How long until inflation starts to effect rates?

[jrcase]

OK, so the recent rate cuts will fan the flames of inflation. I think we all agree to that. WHat is everyone's opinion on time frame? Are we talking quarters, years, decades?

Sidenote..... where would you keep your money (say you have a million in cash.... I don't, I just used that number) while waiting on the rates to peak? Short term bonds? CD's? Money Markets? Just want everyone's opinion.

 

[stock_trad3r]

When there is inflation, it will but not now.

 

[gnome]

In spite of Gummint and Fed contention that "inflation is 2%" [big, BIG lie], inflation has probably been closer to 10%/yr for last 5 years.

Rates are being held down by various mechanisms and probably won't sky until the world gives up on the Dollar and starts dumping their bonds.

 

[Cache Landing]

Quote from gnome:

In spite of Gummint and Fed contention that "inflation is 2%" [big, BIG lie], inflation has probably been closer to 10%/yr for last 5 years.

I agree that inflation has probably been higher than 2%. I think somewhere to the tune of 3-5% depending on the year. But to say that it has been 10% annually for 5 years seems to be intuitively incorrect.

Certain items have increased quite a bit, but they aren't the rule.

5 years ago my spicy chicken combo from wendy's cost about $5. Now it costs about $6.25

25% total or 4.5% annual

My shoes used to cost $50; now cost $60

20% total or 3.8% annual

Movie tickets were $5.50; now they're $6.50

18% total or 3.4% annual

My rent used to be $450 now $625

38% or 6.7% annual

Your 10% annual would mean that on average goods have increased 61% over the last 5 years. That is simply absurd when I look at cost increases in the goods that I buy. A couple food products have increased that much, and gas certainly has. But gas only makes up about 5% of my overall purchases. Looking at my personal purchases I would say that 4.0% annual for the last 5 years is a much closer estimate.

 

[Martin Gale]

Finally, a voice of reason.

Quote from Cache Landing:

I agree that inflation has probably been higher than 2%. I think somewhere to the tune of 3-5% depending on the year. But to say that it has been 10% annually for 5 years seems to be intuitively incorrect.

Certain items have increased quite a bit, but they aren't the rule.

5 years ago my spicy chicken combo from wendy's cost about $5. Now it costs about $6.25

25% total or 4.5% annual

My shoes used to cost $50; now cost $60

20% total or 3.8% annual

Movie tickets were $5.50; now they're $6.50

18% total or 3.4% annual

My rent used to be $450 now $625

38% or 6.7% annual

Your 10% annual would mean that on average goods have increased 61% over the last 5 years. That is simply absurd when I look at cost increases in the goods that I buy. A couple food products have increased that much, and gas certainly has. But gas only makes up about 5% of my overall purchases. Looking at my personal purchases I would say that 4.0% annual for the last 5 years is a much closer estimate.

 

[Cache Landing]

Quote from Martin Gale:

Finally, a voice of reason.

Like I said in a different post. Each person is entitled to his own opinions, but not entitled to his own facts.

I don't subscribe to the super-competent government philosophy. Our government is incredibly incompetent as a whole. They simply don't have the ability to regulate inflation as suggested. They really can't cause it or stop it. They can only hope to react to it and try to contain any problems that market caused inflation causes. Same goes for the FED. I think they take far too much credit for being able to manipulate inflation. They aren't that powerful.

 

[gnome]

You guys are missing the big point about "excess money creation" and government deficit spending.

There is also obfuscated inflation in many products... like the "pound" of coffee.. first 13oz, now sometimes 12oz, or the "half gallon" of ice cream... now 1.75qt and sometimes 1.65 qt.... or the "200 ct" asprin which is now 170 count...

All of those are price increases, much of which escapes notice by most.

Seek out information about M3. It's almost that simple.

 

[Cache Landing]

Quote from gnome:

You guys are missing the big point about "excess money creation" and government deficit spending.

There is also obfuscated inflation in many products... like the "pound" of coffee.. first 13oz, now sometimes 12oz, or the "half gallon" of ice cream... now 1.75qt and sometimes 1.65 qt.... or the "200 ct" asprin which is now 170 count...

All of those are price increases, much of which escapes notice by most.

Seek out information about M3. It's almost that simple.

I do follow a "synthetic" version of the M3. What I am talking about is looking at actual prices that I am paying. It is something that can't be argued. I have no problem accepting 10% annual inflation if I can look at the prices of goods that I buy and see price increases in the 60% range. Admittedly, I don't buy much milk, ice cream, or other such dairy products.

I have a question for you. Assuming there is only $10 billion in the system, and population and GDP remain stagnant for some period of time. During that time $1 billion is introduced to the system.

Of that $1 billion, $900 million makes its way into securities, while $100 million continues to float around between demand accounts, cash purchases, etc...

What was inflation during that time? How far did prices probably rise in general?

 

[Cache Landing]

Quote from Cache Landing:


I have a question for you. Assuming there is only $10 billion in the system, and population and GDP remain stagnant for some period of time. During that time $1 billion is introduced to the system.

Of that $1 billion, $900 million makes its way into securities, while $100 million continues to float around between demand accounts, cash purchases, etc...

What was inflation during that time? How far did prices probably rise in general?

Nobody wants to answer that question?

 

[piezoe]

The recent moves of the Fed would not necessarily have had to have been inflationary, would they?, provided they offset them by selling bonds, which they may have done, as they would have been selling into increased demand.
What have long term rates such as 30 Yr mortgages done? It seems that eventually both long and short term rates must rise from where they are now, but when? It would also seem that this is a relatively good time to be taking on long term debt. (At least our Government seems to think so!)