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Comment by compumike | Hacker News Reader

It may also help to see the cumulative inflation picture: https://totalrealreturns.com/s/USDOLLAR?normalize=end (disclosure: my side project)

The 1974 and 1980 peaks from the article correspond to the steeper slope regions in those same years on my graph. (I'm plotting 1/[CPI-U price level], while the article is plotting d/dt [CPI-U price level])

On my y-axis is the purchasing power of a US dollar, relative to current level. So when the y-axis shows 9.813 on 1962-10-04, this means that sixty years ago, a one-dollar bill would buy a basket of goods that today would cost $9.813.

It certainly "feels scary" when the purchasing power is eroding quickly (i.e. a fast-declining slope on my purchasing power graph, or a peak on the article's year-over-year derivative graph).

All data from BLS: https://www.bls.gov/news.release/cpi.nr0.htm

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I haven't dug into everything you are doing, but the biggest flaw I see seems to be that you assume Cash returns 0% nominal, i.e. that there is no return for holding cash. That is only true if you hide it under your mattress(and no deflation happens). Most people do not hide money under their mattress anymore, especially if they have large amounts of it. They put it in a bank account or in a MMF or some other interest producing place.

Since 1972, Cash has a real return of 0.53% (inflation adjusted):

https://www.portfoliovisualizer.com/backtest-asset-class-all...

Doesn't that practically mean the rich get richer and the poor stay poor? If it would be net 0 everything would stay the same?

Is that surprising? Alternatively, do you have a fix in mind? Having power means you can build more things that give you more power faster than someone with less power. You can't change this using inflation, as people will just hold something else instead of cash (and, in fact, inflation seems to most punish the people with the least power, as those people are spending a much much greater proportion of their income on critical consumption and are least able to hold assets that aren't cash... hell: we make laws that actively limit or even prevent poorer people from holding non-cash assets "for their own protection").

That blows my mind. I'm allowed to spend $10 in a bottle of alcohol or a packet or cigarettes, no questions asked, but I'm not allowed to spend those $10 in stocks of a tiny company unless I'm able to demonstrate that I sleep with the founders or make their lunch or run their accounting, or that I have so many millions on my name that investing $10 without doing any of the above really could not harm me.

It's not like accreditation exists to ensure poor people stay poor, framing it like that is disingenuous. Small-time investors are unlikely to be able to even semi-accurately estimate the value of a company, so they're much much more likely to be tricked into overpaying.

It isn't that it exists for that reason, it merely has that effect as a callous side effect of not really caring about the power imbalance it causes on said poorer people. "The road to hell is paved with good intentions" 100% applies to people trying to protect other people from none other than themselves.

Can't hold more than roughly $5000 of real assets and qualify for Medicaid (subsidized healthcare).

Keeping that cash in the mattress is a very real option for many people with huge responsibilities (child care) and very little power.

[citations needed] - I don't know what the savings limits are as of October 2022.

According to elderlymedicaid.com[1] it's based on income, and varies by state.

[1] https://elderlymedicaid.com/medicaid-asset-limits

There a a lot of exemptions to the asset limit, including primary house and car, which are often the two most valuable assets many Americans own.

> Doesn't that practically mean the rich get richer and the poor stay poor? If it would be net 0 everything would stay the same?

The rich aren't rich through this route, although things they do mean that bank interest rates are a guaranteed return for people who are less risk-tolerant. They're rich through one or more of: risk-taking, talent, hard work, luck, connections, etc, all of which feed into the one thing that makes them money: usefulness to other people.

Not because of this one thing, every bank offers some return on holding cash. Most are ridiculously low.

Personally I like to think of it as, the US govt guarantees a return on overnight cash based on the Federal funds rate. Banks and other people that hold cash will give you that rate minus some fee(s) for the hassle of keeping up with your cash for you. Most banks have a very hefty fee, but not all banks.

As of this writing:

The Federal Reserve will pay 2.56% for cash deposited with them.

Bank Of America pays 0.01%, for a fee of 2.55%/yr.

Ally bank pays 2.25% for their savings account for a cost of .31%/yr

If you are willing to hold cash in an ETF, ICSH will hold cash for a 0.08%/yr fee.

For the record, I'm not against Bank Of America, I have an account with them, but I don't hold much, if any, cash with them for any length of time, because I know they charge a lot for that service.

Yes, if it were not for the inherent risk that comes with it. If you put the cash in your mattress you only face the risk of losing it due to it being stolen or when it burns. You can get insurance against that it this would need to be deducted as well. So effectively you are losing money.

Now for money on your bank that pays interest it's not necessarily better. The bank can be robbed or simply go bankcrupt. And since the money there was used by the bank for various things, there's no guarantee you'll get it back. This inherent risk needs to be priced into the ROI.

So IF the government always saves banks with buyout, then yes. That's also why I believe it's not a great idea and people of such a bank should lose at least a part of their assets/savings to understand the fact that the money isn's just stored by the bank.

This is dumb. That's not an insult -- I'm not calling you dumb, but just your argument.

1) Banks are FDIC-insured, so unless the federal government goes under, my money can't be lost. If the US disappears, so does the dollar.

2) If people lose part of their money due to a policy like the one you propose, they won't "learn." You're asking ordinary people to be aware of things which are accessible to a fraction of a percent of the population. They'll assume banks are safe, and lose trust in "the system" if they're not.

3) Even so, I have no way of knowing what's going on at my bank. For all I know, the executives might be crooks embezzling money for the Italian mafia. We have organizations like the FBI, SEC, etc. since individuals can't investigate these things. I'd like to focus on my family and my job. That's why we've specialized.

The current approach for banking is better than free market. Personally, I think banking would best be nationalized, a la China. It's not an industry where efficient free markets do very well. That's true for health care and parts of real estate too. (And yes, there are other industries I would privatize much more, like education. This shouldn't be an ideological socialist versus free market argument, so much as looking at the extent to which free market assumptions apply to a given industry)

> This is dumb. That's not an insult -- I'm not calling you dumb, but just your argument.

No worries, I'm here to discuss and learn things, so happy about your reply!

> 1) Banks are FDIC-insured, so unless the federal government goes under, my money can't be lost. If the US disappears, so does the dollar.

Yes, but there is still the chance of a "haircut" or similar. At this scale, rules can be bend. But my response was a bit more independent of the country, so maybe it doesn't apply well to the US, point taken.

> 2) If people lose part of their money due to a policy like the one you propose, they won't "learn." You're asking ordinary people to be aware of things which are accessible to a fraction of a percent of the population. They'll assume banks are safe, and lose trust in "the system" if they're not.

Maybe for the first time. But if you think about it, maybe the system is how it is _because_ people trust in it (too) much.

There are a couple of options. For instance, the state can give a guarantee for only a limited amount of money (think $20k or something like that) per person and/or institute.

Second, it might very well be that banks will come up with two different kinds of accounts: 1) an account where the money is not safe and can be used by the bank for investments - but you get interest. 2) an account where the money is safe, but you don't get interest but have to pay a fee for the bank's services. The money then stays your property and the bank just keeps it for you, so even if it goes bankcrupt, no one can take the money since it's still yours.

I don't think that would be a bad idea.

> 3) Even so, I have no way of knowing what's going on at my bank. For all I know, the executives might be crooks embezzling money for the Italian mafia. We have organizations like the FBI, SEC, etc. since individuals can't investigate these things. I'd like to focus on my family and my job. That's why we've specialized.

I believe that for your health, your relationships (friends, familiy, ...) and your finances, you cannot delegate that, you must keep control yourselve. You can get people to help you, but in the end both control and responsibility are yours. That's what I think works best.

> No worries, I'm here to discuss and learn things, so happy about your reply!

Thank you! I enjoy discussions with folks like you.

> Maybe for the first time.

If we're having regular bank failures, we're going to enter "failed state" status. Can you name any nation which regular bank failures which isn't a hellhole?

People don't learn from once-in-a-lifetime events.

It's also not what I want people to learn. Systems like this ought to work well enough in a well-governed country that ordinary individuals don't need to think about it.

The US has problems, but not at the level of people worrying if their bank accounts will disappear tomorrow.

I also want sufficiently functioning police departments that people don't need to worry about how to defend themselves. There are things which ought to work. Retirement savings ought to be one of those.

> For instance, the state can give a guarantee for only a limited amount of money (think $20k or something like that) per person and/or institute.

The current limit is $250k. This seems reasonable, and potentially low. I'd set it at $1M, and include accounts like 401k and IRA accounts, so your retirement investment savings can't disappear in a poof for reasons outside of your control. If I bought stocks, I can (and should) expect their value to change, but I should be able to count on Fidelity safely making sure those are still my stocks.

> Second, it might very well be that banks will come up with two different kinds of accounts.

It might well be. 0.1% of the population will chose wisely. Like medicine, this is something you want to just work.

> I believe that for your health, your relationships (friends, familiy, ...) and your finances, you cannot delegate that, you must keep control yourselve. You can get people to help you, but in the end both control and responsibility are yours. That's what I think works best.

Why? All evidence suggests the contrary:

- People seem happiest in communal societies, where they don't pick their friends or family. We evolved in tribes.

- I'd love to live in a structure where I get healthy food and plenty of exercise as a "default." Staying healthy with companies marketing high-sugar foods, and obsolete parts of my brain pushing me to be lazy, is a constant uphill battle. I'd stop short of a mandate, but if everyone is healthy, we're all better off.

- Finance is a black hole for most people. People ought to be able to trust that if they work hard, they'll be able to afford basic food, shelter, and medicine (including in retirement). It feels like a trap to make people manage this.

If my life consisted of:

- Wake up for morning exercises. There are plenty of communal spaces for exercise. Volunteers run free dance, martial arts, yoga, etc. classes. My taxes fund the space.

- Work hard on open source, which benefits everyone, for some number of hours

- Spend time with my family

- Not worry about much of anything else, and count on systems working

I'd be pretty happy. We haven't figured out how to do that, but utopian ideals don't have everyone needing to investigate their local hospitals for corruption, banks for fraud, and mastering medicine and finance. As a nerd, I enjoy learning about those, but it shouldn't be mandatory.

> Can you name any nation which regular bank failures which isn't a hellhole?

That's a bit unfair, because there is no country (yet) where there is a system similar to what I proposed. If there were, then maybe it would be pretty normal and putting money on the bank that yields interest will just be seen and regulated as investing into stocks nowadays.

> It's also not what I want people to learn. Systems like this ought to work well enough in a well-governed country that ordinary individuals don't need to think about it.

To me it feels like you are trying to push away a responsibility that is impossible to push away. (sorry for me bad English)

What I mean is, once someone gives money to the bank and the bank _uses_ it instead of storing it (e.g. for a loan/credit) then there _is_ a risk that the money will be lost.

So if you want banks to be failsafe in the sense that it is legally guaranteed that you can never lose your money (currently that's not the case right) then banks should be fully government controlled or at least so tightly regulated that they are very very different from a regular business. I mean, banks are already highly regulated, but not nearly enough in my opinion. If the bank can't lose/go bankcrup, then it also shouldn't win, so no profit or highly regulated profit.

EDIT: I forgot to say that if the state is essentially insurance for the bank, it should charge for that service just like a normal insurance company would.

> Why? All evidence suggests the contrary: (...)

None of the points contradicts what I said.

But look: even in a communal society YOU pick your friends, no one else. And if there are two kinds of foods, one tasty, cheap and unhealthy und one so-so, kinda expensive but healthy, would YOU trust the advertisements which one to pick?

Even with a doctor: sure, it's great to have competent doctors. But it's a fact that there are better and worse doctors. So if health is important to you, YOU have to pick the right doctor. If you rely on someone else to do so, you are essentially putting your life in their hands. While anyone can decide to do that, I just don't think that it's a good idea.

The problem with your nice example life is that once things go southwards (and eventually they always do) then you can't deal with it. I prefer a slightly less optimal system that has less potential to go really bad, even if average quality of life is a bit lower.

> That's a bit unfair, because there is no country (yet) where there is a system similar to what I proposed. If there were, then maybe it would be pretty normal and putting money on the bank that yields interest will just be seen and regulated as investing into stocks nowadays.

You can do this in the USA, look up the ETF ICSH for instance :)

Yes, see also Piketty

Yep, always need to pick your risk-free asset for comparison.

Yeah but that’s not the whole picture… in 1962 the ford truck was $2000 now is around 40,000 so while a new one is better you still have to earn 2x as much to get the most basic one available

When I go to ford.com and look at their basic truck, the 2023 Maverick, I see "starting at $22,195". So if a 1962 truck truly sold for $2000, the inflation seems to account for entirely the price increase. And I'm pretty sure everyone will agree a 2023 Maverick is superior to a 1962 F-100 in every conceivable aspect.

Housing and healthcare are better examples of goods or services whose prices have increased faster than CPI-U.

In the 80s when I was a kid, we owned our own house, even though my father was a small time farmer and my mother stayed home raising us. We scraped by. In today's standards, it was a life of abject poverty. I knew a guy whose father ran a steel company (self made millionaire). Their house wasn't much bigger than ours, but they had VCR, microwave, CD players and satellite TV years before we did. But the real difference was that they had a new Mercedes and we had a low-end Ford that we drove until it fell apart. Our house build cost about 4x the price of the Ford. The Merc? I don't have exact figures but I think you could have built our house at least 2.5x times before you hit the price of a new Merc. These days that's totally flipped around. For the cost of building my parents house today, you could have at least 4x new Mercs.

In the 1920s it was cheaper to retain a servant full time than to own a car. Now it's completely the other way round, and for a car a million times better. Production of goods scales; anything labour-intensive does not, especially when land supply and usage are constrained by government regulation, and cost of labo[u]r is inflated by same.

I'd be surprised if you can get a truck at anywhere near MSRP these days. Trucks aren't a great example anyways because they're seen as a luxury good in the US today, which wasn't the case in the 60s.

Check the new car market again. Buyers have radically cut back as the economic uncertainty has proceeded since summer, plus the supply chain issues continue receding into the past.

> I'd be surprised if you can get a truck at anywhere near MSRP these days.

Europe, that's where. List price vs MSRP is not a mostly US issue honestly.

Idk..

First, you can't get the old vehicle new for cheap. That option is no longer available. You do get an objectively better one, but value is fundamentally subjective.

Marginal economics bridges this gap with consumer choice, but if no choice is available then I don't think you can assume consumers are better off.

In any case, I think inflation is a backwards lens through which to examine vehicle prices. The primary mover is industrial learning curves. Inflation is downstream.

In the 20s, when domestic car sales increased annually, the auto manufacturing industry was constantly growing. Factory efficiency increased every year and prices came down every year. The model T got cheaper every year, not just better.

Part of what caused the depression was this process maturing. Auto sales peaked. Manufacturing volume stopped growing. Efficiency stopped growing with it.

This breaks many financial assumptions/instruments and results in deflation, or rather, a local quanta of deflation. Growth industries can vary a lot of long term debt/equity/promises. Shifting from one state to another is deflationary/deleveraging.

Anyway, vehicles stopped getting cheaper 100 years ago. They get better/nicer gradually. Not cheaper though, ever.

Cars don’t break down as much and last much longer. A 20 year old car nowadays can still be perfectly usable. So in effectively they did get cheaper, just buy used (at least that was the case until 2020..)

I own a 21 year old car that still drives great. It's amazing honestly.

Same, also one that is 40 and one that is 60. There hasn’t really been an increase in reliability over time. The difference between manufacturers has always been the defining factor. Simply compare a new Nissan to a new Toyota and you’ll see what I mean. Project out resale value 10 years and you’ll see a dramatic drop in value for the less reliable one. It was cheaper to manufacture, used lower quality parts and engineering and the result is wildly different reliability.

The F-150 is the lowest cost full size pickup truck Ford makes. If you can't put full sheets of plywood and 2x4s in it, it's not really a pickup truck.

  How Much Does the Ford F-150 Cost?

  The 2022 Ford F-150 starts at $29,990, which is the lowest base price in the full-size pickup truck segment. However, that's for the three-seat Regular Cab, so if you're looking for more room, take note of the Super Cab's $34,075 base price and the SuperCrew's $37,700 MSRP.

Source: https://cars.usnews.com/cars-trucks/ford/f-150

The nearest dealer to me had 17 of them ranging in price from USD$34k to USD$62k

The 2022 Maverick has an engine literally twice more powerful than the 1962 F-100 (270 vs 135 hp). With your logic, picking on one tech detail of many, I could argue the 1962 model is "not really a pickup truck" with such a puny engine of weak towing abilities !

What this shows is that Ford merely decided to trade 18 inches of pickup box space for a second row of seat, a more powerful engine, and many other higher-end specs. Today Ford could definitely make a 1962-spec'd pickup with a weak 135 hp engine at less than $20k.

The one tech detail chosen is pretty relevant to the economic (as opposed to style) use-case here.

Being able to carry a 4x8' sheet is the difference between a productive vehicle or not for a significant chunk of the contracting tradesman market.

Sure, lots of users want trucks for other reasons where a short box does fine or a second row of seat is the winning feature regardless of box space, but the logic being applied for a full size bed requirement isn't arbitrary.

Learn to use straps, really easy to haul a 4x8' in a short bed.

Noone wants a normal bed. They want a crew cab short bed. Supply and demand.

I want a full bed. As a result when I looked I was doing so in the past. Came close to buying a VW flatbed with a tools compartment built in. Thing was from the 60s.

short bed with straps: 1] load 4x8' 2] attach straps correctly 3] tighten straps 4*] re-attach straps if incorrect

long bed: 1] load 4x8' 2] close gate

As far as 'noone wants a normal bed', citation needed.

A 1962 Ford truck would only have a single row. Without the Maverick's second row, you'd probably get a full-sized bed.

The cheapest F-100 also had a short bed, so it wasn’t a real pickup truck either. You had a pay a whole $35 extra to get the long one!

It had a bed ~2 feet longer than the 2022 Maverick.

With regards to differentiating prices of products by category over time, this chart looks relevant: http://www.roseassociates.ca/20-years-of-price-changes-in-th...

"The Price of Tomorrow" by Jeff Booth really nails this concept.

I suspect that to an extent, prices rise with the proportion of income people are willing to allocate to something. Cars will rise to the amount that matches the importance people place on them. If cars become less important due to electric bikes and Zoom, manufacturers will be able to charge less. The investment in researching car design would decrease accordingly. Same with energy sources etc.

True, but only for goods with a moat. Let's say an iPhone. I may value a fruit at 10 Euros and you may sell me a fruit at that price, but if someone else can produce them for 2 Euros they will perhaps sell them for 5 Euros and make a good profit. So the price will be 5 or even less.

You should go to a dealer and try to actually get one for $22,195. Dealers have been gouging with huge fees above sticker / MSRP.

I’d prefer a brand new 62 f-150 to a 2023 maverick.

But yeah housing is a better example. We really fucked that one up didn’t we?

Healthcare is hard because we have so many better technologies, but worse outcomes so the price increase is arguably not worth it. Maybe this one is like the truck. Lotta new technology, at the end of the day not better.

And most people rarely need a pickup truck for its specifically design utility. They likely just want a safer car which is essentially an arms race at that point. I think less pickup trucks on the road would be a good thing considering how the majority of people drive.

American CAFE standards drove people away from station wagons and towards SUVs and pickup trucks.

> They likely just want a safer car

Are modern pickup trucks objectively safer than modern cars, or is it more about the perception of driving something that feels it's half way to being an armoured vehicle?

In Europe almost no-one drives around in a truck. Even the tradespeople (carpenters, plumbers, roofers, gardeners, heating installers, you name it) all drive light vans, not trucks.

> Are modern pickup trucks objectively safer than modern cars

In a collision with a significantly lighter/smaller car? Usually

> In a collision with a significantly lighter/smaller car? Usually

Can you give a source for that?

I'm struggling to find anything up to date which isn't blatantly biased, so here's something (old!) from Berkeley Lab:

'Those who think that driving big is driving safe, or that lightweight, fuel-efficient vehicles are inherently more dangerous than their heavyweight counterparts, need to think again. A researcher with Lawrence Berkeley National Lab (Berkeley Lab) has teamed with a researcher from the University of Michigan in a unique risk analysis study which shows that, contrary to conventional wisdom, vehicle quality is a much more important safety factor than weight for the drivers of vehicles involved in a crash.

"Most cars are safer than the average sports utility vehicle [SUV], while pickup trucks are much less safe than all other types. Minivans and import luxury cars have the safest records," states the report, "An Analysis of Traffic Deaths by Vehicle Type and Model," which was prepared by Tom Wenzel, an energy analyst with Berkeley Lab's Environmental Energy Technologies Division, and Marc Ross, a professor in Michigan's Applied Physics Department.'

https://www2.lbl.gov/Science-Articles/Archive/EETD-SUV-Safet...

You can't just pick one single item and consider it 'representative' of inflation. [1] Some things cost more than they used to, some less. Cars happen to have tracked very well.

[1] https://ritholtz.com/wp-content/uploads/2018/02/pricechanges...

They also last much longer

Or we are forced to make them last longer.

That doesn't match my experiences; IME cars do last longer now.

I have owned and spent substantial time driving a 1978 Buick Regal and a 1968 Westphalia VW van.

I don't think that you're gonna see 200K miles out of either of those vehicles. The Buick had about 120K on it and was clearly on its last legs. It's likely been scrapped. The VW only runs because I sold it to a mechanical engineer who wanted to have a project to work on with his children, and it's now a "vintage" toy instead of my daily driver.

I am at about 180K on my 2014 Tacoma and I expect to get at least another 120k out of it before I sell it.

Shout out to Toyota making 200k miles the new 100k. The Toyotas I have owned have been over 150k with very little issue.

My 2001 4Runner has over 350K miles, and is still rocking 4x4 action on the North Carolina beach daily.

Non salt state? Pre 2005 Toyotas had serious corrosion issues in salt road conditions

random anecdote: 2004 chrysler Sebring - nothing special, hit 180k before I had some 'unknown' engine problem. Mechanic spent a couple hours trying some stuff, and something worked, and I got another 60k miles out of it before it was time to let it go. That was over a 14 year period. If I was mechanically inclined, I probably could have done a little bit more on my own re: preventative/etc, to get a bit more out of it. Or... had I sunk another $2k in (estimate) to fix a bunch of stuff, who knows? I might have got another few years. But I went with something smaller, newer, better mpg, and probably overall better safety (12 years newer).

People are extremely overestimating how cars last decades ago. Barring other things, corrosion protection was nonexistent, few year old cars were rusting away.

I think a new 2022 Ford F-150 will run closer to $60k.

I had no idea that kids in 1962 were spending $100 on one piece of licorice. Kinda puts the “millennials and their avocado toast” thing in perspective, huh?

Great stuff!

This is a nice demonstration of the variability of inflation and how under-trend we have been for many years. There was a strong push from some monetary policy people to move toward a longer term, average inflation targeting that would make the Fed have symmetric reaction functions to upside and downside inflation while attempting to keep a longer term average as the goal.

One interesting explanation for high inflation during the 1970s to early 1980s was that the monetary system and supply of real assets had to adjust to a massive influx of working age adults (babyboomers). A second wave from that population event started to enter the workforce over the last ten years. It might be interesting to normalize the data here against the size of the workforce.

My partial theory is oil production grew exponentially up till a bit after 1970. And before that the US had outstripped domestic supply and started having to import oil.

And you are right boomers household formation increased demand for stuff.

nice site you built. where did you source the data?

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