So... let's pretend you have seven trillion on your balance sheet. That's a lot of debt service. In non-banker terms, that means "making interest payments." Good thing you're keeping the interest rate at fuckall. But let's say you wanted to, oh, not have seven trillion on your balance sheet. What do?
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If a big mac cost $4 instead of $2, and you delineated your debt in big macs, you would owe half as many big macs. So if you make everything worth less money, then your debt is worth less money! The money people have been talking about this since 2008 or so; Mauldin in particular has long held that eventually we would "inflate away the debt". This has the fortunate side effect of allowing you to "resolve your obligations" because if half your money goes to "entitlements" and you need more money, you can either cut entitlements or get a bigger budget. Unfortunately the result here is euphemistically referred to as "punishing savers" because the money you have in the bank is now worth exactly fuckall and oh by the way that $1100/mo social security payment that's keeping gramma in cat food? Yeah her buying power buys half as much cat food now so she's going to have to share with Mr. Sprinkles.
On the plus side your mortgage is going to go up. If you own a house? It's going to be a net zero to sell it and buy another because your asset is going to appreciate too. On the minus side so is your rent. Your buying power is going to go down commensurately with the rentier's income.
Powell is gonna do something new under the sun: say 'yay inflation good!' while simultaneously saying 'boo interest rates bad!' And he's gonna do it because so is everyone else. And you thought paying off your credit card was a smart move. Dumbass.
So the argument here is take on as much debt as humanly possible because it's about to matter a whole lot less.
Inflation has a lot to do with money supply in normal times. Unfortunately all the new money has gone to a small percentage of firms and therefore not caused inflation in the same way it would had the money been more evenly spread around. Not sure what the fed can do different this time, since it's up to companies to increase wages when they have a lot of money, but I don't think we've seen any evidence that's going to happen.
Nonono. They're the exception to the rule cause they're a totally magical company that'll eventually turn a profit and then corner the market cause once they start making money, every other car manufacturer will be made irrelevant over night. It's bound to happen any day now.
Every now and again there's an article that says the dollar is gonna lose its place as the dominant global currency. Sometimes people say cause of the rise of China, sometimes people say cause it's tied to Oil and Oil isn't gonna be around forever, sometimes people just kind of wave their hands and say cause nothing lasts forever. I don't know how accurate any of those predictions are (though I put most faith in number three, cause really, nothing lasts forever), but does something like this help or hurt the dollar on the global scene?
Edit: For clarification, I don't know enough about global currency either to know whether or not it's really all that important who's on top. Though I'm assuming, being an American, having the American Dollar on top benefits me in some ways I'm unaware of.
Having the global reserve currency is really important. It allows you to print money where other people can't. The dollar is a long way from not being the global reserve currency, much further away than most people should worry about. It was the pound sterling, for example, until the end of the Great War.
America deciding inflation doesn't matter is only important in the face of what other currencies do. If, for example, the dollar inflates 30% against the Euro, that makes American goods cheaper in Europe and European goods more expensive in the US. It encourages European investment in the American economy and discourages American participation in the European economy. All these things are good from an American trade standpoint.
But if you have carefully calculated that a $750k 401(k) will allow you to retire at 65, it has just become the equivalent of a $500k 401(k). You're putting off retirement until 72, at which point you'll have to look at it.
LOL I think Powell is about to say 'we give no fucks about inflation' because Powell is a year away from saying 'we can't do shit about inflation'.
The way the minimum wage fixes that is if you tie it to local cost-of-living increases that you calculate yearly or quarterly. And that's not going to happen without some serious political revolution.
It could be done federally, scaled by the existing federally-appraised per diem recompensations for gov't employee travel expenses, which vary significantly between regions/cities. Obviously, nowhere near perfect, but perhaps a decent band-aid.
- Better buy that huge house now.
Have been watching the market. Big check.
- To bad there is no inventory.
Not too many assets where you can buy it low and be assured that you'll be able to make progressively more in rent.
- Also not a fixer upper because material costs will murder you
Yeah but if you take out a HELOC you're golden.
I realized dropping off my kid that my family's livelihood is tied to (A) union contracts, which are negotiated on like 3-4 year timeframes (B) insurance payouts, which are renegotiated on like 5 year timeframes and (C) medicaid contracts, which were renegotiated in 2015 and 1988.
Looks like I need to get gud at lobbying.
Looks like you need to buy a new/bigger house because built in adjustments in those contracts increase your wage a nominal 2.5- 3% a years. With the interest rate at 3 you basically aren’t paying anything in interest it’s free money. You have an upside risk if rates ever hit 5%+ but I’m pretty sure the us government will not be able to survive rates above 6 without some sort of massive printing and inflation.
There are no adjustments in those contracts. WE just re-upped three of them and the prices are exactly what they were. And insurance contracts are like buying diamonds from DeBeers - you take it or you leave it and if you leave it you have to recertify.
Ours adjusts like 2.5% a year or so. The company plays games with the pool but generally you still get around 2-3%. If I knew I would keep my job I’d feel secure buying a million dollar house, unfortunately our company will likely lay off 50-60 % of the workforce and while I’m on good terms with my boss we don’t go to the same church or do regular dinner parties so I may or may not survive that large of a cut