For Americans Shocked by Inflation, Argentines Have Some Advice
bloomberg.com
bloomberg.com
Seems like bloomberg is prepping the masses to live in poverty.
That said, the advice is sound if you really don't make that much money. This is the same thing the farmers do in "poor" countries after they get a "huge" (for the region) payday after the harvest.
All the money ends up flowing to the corps.
https://www.prnewswire.com/news-releases/nearly-40-percent-o...
That's pretty much the job of the mainstream media, defend status quo and normalize anything that threatens status quo. We've gone from inflation being a conspiracy, to inflation being transitory, to inflation being around for awhile but not that bad, to the media giving advice about how to handle hyperinflation. All within the span of a few months
but don't worry inflation(which didn't exist 6 months ago and was a conspiracy) is actually a good thing, CNN will show you how to make money off it
https://www.cnn.com/2021/11/24/investing/inflation-stocks-se...
You’re basically building a straw man.
https://www.nytimes.com/2021/06/21/opinion/inflation-economy...
These are the same people complaining that citizens don't trust the government and experts. Trust has to be earned
Here's an opinion piece stating just the opposite on the same site. Odd they'd publish that if they're intent on "covering it up" as you imply.
https://www.nytimes.com/2021/11/16/opinion/biden-inflation-s...
We've been talking about inflation since 2007 and just about everyone has been concerned for a LONG time that the fed keeping interest rates low meant there was basically no way to mitigate it. There was never a question or a debate that inflation was going to happen, what was and still is up for debate is what that inflation means for the average American. The supply chain crisis is currently a far bigger issue to the average American than inflation.
That's what high inflation does.
The government printed significant amounts of money as per benefits during covid. They did this to prevent a housing crash and subsequent harm to the wealth of society.
The thing is... the housing crash is only 1 market. It is actually better to have housing crash relative to how poor we are about to become as a whole.
Its remarkable that the decision to blow up inflation directly benefits anyone who owns a house. Regardless of their debt owed on the house. This will effectively be the poor class paying the most to prevent rich house holders from pain.
- take on debt
- consume
For when inflation reverses course, as it likely will, those debts will become hard as a rock and you'll be paying back in a currency that relentlessly appreciates. All that stuff you bought but didn't need will fall in price. This is a good way to go bankrupt.
The US Treasury market, the gold market, the trade weighted dollar index, and eurodollar futures are all signaling lower inflation and growth ahead. Before bracing for Weimar, be sure you're ready for USA 1980.
Precious metals are sort of understood from a technical standpoint. We're unlikely to discover a 600-metre-diameter orb of pure gold in the middle of Nebraska, and, conversely, we're not going to suddenly double our industrial demand for it.
Once you strip out the "civilization will crumble and you'll have to use Krugerrands to buy ammo for your Mad Max-converted Prius" crowd, the hedge case for gold is more or less "Gold has a practical ceiling somewhere around 2000-inflation adjusted USD per ounce, and will stay near there indefinitely. Buy at 1800 today and hold it to avoid exposing yourself to dollar-denominated assets." Boring.
In contrast, crypto offers the appeal of avoiding direct dollar exposure, with the excitement of speculation. If it turns out we build the next financial ecosystem on the random token you've chosen to back, there's way more upside than just "avoiding dollar risk."
TBH, a lot of it is very stupid money chasing the moon though. A lot of people have had their risk tolerances out of whack for a long time. I suspect too-big-to-fail and the political mentality that if the S&P 500 goes down, the world ends may have reinforced this attitude, so we see people being more speculative than would be prudent.
Necessities like food and clothing and so on have inflated at a much more moderate rate.
I know everyone thinks this inflation is a short-term shock due to COVID, but every customer and supplier I've talked to is seeing insane markups in all inputs. If anyone thinks these companies are going to quickly give back those price increases after finally seeing them for the first time in forever, I have some bad news for you.
What started as a transient inflationary shock might end up being more persistent than anticipated.
None of this advice is practical for vulnerable USA consumers(a), it's useful for a country with long term runaway inflation.
(a) These people already live paycheck to paycheck, they do not have savings and certainly have nothing spare to invest in inflation-linked bonds which are device for long term savings storage. Because of the aforementioned factors they also do not have access to low interest loans, and even if they did the USA's fiscal policy would certainly respond to ongoing inflationary pressure by adjusting interest rates upwards.
If it's going to be 1%, just negotiate a salary increase for this year of 7%, ignore the rest of the tricks, and enjoy your life.
If the expected value is close to 7% again or higher, perhaps it's time to read some tricks, but each country is different. From the article:
> Spend Your Paycheck Right Away
As the article says, "[U.S.] inflation isn’t quite high enough to warrant such a mad pay-day dash,". Even Argentinean inflation is not high enough.
Anyway, we have a bonus salary / 13th anual salary, and my family try to invest it. For example in concentrated laundry soap for one year (not 10 years) Concentrated laundry soap has a nice price/volume ratio and you are going to use it anyway. I also like tuna cans. Frozen chicken is a risk in case of a power outage. Toilette paper has a horrible price/volume ratio. Upgrading the tablet/netbook may be a good idea too.
> Borrow Lots of Money
You must guess correctly the inflation rate of the next years and get a bank that is stupid enough to take a lower interest rate. It's difficult to do it correctly, and remember to read all the fine print because you may get nasty surprises in a few years.
> Negotiate a Pay Raise -- or Two
Yep. The difference is that here all the process is more optimized because it's necessary to do it each year.
> Buy Inflation-Linked Bonds
It may work. For the amount of spare money I have it's not worth the trouble. It's important to get good advice about which bounds to buy and not invest in crap bounds.
> Buy Homes ...
Here most people own their home. Also every 10 years there is a big bank run, banks close and/or the government takes the money. So unless you want to have a very big pile of cash at home like Scrooge McDuck and risk getting robed, buying a house to live or a second house to rent is a good alternative.
> Buy ... Cars
I agree with the article that cars are not a good investment. (Unless your work depends on using the car and you must keep it updated.) A few years ago it was very difficult to invest the pesos in anything, for example you could buy a only a small amount of dollars, and perhaps the amount was not big enough to buy a house. So some people just bought a nice car. The value of the car and the cash will be reduced each year, but at least you can enjoy your car. (I don't have a car and I prefer not to have one, but each one has different preferences.)
Banks don't actually care about the long-term inflation rate is going to be since they generally resell loans quickly, with Fannie and Freddie backstopping.
Keep in mind bank credit ratings in 2008. They were AAA for a LONG time!
If even one-tenth of the country succeeded in heeding your advice then inflation is certainly not going back to 1% the next year. Wage pressure is the main one that central banks can't easily handwave away and has huge flow on effects to an economy.
In the ideal case get a 7% raise and everyone else gets 0%. It's case of a tragedy of the commons.
1 year treasuries are currently auctioning at 0.25 percent. Obviously the fed is heavily involved in the market to the point of manipulating rates, but they're not forcing anyone to bid on these afaik.
https://www.treasury.gov/resource-center/data-chart-center/i...
“There are four types of economies: Developed, developing, Japan & Argentina.”
—-
Japan in reference to deflation and Argentina to inflation.
Seriously though, buy dollar denominated risk assets, especially real estate.
A .1% APY is losing money everyday in a 6% inflation economy.
Except for a bail money, how many high-ticket items aren't covered by insurance?
It doesn’t really make sense to have 6 months of expenses which lose value in a bank account vs. earning you money in the market.
If something were to happen you can usually pay it off with your pay cheque/passive income source or use a credit card to bridge you over.
Especially if you make the 6 months as necessary expenses vs typical normal expenses.
I don’t want to be relying on that if I lose my job.
Lines of credit can be taken away, and usually at the worst time.
So I’m happy to forego some returns on a moderate sized emergency fund in exchange for peace of mind.
Cash is at risk of inflation. Bonds are at risk of interest rate increases. Stocks and real estate are looking like they might be overvalued. Crypto... yeah.
Maybe the best alternative is to just spend less time on work and more on leisure + personal/professional development? Skills and memories will be valuable for a while still.
My security fund is currently in 60/40 bonds/stock portfolio for precisely this reason, even if the stocks decline by half and the bonds dip a little with them I'll still have a good margin. My 401k that still has 30+ years to run is 100% stocks.
Also my wife is pregnant, so I converted the entirety of our HSA to cash (most of it had been invested up this point) as we're going to need most of that money in the next few months (and that's just for what we can foresee) and losing half of it to potential market perturbations is unacceptable.
... Doesn't the lack of AC imply exactly the opposite, that the temperature rise might be more significant than usual, and perhaps the AC is broken?
Sure, if you push the rates too high, you'll hit deflation, but the point would be to strike the balance before that happens.
I know there's a similar site that uses Google's archive, but I can't remember the url