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I have 9% federal bonds that I will not cash in until they mature...
That's wonderful and all, but "short-term" is widely thought to mean less than one year, which does not remotely apply to the average maturities of public debt securities outstanding. Further, interest rates on any Treasury security are fixed as of its date of issue. Yields from subsequent secondary market trading have no effect on interest actually owed or paid by the Treasury.
The late 70's and early 80's had inflation and rapidly rising interest rates. It sucked!
Ahh yes, the infamous (or famous) stagflation.
You watch sitcoms and other programming from the 1970's and all you heard was about high prices, economic and labor upheavals.
Watch the opening of the Mary Tyler Moore Show where it shows her shopping at supermarket and looking down in despair at (small) packet of meat before chucking it into cart.
Nixon got the ball rolling with his wage and price control polices (those whacky republicans are so cute), then came the energy crisis brought on by OPEC cutting off the spigot. https://en.wikipedia.org/wiki/Stagfl...0s_stagflation
Was a kid during the 1970's and thus wasn't too concerned about larger world of economics. Had a roof over my head, food in my belly and a pretty good middle class upbringing. Looking back don't know how the old man managed to hold things together.
On the housing front mortgage rates weren't bad in the 1970's compared to what they would be in the next decade.
I guess you weren't alive from 1970-1982. It sucked. Inflation adjusted stock & bond market returns sucked, almost as bad as the Great Depression. In the GD, sock prices dropped a lot more, but there was deflation. Many years of the 1970s and early 1980s had double digit inflation. 5% inflation in those years was considered low.
One thing I remember about the 1970's was hamburger! *LOL* I swear my mom like others shoved more of that meat into nearly every meal (except breakfast, thank God). Not surprising Hamburger Helper and its cousin Tuna Helper were big sellers during the 1970's.
Thing was dishes like meatloaf, meatballs etc... were often on the dry side because women used lots of breadcrumbs if they had to make a pound or so of ground chuck (or if lucky ground round) stretch to fill a large number of bellies.
...The only reason we don't see high inflation right now is because the feds are cooking the books. The actual inflation rate is 6% to 8% a year. There is only so long you can do that before you find millions of people living in the street, priced out of housing by inflation. How that will affect the stability of the US is anybody's guess. What the Republican tax bill and the resultant $trillion a year deficit will do is anybody's guess.
Will the value of the dollar hold up? I have some doubts. What I don't see is responsible fiscal policy. If the dollar starts to drop rapidly, yes, we will end up with inflation and high interest rates.
You started out strong and then I had to locate my tinfoil hat. If the only answer that you have to the reality that inflation has not been meaningfully present for the last decade, in the face of extremely low interest rates, is some sort of conspiracy, then you need to revisit your theory.
See, I track my expenses, monthly, annually and over time. There is no inflation in my property tax, utilities, energy, gasoline, insurance, really anything. A lot of those items have actually gone down! Most items are the same price and substantially better in quality. Food might be marginally more expensive, but I know that the NY strips I used to buy 10 years ago at 6.99/lb on sale are only 8.99/lb now. Up some, but not bad at all. 10 years and right about where the FED puts it, about 2% compounded annually. And food prices are notoriously volatile and subject to many other factors.
Just one example: the iPhone! The first iPhone (10 years ago) cost more than the one I just purchased new. Comparing the features and tech would be laughable.
My home value has only risen 17.5% in 19 years! Taking into account improvements, it is probably flat. I live in an upscale suburb outside a major US city. YMMV
The FED can do whatever they want, I know what things cost me and you are 100% incorrect!
I am able to save as much, or more, than 10 years ago, despite dismal wage growth.
i agree . we get blinded by not only the fact what we see is skewed by local factors but many confuse inflation with adding new expenses they did not have prior .
i went from paying a fortune for health insurance to medicare in 2017 .that alone set my expenses back lower than they have been in years .
nyc has had a rent freeze the last 2 years on stabilized apartments ,which is 1/2 of all rentals for millions.
we changed cable providers and knocked the bill down .
my auto insurance came down as a retiree and no longer driving to work .
one's personal cost of living has zero to do with tracking price changes with the cpi where many goods and services tracked mean nothing to you .
everyone loves to claim the cpi is a lie but they are totally ill-informed as far as what it represents .
it merely is taking the temperature of the 1500 mini economies that make up this country and it represents no ones personal cost of living .
kind of like the police are there to protect society at large but they have no obligation to protect you .
i agree . we get blinded by not only the fact what we see is skewed by local factors but many confuse inflation with adding new expenses they did not have prior .
inflationary expectations , fear and greed get more and more influential the farther you go out in years . that is why every time the last 50 years the fed raised short term rates more than 1% in a year intermediate term bonds did well . only 1994 was the exception . higher short term rates reign in inflation .
By increasing the cost of short-term borrowing? That would be inflationary, you know. You need more dots here to connect to, but however many of them any might resort to, the simple fact will remain that inflationary risk is a component of interest rates, right along with credit risk, and risks of war, insurection, inconvertibility and other adverse potentialities.
well the last 50 years the bond market would disagree with you most of the time on the short term borrowing worrying them about inflation . except for some speed bumps it has been 1 long down trend in bond rates for the most part and quite content with the short time financing costs and inflation . .
like i said everytime the fed raised short term rates 1% or more in a year the bond markets loved it , except 1994 .
the anticipated growth has the bond market spooked a bit so rates have been inching up a bit on bonds this year .
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