Log In
Register
Home
Topic RSS
Facebook
Twitter
Email this6:26 am
April 27, 2017
Offline
Alexandre said
Let's talk about hypothetical person who has a decent amount of cash on hand, enough to earn income from HISA and 1yr GICs alone. That person retired few years ago. In January 2021 he realized that his household budget balanced itself, based on that year interest rates.
Fast forward to January 2024. HISA and 1yr GIC rates doubled for many FIs, while inflation, even if it were in fact 10% annually, is not there yet.
At this moment of time income from his savings account can beat inflation.In the long run, inflation will catch up with income from savings and that person will start feeling loss of purchasing power. You are right about devaluation.
But, at the long run, that person and we all will be dead.If your objective is to die rich, take risks.
If that retiree objective is not to outlive his money and die with ideally just above $0 in net worth, then he could be just fine without taking risks. Even with devaluation of principal.if you put $100 in a HISA 100 years ago and spent the interest, your HISA balance shrunk to less than 6% of what you used to have.
If/when they invent medicine extending life expectancy to 150-180 years, then that would become a real concern for retirees or about to be.
Sure, if someone has so many $s that devaluation of his capital does not matter. Or if he is sufficiently close to end of life. But then the interest rate should not matter either.
Many retirees are in their 50s or 60s and may need their money to last for 40 years. For them ignoring inflation and/or messing up basic maths would be dangerous.
6:39 am
January 3, 2009
Offline
savemoresaveoften said
InterestThis said
The prices of most tech has dropped astronomically over the years, for example.
Price of clothes has dropped massively.Like i said before, only main stream non gaming computers and TVs have gone down in real price inflation adjusted.
If you believe high interest income will offset the erosion of your puchasing power by inflation, you better change your belief soon.
....and has the price really gone down more than the quality? My experience is that often a lower price reflects a cutting of costs and usually from reducing the quality of parts or labour and most likely both.
6:53 am
October 27, 2013
Online
cgouimet said
Inflation is up December 2023 to 3.4% vs December 2022 but the Consumer Price Index has been rather stable through 2H2023 ...
The message in your initial post got lost in the rhetoric that followed. The actual CPI Index numbers mean more to me than the YOY data because it depicts the more recent trend to watch, albeit had you added the seasonably adjusted data column, both Nov 23 and Dec 23 data points had significant upticks to 159.5. We will have to wait and see what that means over the next few months.
7:57 am
March 30, 2017
Offline
phrank said
....and has the price really gone down more than the quality? My experience is that often a lower price reflects a cutting of costs and usually from reducing the quality of parts or labour and most likely both.
you nail it right on the head that even if price stays the same or lower, the quality is NOT what it used to be. Thats universally true to all products unfortunately.
8:05 am
February 7, 2019
Offline
AltaRed said
The message in your initial post got lost in the rhetoric that followed. The actual CPI Index numbers mean more to me than the YOY data because it depicts the more recent trend to watch, albeit had you added the seasonably adjusted data column, both Nov 23 and Dec 23 data points had significant upticks to 159.5. We will have to wait and see what that means over the next few months.
I'm with you. Too much focus on the year over year Inflation number everywhere instead of looking at the underlying trends. Focusing on the worse possible view is so much better for Reporters and Pundits ...
| CGO |
8:49 am
April 27, 2017
Offline
cgouimet said
I'm with you. Too much focus on the year over year Inflation number everywhere instead of looking at the underlying trends. Focusing on the worse possible view is so much better for Reporters and Pundits ...
Short term CPI movements are fairly meaningless. There is a good reason to focus on 12-months spans. Less “adjustment” involved, but crucially, you are capturing more meaningful duration.
In any case CPI is backward looking and other factors need to be considered to understand current trends.
9:04 am
October 27, 2013
Online
YOY data may mean more for BoC monetary policy but it is rather meaningless for the consumer which is what many of this thread's posts are really about. Dec 2022 is ancient, beyond the rear view horizon for the consumer. What matters for current cash flow spend and forecasting are current trends.
At a macro level, my cash flow spend is based on the CPI Index which, at 158.3 is only 45% more than April 2006 (109.2) when I retired. That feels about right in the overall scheme of things.
12:59 pm
November 8, 2018
Offline
phrank said
....and has the price really gone down more than the quality? My experience is that often a lower price reflects a cutting of costs and usually from reducing the quality of parts or labour and most likely both.
2001, FutureShop, JVC CRT TV 27" - $1,300 before taxes.
As it is CRT, probably 720p maximum.
2024, BestBuy, Samsung 65" 4K UHD HDR QLED Smart TV - $1,300 before taxes.
1:40 pm
January 9, 2011
Offline
Alexandre said
2001, FutureShop, JVC CRT TV 27" - $1,300 before taxes.
As it is CRT, probably 720p maximum.2024, BestBuy, Samsung 65" 4K UHD HDR QLED Smart TV - $1,300 before taxes.
Fine, but my TVs still work!
Whereas my stove blew a main burner (and that shut down all power to the house). The stove's new replacement cost a thousand $, and came with what sounds like a bird chirping inside whenever the stove is turned on, caused by the thinnest gauge paper thin metal possible expanding and contracting. Oh, and a new clothes washer (also cost a grand) has zero insulation, and requires noise cancelling headphones whenever getting close to it!
So the moral is, how we fare with inflation depends on luck, or in my case, the lack of it! 
The main accomplishment of almost all organized protests is to
annoy people who are not in them.
5:16 am
November 18, 2017
Offline
InterestThis: Tech is not a significant part of most people's long-run spending. Accomodation, food and "entertainment" (food and booze for many) are the big ones, and the fastest-inflating.
If you take new behaviors and adjust your expenses that makes a big difference.
One can change one's behaviours and adjust expenses at any time. Cutting back on spending, or switching to cheaper products, does not affect inflation; it just drops the curve once, with no effect on future increases.
We mostly suffered losses during the earlier part of 2023 when inflation was high, and GIC earnings invested in earlier years were at lower rates.
Similarly, we'll still see higher returns from longer investments as the rates fall. But of course we have no crystal balls; in early 2022 I took a 3.4% term that looked good but was losing ground by early 2023.
RetirEd
Please write your comments in the forum.