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Comment by wand3r | Hacker News Reader

$10,000 makes absolutely no sense in this day and age. The Bank Secrecy Act was made in 1970 and 10k was >250k in todays dollars. It is borderline authoritarian to audit all transactions over 10k now.

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> 10k was >250k in todays dollars

Source? A basic inflation calculator tells me that 10k in 1970 is ~70k in 2021.

Yes, that's more, but it's significantly less than 250k.

This made me wonder if inflation is enough to account for price increases. For instance, it could be the case - I don't know since I'm not an acquainted with the field/data - that the costs of important goods such as homes, cars, education, health care, etc. has increased more or less that what that 10k approx. 70k figure tells you. For instance, maybe its the case that for a generic 10k its worth 70k distributed over all goods and services, but for those that matter most maybe its 250k or 20k, I don't know. Does anyone know more about this topic?

I think they use a basket of goods to calculate inflation, but how has that basket changed / been updated over time? Can any economist weigh in here?

You are right. Inflation is usually computed by tracking the price of a "basket of goods". But this only makes sense in the short term and doesn't account for profound societal changes that technology, ideology, etc. brings to that basket. Consider this quote by Agatha Christie (1890-1976): I never thought I would be so poor as to not have live-in staff, or so Rich as to have a car.

I think you're referring to the CPI (https://en.wikipedia.org/wiki/Consumer_price_index), which, as I understand it, is a pretty hotly contested tool in econ/business circles today.

If you want to check out the raw data for the CPI that the US Federal Reserve uses, check out https://fred.stlouisfed.org/ - though I couldn't begin to recommend how to navigate that site.

Two points on the market basket mechanism for measuring inflation:

One is that I think lots of people over-focus on specific sectors: sure houses and college education have gotten more expensive, but clothes, travel and computers have gotten much cheaper. Most of the complaints about "hidden inflation" that I've seen are basically ways of saying 'if you only look at the things that have grown much faster than the inflation average, then it looks like inflation is much greater than average.'

Now the question of 'hedonic adjustments' (how do you account for the problem that no amount of 1970 money could buy you an iPhone, or a car as safe and reliable as any car made in 2021) is a tricky one. As I recall from my macro class <mumble mumble> years ago, economists basically introduce fudge factors to account for that. I recall some speculation that the fudge factors in the health care sector (of the US) were systematically wrong, because the population isn't actually getting healthy or living longer as those numbers would suggest.

I over-focus on those sectors because the proportion of my budget that is spent on clothes, travel, computers, iPhones, etc. is a small fraction of that spent on housing, college education, and healthcare. I'm not interested in hearing the CPI tell me how many fewer televisions I can buy this year due to inflation when those other sectors dominate my spending.

It seems self-evident that the anything for which the cost has gone up will take up a greater proportion of your budget than anything for which the cost has gone down, no matter what the things are.

I, for one, own a house and am not currently paying for anyone's college education, so the proportion of my budget going to food and clothing is more relevant to me. Should I say that I'm not interested in hearing people tell me how many fewer students I can send to college when I don't have any students to send?

CPI items were picked precisely because they apply to everyone. Raises in housing cost renters more, but increase my net worth as an owner, so it's left out of the CPI. Health care costs in the US are ridiculous, but they're also widely disparate depending on more factors than can be accounted for in a simple measurement like CPI.

Cost of some these things you mentioned definitely went up by a lot and is not fully explained by inflation. A good blog post on the topic: https://slatestarcodex.com/2017/02/09/considerations-on-cost...

Depends on what you are buying - relative prices of various goods change over time; many are critical of things like CPI as being a stand in for inflation for exactly this reason

Example:

1970 corvette: $5,192.00 (Coupe), $4,849.00 (Convertible) 2021 corvette: $59,900

    >>> int(10000 \* (59900 / 5192))
    115369

so, using 'a corvette' as the 'basket of goods' has a ~65% higher inflation rate than the inflation calculator, vs for the big mac:

    >>> int(10000 \* (5.66 / .65))
    87076

which is ~24% higher than the 70k you mention.

> which is ~24% higher than the 70k you mention.

Which is still not 250k.

Either way, I see the point you're trying to make, but when people discuss "how much was X in todays dollars" they don't mean "go find a 'basket of goods' to reflect whatever value they want".

CPI is the go-to measure that is understood. Yes, some things are more expensive relative to CPI (housing, education, medical care), but using a non-standard measuring stick is not intellectually honest (unless you make it clear and disclose your reason for why you think it should be different).

I think it's important to note that a 2021 corvette is not a 1970 corvette. Think of all the additional safety features, the different materials of construction, the vastly better electronics, etc. If you could transport a 2021 corvette back to 1970, there's no way it would sell for only $5,192.

This is actually a serious issue with many products, for example cleaning supplies that are sold for the same price but in different bottles with different internal volumes. Even for something as simple as bread, the average loaf on a modern shelf has many chemicals which would not have been present 50 years ago, and if you do go for a loaf comparable to what used to be available you're paying some markup for "organic" or "artisanal" labelling. Indeed virtually no where can you find a good whose price has not been affected by changes to technology, marketing, customer demographics, supply chains, etc. All of these obfuscate the change in the value of money. A reasonable basket-of-goods comparison requires looking at multiple goods and trying to normalize for all these changes.

Also a Big Mac in 2021 is 3.99. A meal is 5.99, which would have been $1.11 in 1970. Although even here, McDonalds is a very different restaurant now, it's impossible to say how much is inflation and how much is the big mac no longer being one of 6 items on the menu.

> I think it's important to note that a 2021 corvette is not a 1970 corvette. Think of all the additional safety features, the different materials of construction, the vastly better electronics, etc.

This person is clearly neither a car enthusiast not a Corvette collector (e.g. one who determines the price via purchasing)

Paying more for something because it has become a valuable collector item is very much not the same as paying more for something because the value of currency has decreased.

But who buys used cars except for people seeking transportation (honda civic, etc) or enthusiasts? Clearly the former group is not setting the price of sports cars

We're not talking about buying a 50 year old corvette now vs when it was new, we're talking about buying a new corvette now vs a new corvette 50 years ago.

And it doesn't matter if a car enthusiast doesn't care about safety features, if the manufacturer is required to put them in, and they cost money to add, then they affect the price all the same.

Also I used to drive a corvette. It's actually a remarkably practical car for its category - not insanely expensive, low maintenance costs, and good lifetime. It's hardly a super-car intended for a small niche audience (though admittedly not a workhorse).

Sorry, I am past the edit window. I was on mobile and used 1913 not 1970. The point still stands but obviously to a lesser extent. Thank you for correcting me

Inflation calculator says about $70k. But I do agree with your message, stuff like this definitely should be tied to inflation.

The point above is fair but also I can't help but think a lot of people who are bitcoin hardcores really overestimate historical inflation.

I'm a thirty-something and when I was born money was worth roughly twice as much as it is today. When my grandfather was born, it was worth ten times as much as it is today. But you're right, I think us Bitcoiners in particular have a very allergic reaction to inflation and overestimate it's affects accordingly.

That's completely irrelevant because you're not supposed to stash it in a mattress you're supposed either spend it on basic needs or to invest it.

If you started with $10K in 1970, sure, the value is reduced by a factor of 7. Intentionally to incentivize investment.

If you started with $10K in 1970 and put it into the S&P 500, you'd have a 4162/83.15= 51X return, adjusted for inflation is still a 7X return. Notionally $510,000 - excluding dividends/re-investment thereof.

If you started with $10K in 1970 and put it into an average home in the US you'd have $70K today, adjusted for inflation. (Average $/sqft on an inflation adjusted basis in the US is the same now as it was in 1973 [1] - you'd have way, way, way more if you'd bought property in a major metro - I'm just being conservative).

You save value not money. The idea you should save money is a severe misunderstanding of basic economics.

It's really not that hard: don't save money, save value. Your narrative is as harmful as it is straight-up wrong.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

I think it’s BS that everyone has to participate in the rigged game. Saving your money should be a valid option.

Ok, let's dig in.

> ... everyone has to participate in the rigged game.

In what way exactly is the current system of separating a long-term store of value and a short-term medium of exchange a "rigged game?"

In what way would fusing the two change that?

Are you not able to replicate that which you desire by simple purchasing an asset that does that? For instance, let's say you're a coiner and think that's a better way to store value - does the current system prevent you from backing your personal economy with bitcoin? How about gold? Why would you force me into the one of your choice when maximum freedom dictates giving me the choice on how to store value?

Further, how would you propose keeping the unit of value at a specific pegged constant value without managing the supply actively? When the population changes? Productivity changes? Transient shocks like COVID leading to massive drops in velocity? After all, a constant supply does not mean a constant value.

You realize the fed literally avoided a catastrophic deflationary spiral and held the value of money to within +/- 0.6% last year. That's a heck of an accomplishment.

Well, they've never been at a full match with inflation but banks did use to actually pay interest on savings accounts once upon a time.

I think it's reasonable to allow members of society that want to sit on cash to preserve their quantity to a certain extent in that manner - even if it will fall short of gains expected by inflation.

They sort of can. There are CDs, treasuries, money market funds. Interest rates at the moment are pretty awful and I'm pretty much out of all that sort of thing. But they do exist.

Well, for one, you didn't really answer any of the questions I posited.

But further, you have to consider the flip-side of receiving interest: paying it. Having low-cost access to capital makes businesses more efficient. It also makes your personal life cheaper as the average homeowner ends up on a 30-year fixed rate mortgage. A mortgage rate of 2.5% leaves you with way, way, way more free money than the 12% you'd have payed in the 70s. That's true even after factoring in inflation and historic wages.

It's important to consider that converting between the long-term store of value and the short-term medium of exchange is a taxable event, so if your asset gains value at exactly the same rate as inflation, you still end up losing money.

It's not clear to me what that means. I suppose you can go all Scarlett O'Hara and Land is the only thing that matters. But there has never in human history been some value store that was guaranteed to maintain value over time through war, technology changes, cultural/demographic/migration shifts, and yes inflation with modern currency instruments.

If you put the cash into gold, real estate, stocks, etc. it will maintain most of its value if not grow faster. Even putting it into low-interest CDs would help you preserve most of it.

>That's completely irrelevant because you're not supposed to stash it in a mattress you're supposed either spend it on basic needs or to invest it.

Says who? And why has saving become something only stupid people do? This idea that you MUST invest is pure evil and is designed to make the rich richer and the poor poorer.

Saving value is smart, saving money, is stupid. You can tell because on the sticker it says "will lose 2% per year in value."

Exactly, cash has an opportunity cost which is the interest not earned by holding cash instead of investing it at the risk-free rate, and this is true regardless of whether there is inflation or not. Therefore what makes cash a sub-optimal savings vehicle is the existence of risk-free investment opportunities with a positive rate of return. Nothing to do with inflation.

>"Your narrative is as harmful as it is straight-up wrong."

I don't know what narrative you are alluding to. All I was trying to do was provide a human relatable example of how much inflation had happened over three generations. Sure, each individual dollar has less purchasing power but that's supposed to be balanced out by having more of those dollars. But if the reporting threshold doesn't also inflate then you've got an issue.

The narrative is suggesting it at all matters that the units of stored value have changed over time is a bad thing. It's roughly speaking a neutral thing. Like switching between Celsius and Fahrenheit. You just have to plan accordingly.

That wasn't my intention. My intent was to show that the units of stored value changing over time, in this case, is a bad thing when the reporting threshold doesn't rise for inflation as well.

I apologize if I misread, by the way! I know tone doesn't always carry well over the internet.

No worries, and you're spot-on about storing value and not money.

Well if the government mandates that the thermostat must be set to 72 degrees no matter what, that switch from Fahrenheit to Celsius is going to be pretty uncomfortable.

Yes in general we care more about what we can buy with our money than how many pieces of green paper it takes to represent that value, but there are many laws on the books where something bad happens if you have too many or too few pieces of green paper regardless of what they're worth.

> When my grandfather was born, it was worth ten times as much as it is today.

And this is concerning why...?

Alternatively some people miss that asset inflation in the crypto currency space is happening at 1000s of percent of even high consumer inflation. Same with houses, rising 20% in less than a year, some assets are rocketting, inflation or not.

I guess it's an instance of legislative #TODO comments.

No, it's a feature not a bug. If you don't index things to inflation you can eventually cover average and middle-class amounts of money under the law - you just have to be patient.

More likely the number 10000 is now entrenched in so many varied locations in the last 50 years that it would be a monumental undertaking to try and adjust it successfully.

If the rule is > $100k, can't businesses just continue reporting everything > $10k until they get around to updating their systems?

Some countries phrase monetary fines and thresholds in terms of some inflation-indexed value (e.g. "penalty units" in Australia) to as to avoid having to manually update every single value in the laws when they get around to it. I wish the US would do the same.

https://en.wikipedia.org/wiki/Penalty_unit

Remember, all transactions over $10,000 are suspicious, but transactions under $10,000 are considered "structuring". "All transactions" will be suspect independent of where the threshold is set.

Transactions under $10k that are performed in such a way to move more than $10k but keep from the reporting requirements for bigger transactions are structuring, not just any transaction under $10k is considered “structuring”.

This is not correct. "Structuring" has a specific meaning and transferring $9,000 (or any other amount under $10,000) is not enough on its own.

Banks and financial institutions (in the US or that are in some way regulated by the US Treasury- which in practice means everyone who uses USD, including such surprising places as casinos in the Philippines) are required to make Suspicious Activity Reports (SARs) when they suspect foul play no matter what size of transaction. But only when they suspect it: not every transaction gets a SAR, but if you do, then it might be structuring no matter the size.

The most notable person ensnared in structuring case is, of course, former House Speaker Denny Hastert (R-IL). He was being blackmailed to keep his sexual assaults of children secret. He went to the bank to withdraw lots of money to pay his blackmailer, and they filed a document with the FinCEN network. When he realized this, he asked about it and was told that everything above 10k needed to be filed, so he stood in line ~150 times and withdrew 5k each time. That's pretty obviously structuring, and because they couldn't get him for child abuse (because it was so long ago and the victim had committed suicide in the interim), he plead guilty to structuring.

Possibly incorrect rates aside, inflation also greatly affects what charges someone could face for property crimes.

Ditto. Also, FBAR reporting of any account with 10k+ in it. Like seriously, the IRS/US is concerned about 10k in a bank account? Gotta get those tax evaders!

No, it's worse. FBAR is required if you have $10k in total. If you do, then you have to report all accounts, even the ones that have just one dollar on them.

I strongly disagree that it's authoritarian to audit lots of transactions - 10k is high enough that most people will only hit it when 1) buying a car (or other vehicle - i.e. boat) 2) purchasing a house 3) doing a renovation. Otherwise most normal transactions will be well below this level.

I do think that eventually it'd be good to revisit the specific threshold for reporting but 10k still feels incredibly reasonable to me and calling it borderline authoritarian seems quite hyperbolic.

Bear in mind that money laundering is extremely effective and difficult to combat without really strong reporting laws and that the detection of money laundering is what leads to take downs of most large criminal organizations since, once you take away their wallet, most of them wither in efficacy.

> 10k is high enough that most people will only hit it when 1) buying a car (or other vehicle - i.e. boat) 2) purchasing a house 3) doing a renovation

Okay but in 1970 it was 7 years of median rent, 58% of the median home value and 13 months of median salary according to the census bureau.

Money has definitely become inflated since that 10k figure was originally established - but I don't think it passed a significant threshold societally like, say, five dollars passed.

Five dollars was enough to get a modest lunch pretty much anywhere in the 70s and is now, in the affluent parts of the country, around the expected cost for a coffee.

10k, in my mind and opinion of course, went from being "Hey, that's a lot of cash" to "Hey, that's a lot of cash". It remains an amount we (most people at least) don't trivially deal in on a day to day basis and that's where I think the cutoff for this reporting law should be. If most people are going to trigger a mandatory report then LEOs have a lot more data about transactions that are common in society which may be a privacy concern but certainly lowers the usefulness of that ledger - if these transactions are still "rare" then there is a volume of data that can be hand-sifted through to produce interesting insights.

With computers and everything in theory we could probably now handle the volume of tracking the full list of every person's transactions but that would lead to normalizing refusing to report large transactions and we'd only end up seeing the transactions that are made by completely innocent people.

$10K is not a lot of money, especially when compared what $10K was worth when the law was created. $10K won't cover a major health expense, tuition at a nice preschool, a wedding, a nice vacation, any number of hobbies, or many many other things. It's not just a vehicle, house, or renovation.

I think this might be a question of scale since, for me at least, 10k would be an excessively fancy vacation - about three times as costly as a wedding - and when did preschool get so expensive!

I suspect that for the average person it's probably reasonable to include a wedding and tuition in the 10k list - maybe a hobby, though you'd only hit 10k for a transaction if you're buying serious power tools or working on a car/reno on your own.

From Canada at least an all-inclusive nine day stay in Cancun will currently run you under 3k CAD - I know there are resorts that can break the 1k/day threshold but that's a lot of money to put out for a vacation. And, honestly, if you're spending that much you're likely not going to make the purchase in a single transaction or else you're very much not what I'd consider an average person.

Preschool in the San Francisco Bay Area is between $1,200 and $2,000 a month (1). The median house price in the Bay Area is over $1M so just the good faith deposit on a house is >$30K let alone the downpayment and closing costs so you're going to have like at least three >$10K transactions. A four-star hotel in Hawaii is >$500/night, a five-star is >$1,000/night. So a nice two week vacation in Hawaii is >$8K just for flights and hotel for 2 people. The average household income in the Bay Area is >$150K/year (2). $10K isn't a lot of money in California and $70K seems much more reasonable for reporting purposes.

(1) https://www.mercurynews.com/2018/08/25/to-stay-or-not-to-sta...

(2) https://dqydj.com/income-by-city/

> I suspect that for the average person it's probably reasonable to include a wedding and tuition in the 10k list

You're off by a factor of 2-3 here (a little skewed due to COVID), as the average wedding runs 20-30k...

[1] https://www.theknot.com/content/average-wedding-cost

Holy crap people - spend less money on your weddings. Instead spend that money on a honeymoon or setting up your future lives.

When I proposed I did it with a 30$ engagement ring that was quite pretty but cheap. When we got married we had a pair of rings made set with sapphires for 700$ a piece. For the actual wedding we catered in a few hundred dollars worth of indian food for the dozen people we had attend the ceremony - and held it at the house of a family member (a ridiculously scenic house, granted).

Honestly - the most expensive part of our wedding was my suit that was hand-tailored and made of raw silk (and that was picked out by my wife). My wife's wedding dress was bought off a rack and altered for about 120$ altogether.

Certainly don't get into debt for a wedding and I wouldn't recommend trading a downpayment for a wedding. Otherwise, do whatever you want.

$10K is like a used 2013 Honda Civic (1). It's really not a large amount of money for many many people. If someone wants to spend it on a day that enables them to celebrate with family and friends in a rare occasion, who are you to judge?

(1) https://www.kbb.com/cars-for-sale/used/2013/honda/civic/rich...

Oh - I don't think there's anything wrong with viewing a wedding as a luxurious event in your life and spending a lot on it it's just... Do you actually value what you're getting out of blowing 40k on a particular day more than having[1] 50 days of all-inclusive honeymoon vacation in Cancun? Or like, putting a down payment on a relatively fancy[2] house.

I wouldn't judge anyone who made this choice - but if I was their friend I would ask a lot of questions about whether they'd actually enjoy it or just feel like it's a thing you "absolutely must do" due to weird cultural hangups. My wedding was quite pleasant, but it was mostly a blur because it wasn't for us. I think generally isn't a party for the groom and bride to actually maximally enjoy - it's a celebration with the guests.

1. At canadian rates, 'cause I'm Canadian. Somewhat estimated since nothing lets you book that long.

2. Highly dependent on the housing market you're in - if you're in wisconsin enjoy the mansion - if you're in SF enjoy what's probably a slightly larger than average studio.

A $10k credit card bill isn't rare for people who do a lot of business travel. I'm not sure what "auditing" means in this context. As long as I'm not aware of it, I don't really care. It would rapidly get annoying to fill out some form whenever I had a $10K credit card payment. (Not that it's especially frequent.)

That's alright since the credit card company is the one who'd be filling out the form - you'd only need to fill it out if it was a private transaction between two natural persons - and even then only one form needs to be submitted so if it's someone who regularly engages in such transactions (like some kind of service worker) then they'll probably submit the record of it assuming you insist on paying with cash.

Nearly all of this sort of reporting is generally carried out by banks and credit card companies that are being used to execute the transaction - but the US really does want to know if you purchased a used car from someone for 13,000 dollars in cash since, you're probably laundering money at that point.

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