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Comment by omginternets | Hacker News Reader

>favorable coverage of the views of big finance

I'm horrifically ignorant of economics. Why is the "runaway inflation" story favorable to big finance?

I think what the original commenter meant was that news outlets generally echo what big finance says. Meaning that they favor the views of big finance (as opposed to favoring coverage of the views of others).

Yes. And they generally appear to worry over inflation more. Perhaps because inflation tends to favor debtors rather than creditors.

My guess is that those who run large financial institutions came of age when inflation was much higher and a difficult beast to tame. Therefore they see the inflation boogeyman around every corner even though it hasn’t been like that in a long time. (That’s not to say high inflation won’t come at some point, but so far the doom and gloom merchants have been wrong for decades).

You see this inflation mania most clearly with the ECB, which essentially is controlled by Germans. They fear a Weimar Republic-style hyperinflation above all else. So some of the policies coming out of the 2008 crisis reflected this, instead of being flexible enough to cope with the actual conditions and challenges of the day.

Yea, but let's metaphor the boogey man issue to driving a car. When you drive, you're often avoiding collisions. Mostly passively. If you drive faster than the car in front of you, you will crash. If you dont brake at a red light, you will crash. Most people dont crash most of the time because they respect the threat. You cant just go, "you know, I haven't crashed in 5 years. I dont have to brake at this red light." Sure, inflation issues aren't that prevalent in the past few decades. Doesn't mean you stop assuming it's not a possibility. You do things to avoid it. The longer you do that, the longer you avoid problems. You cant stop your precautions just because it's been a while, then whine why the problem reemerged.

I never said it’s no longer a possibility. Just that for every news event that happens, there is an immediate chorus of “inflation!!!!” no matter the circumstances. Some economists argue that there is indeed considerable inflation right now- except it’s in financial assets owned mostly by the wealthy, like the stock market trading at high P/Es, housing (inflated in multiple countries, not just the US due to easy credit). There was also a headline recently that VC investing is record high at the moment. So there’s inflation, just not in consumer staples.

The reason it is so feared is because it's next to impossible to contain once it starts without causing massive economic hardship.

In fact, the Fed could likely do next to nothing about inflation with our country's current debt levels.

Even at a historically average rate of 8%, our federal government would either go bankrupt, cut most spending, or massively raise taxes, causing a severe economic retraction. (Our $26T in debt would require half of the entire federal budget to service our debt at such rates.)

Many of our largest corporations would also fold, unable to service their massive debts. It'd be a disaster.

That's why people fear runaway inflation, even if it hasn't been a problem for several decades. Once you can identify it as a problem, it's too late.

Isn't it why Japan, Europe and now the USA have 0/negative rates? The government literally makes money to borrow money. They can't default with negative or zero rates. They are basically being bailed out by the "economy".

It's sensible to be afraid of hyper-inflation. At some point the economic actors are going to be fed up with it and off-load their investments.

>The reason it is so feared is because it's next to impossible to contain once it starts without causing massive economic hardship.

What's the process for containing inflation, and what's its mechanism of action?

Invest into stocks to save yourself from inflation maybe?

From what I've been reading (disclaimer - over the past few hours) the types of stocks you target during periods of inflation changes. You're also playing a bit of a guessing game, because your return will be less than other investments if an inflationary period does not actually realize.

This is what makes broad index funds so attractive. VTI, VXUS, etc...

Buy real property if you can.

Not sure why this is down voted. Real estate is a common hedge against inflation. It's just much more complex of an investment vehicle and you can't just jump in and out of real estate like you can stocks.

You could opt for a REIT instead.

https://www.investopedia.com/terms/r/reit.asp

While I don't know why it was downvoted "Buy real property if you can" is pretty crummy advice, unless you think an investor doesn't have to do any due diligence and should "just buy" stuff.

How do you know what property to buy? How much property should you own as a percent of your net worth? What is the expected return of the property? What is the likelyhood you will lose money on the property versus the likelyhood you will make money?

Those are all important questions not addressed by "Buy real property if you can"

As for Reits, there's not a lot of financial advisors advocating high investments in Reits. For example the Vanguard Target Retirement fund of funds have very little. The Schwab Intelligent Portfolio seem to call for 5% REITS in an example I pulled up online.

Maybe you know something Vanguard and Schwab does not, but again, there's that question of due diligence.

in the long term real estate is the winner.

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