1 Jacob Adjusted For Inflation (JAFI)

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slsdly
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by slsdly »

Adjusting to CAD, 2.5 JAFI renting. I estimate if I owned (without a mortgage) I could get to 1.6 JAFI without any other changes. Obvious indulgences include 0.084 JAFI on nordic skiing (almost entirely getting to/from), probably 0.11 JAFI on organic food (above the cost of conventional food), 0.10 JAFI on restaurants. I also probably spend an extra 0.08 JAFI because my employer incentivizes me to (e.g. realize benefit through spending), but I always include what it would have cost without benefits in my budgeting, as well as 0.05 JAFI getting to the office (well, cut that off for 2020 ;)).

JL13
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by JL13 »

I think GDP/CAPITA is a better estimate of the value of money than CPI. It reflects the influence of your money in society. Also gonna propose, since we're looking at this through strictly the financial lens, that we use the Shiller PE10 to multiply out how much invested assets are required to provide one Jacob per year:

Jacob--------------- Assets
7,000 --------------- 168,140
6,879 --------------- 104,354
6,852 --------------- 140,666
7,084 --------------- 162,783
7,289 --------------- 154,607
7,494 --------------- 164,121
7,772 --------------- 193,212
8,061 --------------- 213,534
8,228 --------------- 199,198
8,458 --------------- 237,321
8,819 --------------- 293,756
9,206 --------------- 261,273
9,526 --------------- 295,218

The income required has gone up 36%, but the assets required has gone up 75%!

classical_Liberal
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by classical_Liberal »

@Jl13
Interesting, seems to be some evidence of the asset inflation from last QE cycle. How will this one end up?

wrt to a JAFI, I think we have to be careful manipulating numbers too much. At that level of spending the only things that really matter from an de/inflationary standpoint are head-tax, housing, and food. All the other potential consumer categories really only matter in how they could potentially interact with and change prices on the "big three". Even within the big three categories there are ways to "beat the system" to some extent at wheaton 6-7 thinking. It just depends on the adaptability of one's system and preferences.

IOW, if we keep lowering the bar(raising the spend level) for a JAFI spending level because of a metric(s) that considers the net total of all transactions, we are comparing spinach to steak. Someone at one JAFI, by definition, really only uses the spinach and we are inflating her/his spending by the cost of steak.

7Wannabe5
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by 7Wannabe5 »

The other way to calculate it would be a function of change in CO2 emissions per dollar and change in global population. Barring this quarantine interval, it is likely less now than when Jacob first calculated it.

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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by jacob »

7Wannabe5 wrote:
Sat May 30, 2020 1:49 pm
The other way to calculate it would be a function of change in CO2 emissions per dollar and change in global population. [...]
FWIW, that is close to how I calculate and set my personal target standard, which is

world GDP / world population / average ecological footprint = 86600B / 7.8B / 1.75 = $6344/year/person

Laura Ingalls
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by Laura Ingalls »

JL13 wrote:
Sat May 30, 2020 9:02 am
I think GDP/CAPITA is a better estimate of the value of money than CPI. It reflects the influence of your money in society. Also gonna propose, since we're looking at this through strictly the financial lens, that we use the Shiller PE10 to multiply out how much invested assets are required to provide one Jacob per yea income required has gone up 36%, but the assets required has gone up 75%!
But a broad index fund such as Vanguard Total Market would be up ~200%. I think you would be alright.

nomadscientist
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by nomadscientist »

JL13 wrote:
Sat May 30, 2020 9:02 am
I think GDP/CAPITA is a better estimate of the value of money than CPI. It reflects the influence of your money in society. Also gonna propose, since we're looking at this through strictly the financial lens, that we use the Shiller PE10 to multiply out how much invested assets are required to provide one Jacob per year:

Jacob--------------- Assets
7,000 --------------- 168,140
6,879 --------------- 104,354
6,852 --------------- 140,666
7,084 --------------- 162,783
7,289 --------------- 154,607
7,494 --------------- 164,121
7,772 --------------- 193,212
8,061 --------------- 213,534
8,228 --------------- 199,198
8,458 --------------- 237,321
8,819 --------------- 293,756
9,206 --------------- 261,273
9,526 --------------- 295,218

The income required has gone up 36%, but the assets required has gone up 75%!
I think this is a correct way to look at it. One way of interpreting the massive QE since 2008 and consequent lack of measured inflation is that the cost of retirement has doubled. Retirement is something most people are buying on the installment plan but the vast majority of buyers won't realise how much it cost until they think they've made all the payments. It's a good place to hide inflation today just as the housing market "that always goes up" was a good place to hide it in the 90s and 00s.

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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by jacob »

It's definitely the way to look at it from a "sustainable earnings perspective". However, in a world where "earnings no longer matter" because QE is but a pump to keep asset prices growing in the "monetary stratosphere" where they only come down to the economy at the ground as fast as people can spend them (i.e. not faster than usual, because CPI inflation is low), all that matters is total return ... effectively how much your savings have been pumped up. Investors don't like this kind of thinking, but savers do because the mechanism has turned the stock market into a higher yield pension savings account.

As long as everybody don't try to pull their money out at the same time (or faster than the CBs can put a floor under the prices) the financial markets can remain decoupled from the economy. Insofar you create a parasitic class, this is just a wealth transfer from those who didn't bother to save (in the total stock market) to those who did. IOW, people's defined contributions plans have become government sponsored defined benefit plans once again. Doing it with bailouts makes it possible to preserve the illusion though.

nomadscientist
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by nomadscientist »

It has to come back to the Main Street economy eventually or else the system really is sustainable, because people owning notional assets they will never sell is functionally equivalent to those people transferring the value to whoever owns similar assets that are eventually sold.

One relatively painless way of doing this is to delete the 401k dollars left over when the Boomers die rather than letting their children inherit. My guess is that most Boomers will die with substantial assets remaining because the uncertainty of defined contribution causes risk averse salarymen to over-invest and under-withdraw. So, you may see a special 401k inheritance tax imposed to bail out Social Security. Just one idea*.

Nothing says the situation has to be well-managed though. The housing crisis wasn't. Equally those betting big on a collapse should bear in mind that nothing says it has to be poorly managed either.


*Exactly as you say, it turns defined contribution into defined benefit under the table, but internalises the dual benefits of terrorising salarymen to work harder than necessary through their careers, but then staving off the social disorder that would result from unlucky or imprudent salarymen actually being allowed to starve in retirement :)

AnalyticalEngine
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by AnalyticalEngine »

Couldn't it be possible for these unhinged markets to continue indefinitely, at least for our lifetimes? They survived covid after all. If that's the case, could it be an argument for index investing? Since if all that matters is how much you saved, and the government is committed to bailing out the markets forever, then you may as well put your eggs in that basket.

What alternatives are there?

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ScrewTheAverage
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by ScrewTheAverage »

This is a cool idea and drives you to want to improve/try different things to lower one's JAFI!

For 2019 it looks like our JAFI was .81 for two people and .405 for each of us.

Keep up the great work everyone! :geek:

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Lemur
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by Lemur »

We’re 28x annual expenses....if we were Jacob haha 😆 This is motivating in a way.

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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by Solvent »

jacob wrote:
Sat May 30, 2020 5:56 pm
Insofar you create a parasitic class, this is just a wealth transfer from those who didn't bother to save (in the total stock market) to those who did.
This is kind of boomer thinking though, because there are also generational effects. The people coming of age in this market did not have an opportunity to save, since they were not working (they were kids or unborn). Because wealth is quite naturally concentrated towards those who have already had the opportunity to spend thirty years working, transferring more purchasing power to those with existing assets is a transfer from the young to the old.

7Wannabe5
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by 7Wannabe5 »

Isn’t it more like the old people are funding Elon Musk to build the future for the young people? Obviously, when you invest in a business you are only limiting personal consumption.

2Birds1Stone
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by 2Birds1Stone »

Do we have a 2020 update yet? @wolf

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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by jacob »

The original "1 Jacob" which is also adjusted for population and sustainability for 2019 was 87.8TUSD/7.7B/1.6 = $7120/person/year.

wolf
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by wolf »

2Birds1Stone wrote:
Tue Feb 02, 2021 8:09 am
Do we have a 2020 update yet? @wolf
1 JAFI in 2020 was $8,738

the_platypus
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by the_platypus »

In terms of ecological impact, is it correct to say that the impact multiplier of spending does not apply (or hardly applies) if the source is sufficiently removed from the industrial economy? And thus the jafi heuristic does not apply in certain purchasing circumstances?

For example, if I spend more on Amish furniture vs Ikea furniture, is it safe to say that was a more sustainable choice, because (I imagine) what the Amish spend their money on is likely going to be far more sustainable/have less velocity than the average Ikea employee/investment.

Or, if I buy a fish from Mark Boyle (lol) for more than I would pay at Costco, I'm assuming that the velocity of money with Mark Boyle will be sufficiently slow, and his end purchases will ultimately be much less lavish, that it outweighs the fact I gave him more than I did Costco.

Or, should I only shop at places where the employees/culture subscribe to ERE principles :D

I am reminded of what I read about in Ladakh. Locally produced agricultural goods which were grown by human/animal power in a traditional (mostly) subsistence economy were often out competed by state subsidized crops grown hundreds of miles away using all sorts of fossil fuels and nasty chemicals. So there the cheaper things literally put the sustainable livelihoods out of business.

I am guessing that this exception would not hold for e.g. US organic farmers, as they are not sufficiently removed from the industrial economy. But then again, it seems there is ecological value in building a local food system of small scale farmers? It seems to me that sustainable cultures tend to be subsistence cultures, like the Aran Islands and so on; therefore, building up that kind of economy would be ecologically beneficial even if more expensive in the short term?

Please help me justify my expensive organic food habit :lol:

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Alphaville
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by Alphaville »

the_platypus wrote:
Tue May 25, 2021 12:01 pm
Please help me justify my expensive organic food habit :lol:
why do you have to?

i also prefer not avoid supporting agriculture subsidized by unaccounted externalities.

i've seen no proof that the complexity of the global economy can be reduced to a single number as a descriptor, so i'm unwilling to subscribe to this belief. i'm not saying it's untrue, i'm saying i'm agnostic--i do not know it to be true. maybe someone can convince me/show me?

what i know is that i used to live on less than this number, and judging by my basket of goods, i was voting for hell on earth with my dollars.

people in my economic sector were buying global pink sludge to grill on weekends, paying for disposable junk to meet their most immediate needs, and driving gas guzzlers to go from one place to another while metabolic diseases killed them.

yes there is a postconsumer way to spend less, but the consumer way to spend less has hidden costs because the price is only a result of market supply and demand, it does not account for resource depletion. and that's how the poor live--at least in america. they're consumers, and eat cheaply, at the expense of the planet.

so i don't think that sheer cheapness is all benevolent. there have to be other factors. which ones? i don't know.

my current thinking (or call it "impression," as it lacks proper rigor) is that we have a "green" economy and a "sooty" economy. think about them as 2 attractors in a large whole system. yes there are interconnected, but they can also suck energy from each other.

the sooty economy is already paid for: oil drills drilled, armies deployed, industrial plants in place, and lack of environmental accounting. so everything has been optimized for it and can be delivered for low amounts of coin.

on the other hand, the "green" economy, while not a postconsumer economy, i.e. not ideal, is yet to be built and requires subsidies. also it price competes with the sooty economy which reduces its customer base.

so right now it costs double to make fake meat from peas and mung beans than it costs to make meat from methane farters and burned jungles.

therefore i choose to subsidize the mung bean processors. im ok with mung beans too just not huge quantities. so i pay more for the mung bean processors to grow their business with less actual resources consumed-- but more money.

that's as far as my reason can proceed in the eeconomic rhizome, so i choose to subsidize the imperfect "green" and local business over the devil's sooty brother (lol). i want money to move from soot to green. until costs lower and we can all afford "green," warts and all. it won't be perfect but it can be better.

it's also nice to be able to bite into a root vegetable without fear of ingesting malathion or whatever. and knowing that the workers on the other sode of my food chain didn't have to get sick from it either.

anyway i think until we have a true and correct ecological economics our money is just lies we tell ourselves about the world. or, it's true in the market, but maybe not in terms of anything else.

white belt
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Re: 1 Jacob Adjusted For Inflation (JAFI)

Post by white belt »

the_platypus wrote:
Tue May 25, 2021 12:01 pm
For example, if I spend more on Amish furniture vs Ikea furniture, is it safe to say that was a more sustainable choice, because (I imagine) what the Amish spend their money on is likely going to be far more sustainable/have less velocity than the average Ikea employee/investment.
The more sustainable choice would be buying/obtaining used furniture since 10 million tons of furniture are thrown in landfills every year in the US. Alternatively you could use scrap materials to make your own, although used furniture might still come out ahead from an environmental impact perspective.

I’m unsure about organic foods. I bought organic for a long time but now I’m skeptical that it is any better for the environment. My focus is instead on producing more of my own fruits and vegetables so I’m not as reliant on the industrial food system.
Last edited by white belt on Tue May 25, 2021 3:10 pm, edited 1 time in total.

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