Posted: Mon Jan 21, 2013 8:21 am
I happen to be among the believers in future high inflation, mainly due to the fed policy and the uncontrolled federal deficit. Last year the CPI in the US rose 1.7, lower than the average for the preceding decade. The highest outlier was medical care at 3.7% increase, whereas the lowest was piped natural gas at -2.9%. The CPI composition seems to be a reasonable reflection of household spending in America. The CPI does not seem manipulated, as I have seen suggested on this forum.
On one hand, reason would suggest that inflation go up dramatically. On the other hand, the numbers show otherwise. Debtors, of which the us government is the largest, have a vested interest in higher inflation due to the reduction in value of the outstanding principal. But, higher inflation means that Social Security spending increases also, due to its connection to the CPI. Hence, higher inflation means higher SS spending, which is the largest item on the budget. The Government seems to be in a catch 22. I guess it leaves me quite confused. Do we set up a strategy to hedge against inflation, or not? I have not invested in the PP, and I don't plan to do so in the future. How does the current situation affect your investment strategy? I have been very pleased with the stock market performance recently, but is this party coming to an end? 2012 was quite the party for those invested in the S&P500. It rose 12.1% in 2012, a whopping 10.4% real growth over inflation! The SWR last year turned out the be much higher than 3 or 4 %. In terms of real ROI, S&P500 gave its investors one of its best years.
Then one more thing to be concerned about: the trade deficit with China last year was 290 billion, or 1.8% of our entire GDP for 2012. This deficit has been rising almost exponentially, with only one dip in 2008, due to the recession. How does that figure in our investment strategy?
With additional worries such as the uncontrollable deficit, the debt ceiling political fight, maybe another downgrade of the US credit rating, the increase in taxes, the huge cost of Obamacare... the list goes on and on. The news on domestic energy production is really good, but it that enough? The party just goes on. I have this eery feeling that we are in a strange schizofrenic situation, with no rational explanation. Should I see a doctor about paranoia, or am I not alone? Sorry about the very long post but I had to get this off my chest. I greatly look forward to your thoughts and comments.
On one hand, reason would suggest that inflation go up dramatically. On the other hand, the numbers show otherwise. Debtors, of which the us government is the largest, have a vested interest in higher inflation due to the reduction in value of the outstanding principal. But, higher inflation means that Social Security spending increases also, due to its connection to the CPI. Hence, higher inflation means higher SS spending, which is the largest item on the budget. The Government seems to be in a catch 22. I guess it leaves me quite confused. Do we set up a strategy to hedge against inflation, or not? I have not invested in the PP, and I don't plan to do so in the future. How does the current situation affect your investment strategy? I have been very pleased with the stock market performance recently, but is this party coming to an end? 2012 was quite the party for those invested in the S&P500. It rose 12.1% in 2012, a whopping 10.4% real growth over inflation! The SWR last year turned out the be much higher than 3 or 4 %. In terms of real ROI, S&P500 gave its investors one of its best years.
Then one more thing to be concerned about: the trade deficit with China last year was 290 billion, or 1.8% of our entire GDP for 2012. This deficit has been rising almost exponentially, with only one dip in 2008, due to the recession. How does that figure in our investment strategy?
With additional worries such as the uncontrollable deficit, the debt ceiling political fight, maybe another downgrade of the US credit rating, the increase in taxes, the huge cost of Obamacare... the list goes on and on. The news on domestic energy production is really good, but it that enough? The party just goes on. I have this eery feeling that we are in a strange schizofrenic situation, with no rational explanation. Should I see a doctor about paranoia, or am I not alone? Sorry about the very long post but I had to get this off my chest. I greatly look forward to your thoughts and comments.