 

What actually did happen that led directly to inflation post war? Demand went up. Supply was down as many factories had been switched over to producing goods for the war. Wartime price restrictions were lifted. 
 

The inflation wasn't part of some planned government scheme to erase war debt. It was just basic economics. 

Inflation doesn't actually pay off debt. It merely makes it a way to deal with the debt. Paying off a loan with cheaper dollars.    
  Paying back a war loan, takes decades.  In the case of the Revolutionary  war it took until the 1840's?   But some of that was the Louisiana purchase. 
     WW2 loan  never really was paid off.   The lowest the debt to GDP  got was about 1980 when it was at 22% ( it started at 100% debt to GDP)  In the next 12 years it went back up to 78% of GDP. And was again reduced to 56% of GDP.  

Here is a brand new house in your area for the equivalent of $29k 1970 dollars. That's what the 2023 Frenchy buys. I was under the impression it was impossible to find.

https://www.zillow.com/homedetails/33080-Birch-Ln-Motley-MN-56466/115954966_zpid/

Steve_Jones said:

Here is a brand new house in your area for the equivalent of $29k 1970 dollars. That's what the 2023 Frenchy buys. I was under the impression it was impossible to find.

https://www.zillow.com/homedetails/33080-Birch-Ln-Motley-MN-56466/115954966_zpid/

Steve, please find one on Lake Minnetonka Lakeshore.  Something you can walk into the lake without leaving your property.     There is a very old saying in Real estate.  Location, location, location.  

In reply to frenchyd :

I knew there would be a reason you'd dispute the facts. You said it would buy a new home near Minneapolis, so that's what I posted, because it will. Anyone saying "but it is different now" is wrong. The same money will buy a starter home, just like it did 50 years ago. 
 

Would $27,800 get you a new house in 1970? Yes, would the equivalent get you a new house Today? Yes, there's the link. 

In reply to frenchyd :

In reply to Boost_Crazy :

I'm sorry not true.  Lake shore was popular with the original Native Americans.  Tribes  existed around the lake.  
 

The same could be said just about anywhere. I'm not talking about Indian tribes or rail routes when I'm talking about property appreciating in desirable locations. 

 

 It has been at  a premium since.  The main road west from Minneapolis came out past this lake. And early on got a direct trolley.  And railroads came by.  Long before cars.  That led to a steam boat ride out to the big Island where an amusement part  was.    History of this area is dominated by the movers and Shakers of society.  

Since the 1970's price was pretty close to the average home price in MN back then- we don't have the exact year, but it's close. When I say desirable, I don't mean that it's not a nice place to live, or that it's didn't cost more a little more that other places at the time. I mean that not enough people wanted to live there Vs. today, driving up prices. You are portraying it like the area has been vacuum sealed since the 70's, and there has been no outside factors influencing the appreciation. 
 

     While the house itself has had upgrades. The next owner may buy the land to tear down the existing house to construct another of the same size and location, merely to build it as he wishes.   It is frequently done around here. 
 

I'm sure it is frequently done around there NOW. I'm sure that was not done very frequently THEN. One of the greatest indicators of an area that has grown in demand is when people buy homes just to tear them down because they want the location more than the house. That is not normal in 99.9999% of home sales! 

     My title here predates the State of Minnesota and of course the civil war.  
     To acquire even vaguely affordable land travel 20 -30 miles into the rural areas due west would be required at a minimum .  Then that land would be purchased with inflated dollars.  

Again, this can be said about any area that has grown in popularity over the last 50 years, and illustrates my point. I don't get the inflated dollars comment though. I know you get excited about inflation, but I don't think it applies comparing two properties that the same time? 

      $27,800 would have purchased a nice home in an upscale area of Minneapolis at the time. Or a brand new split level home in a new development.  
 

What does that have to do with anything? 50 years ago a house in San Jose and a house in Sacramento weren't too far off in price. They are now. One area became more desirable than the other. More people want to live in one area, and that area has greater scarcity. I also think you really muddied this example by focusing on lakefront properties, and using that as a basis of the claim that your area is now unaffordable. You mean lakefront properties in your area are unaffordable. I did a quick search, and found most listings for lakefront properties are 5000+ sq. ft. homes. Tell me that was the norm in the 1970's.  

Yes that is the case.  Some homes as little as 15 years old are torn down to be replaced   But you are correct in that Lakeshore places   has gone from cottages to 5000 - 15-20,000?   sq ft houses.    The really large ones are not typically publicly  listed so I'm only guessing at some of the sizes.  
    The norm lately is to buy several properties to build one large home.  

      I too tore this place down and built it to the absolute maximum allowed.  But I'm really an interloper.  I built my own ( with my own hands) / design /electrical/  plumbing  etc. rather than had a contractor build it. 
  I also selected the trees and had them rough sawn to the sizes I could use. Hauled them home,  Then planed, shaped, jointed the Timbers together.  About 31,000 manhours so far.  
      
       In that period 4 houses to the north and 4 houses to the south of me, have spent approximately 21 million dollars in construction of new houses.   But across the bay from me one house likely spent all of that on just 1.   Tearing down 3 homes  to build one. 
         So yes this is one of those 99.9999% neighborhoods  

In reply to frenchyd :

So what makes it the slightest bit relevant in a conversation about inflation?  ESPECIALLY when there are discussions about lower income properties?

You are completely disconnected from reality.  

In reply to frenchyd :

We know, we've heard the story many times. Hand hewn lumber. You're the poorest guy in the richest neighborhood. We get it. 

Boost_Crazy said:

In reply to frenchyd :

Excellent analogy.  When I was fresh out of the Navy I bought my first house on the lake for $27,800. Last time that sold, it sold for $1.200,000.    
 How in the heck would someone fresh out of the service be able to afford that?  
    The rent I was paying was higher than the monthly payment. 

     Today it would be difficult to buy a new car for $27,800.   But the people in that house in a few years will brag, "We only paid 1.2 million".  
 

 The house you bought years ago may appear to be the same house that sold for $1.2 million. It's not. The house you bought was not in a desirable location at the time. The one that sold for 1.2 million was. I don't know the particulars- but I'm assuming that there has been some development in the area between then and now. More access, more amenities, businesses bringing higher paying jobs. There are still plenty of houses like you bought years ago that are affordable today. Houses in currently undesirable locations the will be "discovered" and increases dramatically in value. Your error is that you are assuming that your sample of 1 is typical. Most similar homes will not experience the same result. 
 

This is the same fallacy that is popular in many cities across the nation. "It was easy for my parents to buy a house here, my kids won't be able to afford it." The parents moved into a town of 20k with limited jobs and amenities. But over 40 years, the town grew and attracted higher paying employers. If the grandkids want a similar experience to the grandparents, they won't find it in the same city. They need to go find the next up and coming town of 20k. 

The house I bought fresh out of the Navy on Lake Minnetonka Lakeshore for $27,800 most recently sold for 1.2 million.   Tarted  up a bit.   But still sitting on the same lot. Occupying the same footprint. 
 

You get it but still go back-n-forth with him? He's getting y'all

SV reX said:

In reply to frenchyd :

So what makes it the slightest bit relevant in a conversation about inflation?  ESPECIALLY when there are discussions about lower income properties?

You are completely disconnected from reality.  

Simply that what once cost $27,800 recently sold for 1.2 million. Granted it was tarted  up a bit but sat on the same footprint.  
       I'd call that inflation.