Wednesday, August 22, 2018

Stealth Inflation

Many have noticed that the official stated rate of inflation doesn't line up with things you see in day to day life.

First a disclaimer: Even though I have a degree in Economics and another in Accounting I only play one on TV if you base your financial desisions only on what I say and don't consult a professional and lose your money. You deserved to lose it.

There are a couple of reasons the powers what are, are understating the real rate of inflation. First nobody wants to stand up to the temper tantrum that the markets would throw when they learn the era of free money is over. By hiding the rate of inflation the fed doesn't have to raise interest rates and end everyone's heroin free-money bender.

Secondly demographic changes (longer lifespans and fewer children) are rapidly bringing the Ponzi Scheme that is Social Security to make painful decisions. However if wages (therefore payroll taxes) can be grown while Social Security cost of living adjustments (tied to official inflation) are kept stagnant, people think they can kick this can down the road enough that it wont be their problem anymore.

I wouldn't count on Social Security for more that a tithe of your senior living expenses if that.

2 comments:

  1. I tell the mother in law that SS will be gone by the time I retire. They already raised the sge of retirement here in Canada.

    Exile1981

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    Replies
    1. They laid out the menu of pain (benefit cuts, tax hikes, retirement age increases) in the early 2000s, they also laid out how much more drastic these options become each year. Then everyone did nothing.

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