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Step 1: Send the blue line down to 0%.
Yeah, I know. There aren't a lot of steps. The formula is fairly simple.
This should not be confused with the housing bubble recipe just because all the ingredients are identical.
Source Data:
FRB: Selected Interest Rates
St. Louis Fed: CPI-U
6 comments:
Yeah, I know. There aren't a lot of steps. The formula is fairly simple.
HAHAHA! "Simple" humor for the win!
RE: Bad TIPS advice
Posting here, since I'm guessing no one besides Mark checks old comment threads.
Mark Twain had something to say about the stupidity of the population to think a little inflation is a good thing. I think it was from Conn. Yankee in King Arthur's Court, but am not certain.
Between that truism of human nature, and people's eagerness to spend down their capital by not returning the inflated portion of their interest income to principle, is it any wonder every fiat currency ever invented ends in debauchery? It's what the people want, and the bankers and elite are only too happy to give it to them. Up until mobs take to the streets, but hoocoodanode *that* was going to happen?
mab,
It pleases me that the humor was not lost. :)
AllanF,
Constituent: I'm very concerned about all this money printing.
Senator: What's your biggest complaint?
Constituent: My cut of the inflationary profits seems smaller than others.
Senator: In addition to what we've already done, we'll be printing $600 stimulus checks for *everyone* who has a pulse.
Constituent: I have a pulse! Woohoo!
Senator: That's fantastic. You'll be getting a check then.
Constituent: I generally can't stand senators but... You sir, are the best incumbent this state has ever had!
Sigh.
Insurance Industry Lobbyist: Senator, before we open the closed door that we're making this deal behind, exactly what are the particulars of this deal again?
Senator: As I said, we'll be printing $600 stimulus checks for *everyone* who has a pulse.
Insurance Industry Lobbyist: Yes, I know you said that, but, what about the rate increases my clients have asked for? We need approximately $300 million more dollars just in the state of Florida alone next year in premiums to cover our loses from the CRE debacle.
Senator: Yes, I know the position your clients are in my good friend. And I'm here to tell you that the rate increases you've requested represent exactly $600 per household across the state of Florida. See, you and I have been on the same page all along. It's called the circular economy of Republican politics. After the election whereby my constituents will elect myself and my fellow Republicans into power once again, you request will be granted and I'll wisk away with a freshly minted "tax cut" under my belt. And I'll see you at the "retreat" next month where you and I will sit down with our friends from AIG and play some bridge!
G.H.,
Senator: ...and I will sit down with our friends from AIG and play some bridge!
Insurance Industry Lobbyist: I can get you a great rate on a "bridge loan" to tide you over. *wink *wink* *nudge* *nudge*
Here's a bonus thought for this post.
Is it a good idea to buy commodities that have appreciated 400% based on a decade of a 0% real fed funds rate?
Put another way...
Over the course of 10 years, is 20% in missing cumulative real interest enough to safely cover 400% or more of hard asset gains? That's roughly a 20 to 1 ratio.
It wasn't in the early 1980s.
Is now really the best time in the history of our country to go out and embrace leverage? It will be if we hyperinflate perhaps, but otherwise I think not.
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