If one government really has an incentive to underestimate inflation, it's the Belgian one. Belgium has wages auto adjusted to inflation by law.
https://www.reuters.com/world/europe/on ... 022-10-28/
Happy times for homeowners with a fixed low rate mortgage.
Nobody Talks About It - Stocks Don't Beat Inflation
Re: Nobody Talks About It - Stocks Don't Beat Inflation
Isn't this more due to the wage gap/inequality mentioned earlier? Where the price of assets/services have all increased, but (most) people's salaries have remained stagnant? This is especially obvious in the continual US discussion on minimum wage...but also glaring are the differences in percentages between what the CEO makes vs the average worker, comparing from the 70s/80s to now...tylerrr wrote: ↑Thu Jun 22, 2023 3:38 pmMeanwhile, virtually no married couple in the United States can have one spouse stay home to raise kids while the other spouse goes out and works full time to pay for a mortgage and bills.
When I grew up in the 80s, it was common that one Spouse could pay for a household while working full time. Now, hardly anyone can afford that.
But I'm crazy? Nothing has changed in inflation? It's all because we spend more than in the 80s?
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unemployable
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Re: Nobody Talks About It - Stocks Don't Beat Inflation
The US has an incentive too. Government debt (TIPS, I-bonds) is indexed to CPI. As are tax brackets, welfare payments and government-job salaries. (Social security isn't indexed directly to CPI but CPI strongly affects it.)
The substitution effect is real. The basket of goods measured in CPI changes over time not only due to substitutions (Walmart instead of Joe's Corner Market), but also to the changes in prices themselves. TVs and computers have plummeted in price which causes TVs and computers to make up less of the CPI. I'm sure you can find stuff that goes up 10%/year over a multi-year period — heavily regulated and taxed items such as cigarettes and refrigerant-12 come to mind — but the invisible hand always feels us up until we use less of it.
Re: Nobody Talks About It - Stocks Don't Beat Inflation
Not to mention GDP growth is always computed in real terms, so the lower the CPI, the higher GDP growth you get to report. That's true for all governments in the world.unemployable wrote: ↑Fri Jun 23, 2023 12:48 pmThe US has an incentive too. Government debt (TIPS, I-bonds) is indexed to CPI. As are tax brackets, welfare payments and government-job salaries. (Social security isn't indexed directly to CPI but CPI strongly affects it.)
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prudentelo
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Re: Nobody Talks About It - Stocks Don't Beat Inflation
Stock beat Weimar inflation and most likely to beat inflation in long run.
This is because stock value depends on actual business profit, not government estimate of money supply / money velocity.
What you (OP) observe is just that stock doesnt return reliable steady return, but jumps up and down a lot around long term trend in any given year. Which is well known fact.
This is because stock value depends on actual business profit, not government estimate of money supply / money velocity.
What you (OP) observe is just that stock doesnt return reliable steady return, but jumps up and down a lot around long term trend in any given year. Which is well known fact.
Re: Nobody Talks About It - Stocks Don't Beat Inflation
Yes.
Maybe it’s because the stocks are the inflation. The rich have migrated from printing little banknotes to printing stock certificates.
The majority of toiling masses haven’t caught on and they’re still clamoring for the bank notes. We cannot put greenbacks in our 401k so print up some stock certificates. Those that have graduated to the trade in equity notes have increased their wealth in greenbacks but they own no more of the total share of corporate equity. At the end of the day they fill the same slot in the hierarchy as their non owner predecessors.
Look no further than the deluge of new stock certificates and their increasing “value” and you’ll see that stocks don’t beat inflation because they are the source inflation. Most people's personal value is unchanged over time when valued in the fiat currency de jour.
It’s just a new kind of note. You can look at the cost of goods in dollars, gold or stocks. If valued in S&P500 there isn’t much inflation. There’s nothing magical about stock certificates. Most of us have never even held one in our hands. They are just paper.
All paper is vulnerable to this effect.
ETA - I’d also add that gold used to be used to back up the dollar. Once the government took the dollar off of gold you see inflation in dollars but not so much when things are valued in gold. Currently what are dollars backed up in? Niall Ferguson will answer something vague like “the value of America.” Loosely interpreted this may be the value of corporate America among other things like domestic natural resources. I’d count American human capital as rolled into US corporate value since a lot is tied up there. Same for natural resources owned by mega cap producers like Newmont and Exxon.
So I envision (perhaps wrongly) that the dollar is backed up by a bunch of stock certificates in the current model after Nixon took us off the gold standard. That’s why I think stocks will move with inflation just like gold backed dollars used to. You’re not going to add any extra value investing in the average because it is just the hard currency that is backing the greenbacks. At the end of the day you really haven’t done any real work issuing and selling stock certificates so why is there this expectation that you are going to beat inflation? For most issues you’re just changing one type of paper for another. Saying stocks don’t beat inflation is like saying gold backed dollars don’t beat gold.
If any of this nonsense I’m spouting is true it means our massive explosion in stock value is for the most part inflationary. The kink is that the ownership of shares is skewed to the very wealthy. So the inflation is mostly felt by he poor folks. The rich just cash in more chips to get the poor to do their bidding. And that’s something the lower 90% cannot do.
Perhaps Jerome Powell is on to something by jacking up interest rates to destroy stock values. The destruction of stock value may be destruction of excess money.
Maybe it’s because the stocks are the inflation. The rich have migrated from printing little banknotes to printing stock certificates.
The majority of toiling masses haven’t caught on and they’re still clamoring for the bank notes. We cannot put greenbacks in our 401k so print up some stock certificates. Those that have graduated to the trade in equity notes have increased their wealth in greenbacks but they own no more of the total share of corporate equity. At the end of the day they fill the same slot in the hierarchy as their non owner predecessors.
Look no further than the deluge of new stock certificates and their increasing “value” and you’ll see that stocks don’t beat inflation because they are the source inflation. Most people's personal value is unchanged over time when valued in the fiat currency de jour.
It’s just a new kind of note. You can look at the cost of goods in dollars, gold or stocks. If valued in S&P500 there isn’t much inflation. There’s nothing magical about stock certificates. Most of us have never even held one in our hands. They are just paper.
All paper is vulnerable to this effect.
ETA - I’d also add that gold used to be used to back up the dollar. Once the government took the dollar off of gold you see inflation in dollars but not so much when things are valued in gold. Currently what are dollars backed up in? Niall Ferguson will answer something vague like “the value of America.” Loosely interpreted this may be the value of corporate America among other things like domestic natural resources. I’d count American human capital as rolled into US corporate value since a lot is tied up there. Same for natural resources owned by mega cap producers like Newmont and Exxon.
So I envision (perhaps wrongly) that the dollar is backed up by a bunch of stock certificates in the current model after Nixon took us off the gold standard. That’s why I think stocks will move with inflation just like gold backed dollars used to. You’re not going to add any extra value investing in the average because it is just the hard currency that is backing the greenbacks. At the end of the day you really haven’t done any real work issuing and selling stock certificates so why is there this expectation that you are going to beat inflation? For most issues you’re just changing one type of paper for another. Saying stocks don’t beat inflation is like saying gold backed dollars don’t beat gold.
If any of this nonsense I’m spouting is true it means our massive explosion in stock value is for the most part inflationary. The kink is that the ownership of shares is skewed to the very wealthy. So the inflation is mostly felt by he poor folks. The rich just cash in more chips to get the poor to do their bidding. And that’s something the lower 90% cannot do.
Perhaps Jerome Powell is on to something by jacking up interest rates to destroy stock values. The destruction of stock value may be destruction of excess money.