https://totalrealreturns.com/ has now been updated with this morning's CPI-U data release. It continues to update every night a few hours after market close.
On an inflation-adjusted (real return), dividend-reinvested (total return) basis (i.e. in terms of real purchasing power):
Stocks are down -29.6% from their peak on 2022-01-03
Bonds are down -28.3% from their peak on 2021-08-06
In a Bogleheads discussion "How unusual is the current downturn? Actually pretty common." https://www.bogleheads.org/forum/viewtopic.php?t=387569 it is clarified and discussed that the stocks drawdown is fairly common, while the bonds drawdown is several times worse than the 2002-2003 lows or the 2008-2009 lows.
(This website is my side project, released 3 months ago as "Show HN: Inflation-adjusted stock charts – Total Real Returns" https://news.ycombinator.com/item?id=32081943 . I've been slowly implementing many of the requested features from the comments thread...)
I've investigated and it appears that the data comes in already completely buggy from my upstream data provider, https://eodhistoricaldata.com/ . I will open a support ticket with them!
Even very conservative funds like SHY aren't quite like a MMF. BIL is very close though. We can see that SHY is negative for the year, while BIL (and "proper" MMFs like VMFXX / VUSXX / etc. etc.) are all positive / better than cash under a mattress.
I'd argue that when most Bogleheads talk about "cash", they're talking about BIL and MMFs. Something between 0 months to 3-months of maturity.
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I'd still like to see MMFs working of course. I'm sure there's a minor difference between BIL and VMFXX that I haven't though of... but BIL is the closest thing I can think of to a money-market fund.
It's mainly a supply issue. There is also a demand component but supply is the main bottleneck causing this sticky inflation. Originally they thought the supply issues would improve by now but it just can't catch up for some reason. So they need to force demand down until supply catches up. China also isn't helping with their foolish lockdown policies that are severely affecting supply chains.
Guess this is what happens when Western lawmakers sell out domestic manufacturing because some dickhead MBAs said it would be "efficient".
> Guess this is what happens when Western lawmakers sell out domestic manufacturing because some dickhead MBAs said it would be "efficient".
One could make a more charitable interpretation than that. It has been an observed strategy of the modern western world to transition from physical labor as an asset to “IP”; i.e. immaterial rights (mostly copyrights and patents), as an asset. One could charitably then guess that law and policy makers might have envisioned the western world as, like Joel Spolsky once said, “a trendy couple sipping Chardonnay in their living room outsourcing everything”¹. Joel was talking about companies, but the analogy can be stretched to entire countries.
The strategy didn’t work as well as they hoped, obviously, since IP rights depend on laws, and sovereign nations are ultimately not beholden to laws. The strategy still worked somewhat, only, I think, because a Chinese company can’t just create a popular product and sell it in the west (although they are getting better all the time, like how Amazon is filled to the brim with pseudo-brand junk). There’s something fundamentally missing there, like how hardware companies can’t write good software to save their lives, and mostly vice versa. This fact has allowed the west to cling to the dream of Chardonnay long enough to survive until today, when we can finally see the first really big drawbacks of not having control of your own production and supply chains.
And Xi cannot change China’s zero-Covid policy, because, to do so, he would have to lose face by admitting it’s a failure. He would rather have the population endure continual hell. It’s such a tragedy for China.
Wait, how is it a failure? I get that their cases have doubled in recent months, but that doubling is from 250 cases a week to 500[1] and their highest spike was a brief 5,000 number of cases in April.
Whereas the US, with a much smaller population, has been rocking at least 10,000 cases a day (and far more deaths) all year, with almost all of May to July having more than 100,000 cases a day.
I would suggest reading up on how the zero COVID approach taken by the Chinese government has impacted its citizens, and how it’s really very much divorced from any pragmatic notion of saving lives.
Can anyone in this thread link to an actual article and describe how horrible it is? It's perplexing that I'm getting so downvoted and the replies have absolute zero information besides "it's just horrible" which sure, maybe it is, but they've had millions less people die from COVID so I need at least some information to change my mind from "it sure seemed to do it's intended job."
They are just going to have the millions of people die later when everybody catches covid, and in the meantime are inflicting lots of misery in their attempts to delay it.
COVID right now is mutating towards being more contagious but less severe. That isn't really antivaxer logic, get a good vaccine and you should be much more protected against either catching or getting severe symptoms from a more endemic COVID.
It most definitely will rebound, I don't think anyone with any knowledge about how these things work will argue otherwise. But it isn't clear if or how fast we will get back to 2019 numbers, especially since our long term health care labor and infrastructure was decimated by the pandemic (by COVID directly as well as by lockdowns, and just by people not wanting to do the work anymore for what we are willing to pay for it).
They are trying to prevent COVID completely, which, given that some amount of resistance to COVID is based on already having it before, it turning out to be untenable. Coupled with less effective vaccines and other countries taking a "COVID is now endemic" approach, it really puts them in a bind in how to move forward without huge medical and/or economic consequences.
This is pure nonsense, you can progressively curb any human rights and stop civilization just to keep saving another human life. We can probably save few hundred thousands of lives annually just by banning cars. Same for cigarettes, alcohol. And so on.
There was time to be scared like small children when covid came and nobody knew anything and everybody was afraid to certain extent. Since then we know much more, covid mutated to being much less deadly and its in proper 'meh' category. Or are you equally concerned about flu?
Anybody spinning it as something more is doing so for some political reasons.
This makes me think of the oft repeated phrase in pop culture (i.e. movies).
"I don't want to survive... I want to live!"
I don't think any policy is or was perfect. All are an imperfect compromise attempting to balance preventing unnecessary illness and death with the rest of our needs - to produce, consume, be social, etc.
So overall I'm reasonably OK with the attempt to prevent overwhelming community transmission early on at the expense of some economic activity while buying time to get vaccines and treatments researched and distributed. It wasn't perfect, and lots of people are not happy about it, and millions of people still ended up dead. It might have been worse; maybe it could have been better.
But given what we know now, and that we have vaccines available, and a seemingly less dangerous strain dominating, it seems like strict lockdowns are all but entirely proven to no longer be the best attempt at balance and compromise for the overall well-being of the people (and the economy).
We could reduce a ridiculous number of deaths by reducing the speed limit on all roads and highways to 25mph, but we don’t. The trade off isn’t worth it to most people.
Zero COVID policies made some amount of sense when we thought a vaccine that would work really well was around the corner, as the effect on daily life would be temporary.
What is weird is that he can't just force all the old people to get vaccinated. You'd think that'd be one of the benefits of being an authoritarian, but apparently that'd be touching some kind of political third rail in China.
He really is stuck with Zero Covid because China's death rate would still be very high if they drop that and let it rip (Similar to what happened in Hong Kong with Omicron).
I think this is a really legitimate question with a complex answer. At the end of the day, Covid is one of the most contagious diseases out there. It has terrible impacts, but China’s policy is like trying to hold back the rising ocean with ever higher sea walls. The cost will continue to mount, the global isolation will continue to take its toll and one day the waters will break through the walls anyway.
China is just kicking the can down the road. They have poor population immunity and the virus is endemic in most of the world. Eventually it’ll sneak in
You're picking a subset of even the CPI basket of goods, but still the answer is yes[0]. The linked chart currently only goes to 2021, but 2021 was down almost 13% from 2020, and I have no expectations that 2022 will be any different.
The supply chain has stumbled incredibly badly in ways that affect almost everything, including milk and bread--which have to be packaged up and shipped and in the case of bread, contains added ingredient that might themselves be in short supply.
To be fair, it looks like a long term decline, with a larger drop between 2018 and 2019. Could be that milk is less and less preferred by consumers. The milk might still be used for cream, cheese, yoghurt, ice cream, protein powder, and so on.
According to this, the number of milk cows stays constant:
Well if supply is not coming back the only thing you can and have to reduce is demand. Either via raising interest rates or via runaway, entrenched inflation if you don't raise rates quickly enough.
Once you have entrenched inflation you need to raise rates even more if you ever want to get it back under control.
Housing is also a huge contributor to inflation, and hiking rates kills demand for new construction as effectively as it kills demand for all other housing. They're making the housing crisis worse in the long term, just as they did in 2008.
It's wild. The Fed brought interest rates down to zero and created a massive asset bubbled fueled by cheap debt. Now they're cranking up interest rates to pop they bubble they created, and we're supposed to applaud them for carefully maintaining "stable prices". All they've done is put us through an economic rollercoaster where most of us ended poorer in the end.
well don't forget, in 2008/9 they were fighting a deflationary spiral. That was the biggest fear and Bernanke even said he'd drop bags of money from helicopters before getting trapped in that situation. There were lots of voices warning of the inevitability of high inflation but the deflationary conditions soaked it up until now.
I think the real problem is the pandemic was not a deflationary situation, we just turned off production quite literally and then increased demand by giving everyone money for not producing anything.
The crazy part is that they dropped reserve requirements to zero for banks at the beginning of the pandemic, and for all the hiking of rates the reserve requirements are still at zero. They slammed on the brakes while the other foot is still flooring the gas pedal.
New buyers want lower prices yet when that actually happens, new construction stops. Thus creating a massive backlog and shortage for the future, leading to the next bubble.
Actually the CPI is weighted. You can find the weights here [1].
Note that the weight for housing is much, much higher than the weights for food and energy costs. That plus historically high levels of inflation in housing means that housing is a big driver of inflation.
I thought Cathy said FED is wrong and inflation may have been peaked :/. She may have been right for the first part "FED is wrong", but for the different reasons - not to tame inflation more aggressively.
The growth companies that she invests into cannot take this rising interest rate environment.
So she's loudly complaining about deflation to hope that the Fed cuts her (and her investment choices) some slack.
Alas, the average American needs to deal with inflation more than the billionaire class needs to feel good about their bets.
Don't get me wrong, my stocks and bonds also hate this rising interest rate environment. But I'm also enough of a citizen to see what must be done to tame inflation: more rate hikes and possibly at an even faster pace than originally expected.
Always find these statements strange, and needing qualification.
If I look at the S&P 500[0], it's currently up 27% from what it was 5 years ago (and 152% from 10 years ago), before accounting for dividends and inflation. (Dividends being roughly 2% and approximately matching inflation before 2022.)
So what I see is an irrational uptick in 2021, and a correction in 2022.
I take it to mean those 5 to 10 years of investment progress were always a fiction. They felt like it at the time to me, but I agree it was nice seeing the numbers go up.
Economists are looking at this today and saying there's not much the Fed can do. They have crude and big hammers. You need more than just dynamite to sculpt Mt Rushmore.
Historians should be looking at Congressional inaction, and how unified obstruction from one party and division in the other made it impossible for the federal government to enact meaningful policy initiatives that could have done anything.
The thought is pretty straight forward.
Prices are a function of supply and demand.
If buyers have more cash, they are willing to pay more, so prices go up.
If you increase the money supply and that money gets into the hands of buyers, the prices will rise.
yes, on both sides. How much a human is willing to pay, and how much a human thinks they can get.
If your point is simply that businesses are choosing to maximize profit, that of course is correct. It always has been unless you are a non-profit or state owned enterprise.
The salient question is what conditions changed in the economy so that they can increase prices.
It isnt like they were running as charities before.
> The salient question is what conditions changed in the economy so that they can increase prices.
Agreed.
> If your point is simply that businesses are choosing to maximize profit, that of course is correct.
My point is pedantic and political. I don't like humans being removed from the equation.
Framing inflation as a natural consequence of increasing the money supply is one way to do that.
The widespread thinking that "businesses exist to maximize profits" is another. (Yes, I'm aware of obligations to shareholders in corporations, but that's beside my point.)
Removing humans from the equation makes abuses just palatable enough to go down.
I personally don't think that raising prices is abusive or even unethical. A tenant of voluntary labor and exchange is the ability to set your own price. Like you said, it is an inherently human choice.
I would be curious to hear how you think economic interactions should work.
The increase cost of goods and service is not the cause of inflation, it is the definition of inflation. The cause is increased supply of money along with velocity of money.
Would inflation occur if all companies decided to act together patriotically and not increase what they're charging in response to the increased money supply?
> it is the definition of inflation
Doesn't the definition of inflation have more to do with the decreased value of currency? There are plenty of uses for currency outside of the purchase of goods and services.
If buyers have cash piling up and companies magically decided to hold prices, the cash would just flow into whatever could be still be bought, probably housing.
In reality, the only thing that puts downward pressure on prices is if people cant afford them.
housing is one factor in tracking the value of a currency.
Assume we freeze the prices of consumer goods, cost of housing still figures into your budget and cost of living.
>It would certainly reduce asset availability, but— to use your example —there's an absurd surplus of housing nationwide.
I cant relate to this idea of an absurd housing surplus. It simply doesn't match m understanding of reality. Housing prices have gone through the roof almost everywhere people want to live.
I'm saying that the root cause of the problem is speculation.
Price adjusters within companies are using the news of the increased money supply to gamble that customers will pay more and they've been right, so far.
There's quite a bit of tacit collusion driving this, of course, but it's also a self-fulfilling prophecy. Price adjusters within companies know that everyone believes that printing money "causes" inflation, so they take advantage of the opportunity.
> You need more than just dynamite to sculpt Mt Rushmore.
Not really. Volcker did his job with dynamite just fine. You raise interest rates above prevailing inflation rates. Easy.
But the current Fed is stuck. They can't fix inflation Volcker-style (hiking to 9-10%) without destroying the bond market and kicking off a cascading debt crisis.
So they're targeting a middle-ground terminal rate of 4.5% and hoping the can will be kicked long enough that it will be someone else's problem in the medium-term future.
What does this even mean? If there were no supply-side constraint, prices would dive toward zero like some post-scarcity Star Trek society. There is always a supply side constraint; when you dump a bunch of demand in on top of that, of course prices will go up.
It means we're experiencing a period of uniquely high constraints. There are less goods available now than there used to be, because the normal levels of supply are constrained by pandemic and war.
Maybe for some industries, but this inflation is very broad base. A supply constraint is likely to cause inflation in individual sectors, and we certainly see that for things like new cars. But it’s hard to buy into every single sector being supply constrained at the same time.
Really? We've had a global pandemic wrecking supply chains all over the world, lockdowns continue in China - one of the world's largest manufacturing entities, and we have the Ukrainian War wrecking energy and food supplies. Altogether every single sector of the economy is impacted. I'm not sure why you'd think that wouldn't be the case.
If it results in demand. Not all spending by the government leads to demand. I see people blaming student loan forgiveness, for example, and like... No one has redeemed that yet and it's not clear how much that will even have an immediate effect. If someone keeps paying off their loans at the same rate they were, they won't have increased demand right away.
Likewise, if people increase their savings or pay down other debts, demand isn't increased right away.
It's just not as simple to draw a line to specific government spending and say "that caused inflation".
Here’s an easy counterpoint: soda, which is primarily water and bottled locally so gas shouldn’t affect the price too much, has gone up just as much as everything else.
I was able to collect unemployment as a sole proprietor due to COVID. It was needed as I’m a photographer, but we were also allowed to deduct expenses from what we made that each week. When the math lined up I absolutely bought some new equipment to offset my profits which allowed me to get unemployment that week, and other weeks my usual expenses offset my profits as well.
I then had extra money to invest. I’m sure I’m not the only one. Huge amounts of cash was injected everywhere in the economy. The fact that Biden was calling for 3 separate “once in a generation investments” after that and during “transitory inflation” should have been enough to get him absolutely destroyed in the media.
The plural of anecdote is not data. My spending has remained more or less constant.
The supply chain in soda is complex, you have corn producers (whose equipment, fuel, labor, and seed costs are influenced by supply), the price for corn is increased as global farm production is hit by war, you have water costs (which, depending on region, could be increasing), you have fuel and distribution costs, labor costs, plastic bottle costs... I guarantee you can trace back increased costs to regions hit hard by pandemics.
I think you're alone if your spending has remained constant. I don't know of a single grocery item that I buy that hasn't gone up in price significantly.
My wife used to work for a well known food brand. Somewhat early on in the pandemic grocery stores raised their prices for that brand's products, even though they weren't paying any more for the product. Eventually the brand did raise their own prices as they decided they'd rather have that money themselves.
In both cases it was as simple as other prices being raised, consumers had the money to spend, so why not?
Don't know why you're being downvoted. This isn't a problem that raising interest rates can fix. Raising interest rates can't create supply on inelastic demand.
> Raising interest rates can't create supply on inelastic demand.
They don't need to. Interest rates aren't intended to control prices by creating an abundance of gasoline, but by creating a scarcity of dollars.
Yes, this can bring down gasoline prices. No, it doesn't mean gasoline gets less scarce in the process. It just means that each $1 gets dearer. It means that the price looks fine but you can't afford it anyway because your pockets are empty. The gasoline is still scarce even though the price is low. That's what they can do, and what they are doing.
And it's best to understand that, when interest rates go up, the first pockets to empty are emptied by falling asset prices. Stocks, bonds, and real estate. That's why high inflation numbers are bad news for assets, even though they'd intuitively seem like inflation hedges.
Yeah you've completely ignored the inelastic portion of the sentence...
There are these products that no matter how dearer $1 gets - you will absolutely buy them. You can't destroy demand on these products like what you're describing. You and your family could literally die without some of these products. And no raising of interest is going to help that.
Yes; you will buy them with the last one dollar in your pocket, instead of the last two dollars. The price can vary fluidly even if the quantity consumed does not.
A century ago, a loaf of bread cost only a nickel and that's not because people ate less or because food supply was more plentiful or demand more elastic.
But even setting that aside, interest rates operate on aggregate demand which is averaged across all goods, just like inflation is.
Unemployment is a tricky stat, which according to BLS conveniently excludes unemployed people who "haven't looked for a job in 4 weeks." And then knowing how difficult it is to pull hard information out of these poverty stricken areas, especially hidden homeless, I feel confident the whole picture is being blurred intentionally.
I live in a high poverty city with wondrously low "unemployment" but a high number of people who don't have jobs. The answer: if you can qualify for a job, yes you can get a job, but a lot of people do not qualify for anything worthwhile, so why try?
People still need to eat and that food gets processed and delivered with energy. They'll have to heat their homes in the coming months, all of that has been hit hard with energy prices and is something that can't be wished away with higher rates.
On inelastic products, if you've read my point above - yeah.
Can you turn off your spending on food?
Edit: from the report:
> Increases in the shelter, food, and medical care indexes were the largest of many contributors to the monthly seasonally adjusted all items increase.
Can't turn off spending for food and medical care if you want to live
I can absolutely turn off my spending for food, probably by 95%. If I lost my job I’d switch to beans and rice and other cheap homemade food and totally cut out anything expensive like takeout. I could live out of my pantry and freezer for a while if I had to, even.
You need a house, you don't need a nice house. You can buy food you need to cook instead of expensive premade stuff - or even go to primarily rice, beans, and potatoes. Medical care you can put off, switch to a cheaper generic medication, etc.
I would guess that people either don't appreciate or don't recognize the sarcasm. Or recognize it and don't agree that tightening the money supply is unnecessary
September's CPI inflation rate dipped less than expected, reinforcing Fed rate hikes. Core prices rose at the fastest since 1982. Dow Jones futures tumbled.
or lifestyle, I earn 50k€ net year, but my expenses are ridiculously low, around 2k€ year total probably counting housing tax (bike, proprietary of small apartment, no consumerist lifestyle, no external services, no shopping, no pets, no pollution also as a result, and I'm super happy like this)
I sigh at the foresight of the army of ideologically driven economists, politicians and manipulated voter populace that this was caused by so-called unsolid fiscal policy. Just look at the UK.
I wonder if Yellen is starting to realize that the present inflation isn’t so transitory? Apparently not, the administration is still pursuing inflationary policies such as the student loan giveaway and the infrastructure pork bill.
The Biden administration gets an F- on fiscal policy.
The infrastructure bill is desperately needed. It’s the best piece of legislation to come in my adult life. It could be the difference between America crumbling into obscurity, or revitalizing the economy.
The student loan one.. woof. The timing is rough. I know it’s not popular to say, but all those dollars not going to loans are going to contribute to inflation.
We've had policies that have led to the highest prison population and incarceration rate in the western world. There's been little effort on making those in prison employable. 2 million prisoners, many non violent stuck there unable to help with the massive problem society has post COVID. We could fix this to everyone's benefit.
Daycare. It allows a small number of adults to enable a much larger number to work. There's no federally funded program towards this yet it's a massive societal force multiplier. Especially for single parents.
It's amazing to think we have corporations complaining about labor shortages who also back politicians that promote policies that create labor shortages.
Beyond helping to fund daycare for the parents' sake, we should recognize that early childhood education workers are often paid less than a living wage and finding workers is very challenging. The government should fund living wages as well as subsidies for the parents.
Early childhood education is important for child development, and investing in that is investing in the economy.
Only a small portion of that massive omnibus law, and every massive omnibus bill, is needed. The remainder is made up of special interest lobbying and donor class favors.
I have to say that if the economic system is dependent on siphoning off money from young people in the form of student loans, that already sounds like a system ready to crumble if those young people aren't able to establish themselves financially.
My impression of the US is that it's already too far gone into various collapses to really recover, but I don't know what that means for its future.
> The student loan one.. woof. The timing is rough. I know it’s not popular to say, but all those dollars not going to loans are going to contribute to inflation.
I'm sure my wording could have been better, but the thought that student debt is large enough to have material effects on inflation for an economy the size of the US was a bit of a revelation to me.
The federal student loan portfolio currently totals more than $1.6 trillion.
The federal government receives about $70.3 billion in payments for student debt per year[1]. In relation to the 4.4 Trillion in revenue that is about 1.5% of revenue.
What is more meaningful is the total amount forgiven, which is around 300 billion of debt of the students balance sheets, essentially immediately [2]
That is about 7% of the entire federal revenue.
Essentially folks have 70 billion more to spend this year, and also don't need to worry about payments on 300 billion in coming years.
The numbers being thrown around during the pandemic are truly staggering and people don't have the context to judge their size in relation to federal revenue.
For example, the US spent about $11 Trillion on pandemic relief. That was more than 3 times federal revenue in 2020, which was already a trillion dollars over budget.
Yep, on those scales it doesn't seem like much of an issue, does it? Also, essentially immediately seems to be doing some work there - didn't Biden already cancel part of it that was challenged in court? And I assume other parts will face court challenges?
I haven't followed the the challenges, but I think the sentiment is that it just throwing gas on an existing fire and digging the hole incrementally deeper.
Who is going to replace it? Some people say China, but then the Zeihan POV says their population is too old, they lockdown every three seconds because they still haven't developed a competitive vaccine, and that capital wants to escape the country at record speed seems to indicate its not China (again according the to Zeihan fanboys). Whats the counter argument? I can't see any country overtaking the US. Maybe everyone collapses into a worldwide depression. Maybe thats possible.
To demonstrate your case, consider what Yellen said earlier this week on Tuesday, October 11th: "I'm not seeing anything in the markets that causes me to be concerned."
The next day, October 12th: "I'm concerned about the loss of adequate liquidity in treasuries"
The conditions that caused Powell/Yellen to claim inflation was transitory have not subsided, in fact they've gotten worse in some ways. Continued lock downs in china means manufactured goods are incredibly scarce. Ukraine war means food and oil and scarce. Obviously they were wrong to say transitory, but not for the reason you seem to think.
PPP loan forgiveness is fine, student loan forgiveness is bad. Got it. And our infrastructure is literally crumbling, which is also leading to negative economic consequences.
PPP “loans” were always meant to be forgiven from day 1. They were only called loans because of you used them for things not intended (primarily paying employees) then you needed to pay them back. Student loans were not.
Keeping a pause on student loan payments during a time of high inflation and record low employment is absolutely asinine.
I also think that most people that think our infrastructure is bad haven’t been outside the United States. Our roads - especially our interstate system - are among the best in the world. Where we have problems is usually down on the state or lower level due to misallocation of funds.
Our internet isn’t great, but Starlink has been a real kick in the pants to other providers. Mass transit is lacking but that’s mostly due to people’s choice along with the sheer cost of building out such things in the US.
The Trump administration threatened the Fed in 2017 when they wanted to raise rates to prevent this. Trump passed huge tax cuts as well, contributing to the massive inflation we're facing today. Not to mention PPP and the stimulus he personally signed the checks on.
The entire government failed over 3 different administrations and numerous legislatures leading to this. No one wants to do what's necessary. They just want to score meaningless points for their team, meanwhile our lives continue to get worse.
Several trillion dollars were handed by the Trump administration, in response to the Covid-19 pandemic. The uptick in spending is hardly unique to the Biden administration.
One thing future generations will laugh at is the idea that energy prices were so incredibly important yet so incredibly volatile. We go to great length to tell people not to rely on volatile financial instruments, yet a core part of their day-to-day life can vary so much. Apart from reducing pollution and ending climate change, getting rid of fossil fuels will also get rid of this volatility and all the discontent and issues it is causing.
Inflation is theft, and should (in a managed way) be punished as such. Change my mind.
Edit: Imagine if the tax rate every year was the rate minus CPI since the tax rate was created. (I.e. A 30% tax rate, with 2% CPI increase every year, would be only 20% by 2010.) That would get the politicians to kill inflation right quick… or set the tax rate to hilariously unpalatable levels constantly.
But isn't that more of an illusion of greater wealth? I mean, if you don't stay in your current house, you will just swap it for another one. The price level doesn't really matter, just as long as you can still get something of equal value.
If you borrowed money to pay it off and you're still relatively early in your loan then it's great. You just got a massively discounted house. Anyone who bought a house just before the pandemic and locked in an ultra low interest rate to boot is going to make an absolute fortune on their home in 10 or 15 years time. They probably have already with prices up so much. Interest rates will cool it down but cost of living adjustments will counter that.
Inflation is one of the largest reasons for the century of economic success the world has seen. It incentivizes investment and stops liquidity crises in the money market. Non fiat currency would mean mass unemployment every time the economy enters the downturn of the business cycle.
I don't think inflation can be solely blamed on politicians or policy makers. A sudden shock to supply, like Covid, or a bad drought, hording, a war, etc. all drive up inflation. I agree inflation should be "fought" with whatever policy tools are available.
On an inflation-adjusted (real return), dividend-reinvested (total return) basis (i.e. in terms of real purchasing power):
Stocks are down -29.6% from their peak on 2022-01-03
Bonds are down -28.3% from their peak on 2021-08-06
Tech stocks are down -39.0% from their peak on 2021-11-19 https://totalrealreturns.com/s/QQQ
In a Bogleheads discussion "How unusual is the current downturn? Actually pretty common." https://www.bogleheads.org/forum/viewtopic.php?t=387569 it is clarified and discussed that the stocks drawdown is fairly common, while the bonds drawdown is several times worse than the 2002-2003 lows or the 2008-2009 lows.
(This website is my side project, released 3 months ago as "Show HN: Inflation-adjusted stock charts – Total Real Returns" https://news.ycombinator.com/item?id=32081943 . I've been slowly implementing many of the requested features from the comments thread...)