Inflation Q4 0.6% vs 0.8% expected QoQ

[nonaffiliated]

@agnosticusmexicanus Time to watch desperate debtor tell themselves rate cuts are coming while tax cuts are on the way + international situation further boosting inflation which they want to believe it is "under control"

 

[rimmel2]

@nonaffiliated How about desperate doomers coping with any reason they can in hopes of continued inflation and rate increases?

Everyone sees the news through the prism of self interest. You are no exception.

 

[agnosticusmexicanus]

@nonaffiliated You mean the debtors who have been seeing their debts be inflated away nicely in the last year or two?
Either way it's a balancing act the govt does to maintain equilibrium... As a capitalist society it's generally always good to take on debt

 

[nonaffiliated]

@agnosticusmexicanus

who are have been seeing their debts be inflated away nicely

If they were so happy about this they wouldnt be desperately coping imagining rate cuts.

The idea that debt=good just shows how out of touch you are compared to the average person, and all those debtors who are now crying about the consequences of their own actions.

 

[resjudicata]

@agnosticusmexicanus Doesn't this logic only hold if your wage is increasing inline with inflation?

That isn't the reality for most people i know.

 

[rimmel2]

@resjudicata The real value of your debt is decreasing as prices rise regardless of whether your wages go up.

If you are able to hold on and service the debt, you will be better off long term.

 

[gospelwoman]

@rimmel2 You are 100% correct.

This is bang on, debt under inflation produces a reduction in the real value of the debt, it has a side benefit of generally asset inflating too as the value of the dollar went down but the value of the asset remained the same or went up, causing a two forked difference that makes you better off.

The only catch is you have to combat the rising interest rates, if you survive you’ll be better off.

 

[resjudicata]

@rimmel2 How does that help me if my pay isn't increasing?

Why do i care about the "real value" of my debt? If my pay is the same then the "real value" of my pay is going down right?

I can't see how inflation decreasing "real value" of debt is helpful unless my pay increased in-step?

ELI5?

 

[rimmel2]

@resjudicata Assuming the debt is financing an asset, it implies the value of your asset is increasing, which makes you wealthier.

Generally the longer you hold an appreciating asset, the better off you will be. Case in point, people who bought a house 30 years ago.

As an aside, while your wage may not have gone up in line with inflation recently, it will usually average out over time. There will be periods where inflation is low and wage growth is higher such that over a long period of time wages will generally track inflation.

So as I said, the trick is to load up on debt and ride out these tough periods where your wage isn't keeping up in order to be rewarded long term and trust that on average your wage will track inflation over time.

 

[resjudicata]

@rimmel2 But i have to live in my house?

So i'm getting wealthier on paper, but if i was to move out of my house, and into similar house in similar location, then presumably i would need to spend the same amount on my new house as i sold my old house.

The new house has inflated in value by the same amount as my old house, meaning i still have to borrow the same amount of "real value" if i were to sell my house and move. Nothing has been inflated away because i'm now buying a new house at an equally inflated price.

So again, how does this help me?

 

[rimmel2]

@resjudicata Usually the game plan is to live in your house until retirement then retire up the coast to a cheaper beach location and live off the difference in the price of the house you sold and the smaller one you downsized to plus whatever super/pension you get.

That's the ordinary plan. The more aggressive plan is to use the equity increase to fund the acquisition of more investments as your equity grows and then rinse and repeat until you have a big portfolio of investments.

Either way, the equity increase in your PPOR helps you and is desirable.

 

[nonaffiliated]

@resjudicata Investment debtors also love to forget all the other problems that come with such investment and just pretend its free magic money tree.

-Responsible for house repairs, paperwork, legal fees

-You dont magically press a button and sell/buy to move to a new area, that is time and work, especially if you are moving to another country.

-Oh the conditions of your work are bad? Too bad you cant afford to lose the job even temporarily cuz you are in debt so you now have to deal with terrible climate.

And the entire system is built upon this idea of good debt.

 

[nonaffiliated]

@rimmel2

Assuming the debt is financing an asset

That is what you fail to understand, most average people dont use debt for investment, they use it for vital parts of life so there's no $$ return.

Of you also have debtors desperately obsessed with wealth who because of their pure greed fall into debt traps and then cry about it, and sometimes they are lucky enough to be bailed off by the governments so their mistakes are never punished.

 

[rimmel2]

@nonaffiliated In the context of this thread, I am assuming the main asset we are referring to is peoples PPOR.

While not technically an investment, it is an appreciating asset and the foundation of wealth for most people.

Your ppor going up in value is definitely positive for you because it gives you many options to use the equity.