- Feb 5, 2003
You quick to insult first. It's about oil prices. You would see low inflation with the increases in spending but reasonable oil prices. That's history.Sorry to confuse you Catch. I was referring to @m.knox's M2 money supply chart, which is pertinent to the inflation issue. I thought it was in this thread but obviously it is not. I was looking at it prior to responding here. I did not notice that @m.knox had added a chart (above) to debate debt with @JeffClear. My mistake. The problem of debt/GDP, as it relates to inflation, is a little more complicated. It's not where I wanted to take this discussion, but it is certainly pertinent to any response to control inflation.
That said, you could be just a little bit more civil when you respond. It's clear you have a rather poor temperament. I would be surprised if this hasn't held you back in life. You might not even realize it.
I don't know why my use of the word "fair" should get you so riled, but going off the rails with "wimp, idiot, loser" says more about you than it does about me.
Whatever you might think, what happened isn't fair in the least. The government reneged on its mandate to maintain stable pricing. This is seen in bond yields now very pre-pandemic. What happened is huge and could get worse if both the Congress and the Fed do not put on the brakes.
Since I can't find that chart, I will link to a chart that not only shows the money supply, but the year over year % change.
Money Supply Growth Charts
As you can see from the charts, M2 money supply was growing at an annual percentage rate between 4% and 8% year over year (or 2-4 trillion dollars). This accounts for economic growth plus inflation. There was an initial Covid injection of 2.5 trillion (23% year over year increase) in 2020. Then in 2021 we had an increase of about 4 trillion (40% year over year). This came when inflation had already been established and the pandemic was winding down. There was no reason for this spending except to advance the Dem-agenda, and at the worst possible time. For whatever reason, the Fed kept increasing the money supply on top of that spending.
40% is huge. No way that much productivity is in the cards. It is therefore inflationary pressure going forward, another reason for long bond yields to increase. (Bonds get dumped.). Normally the money supply would be kept in concert with production (real GDP) in an economy to produce a stable rate of inflation.
Powell now needs to remove M2 dollars in the same way he created them. (Sell bonds instead of buying them. This puts upward pressure on interest rates to slow economic activity.) Congress could help if it did the same, but we know they won't under Democratic control.
How does this problem affect a pensioner? Let me simplify the calculation again for you with some actual math that is based on expectations built into the bond market. (Hint: They are smarter than you and me.)
Lifetime fixed rate pensions are typically based on bond yields. For a young retiree expecting to live another 30 years we could use the duration and yield for the 30 year bond as a basis for the discounted cash flow -- the effect of inflation. The 30-year bond has risen roughly 1% over pre-pandemic levels. Let’s assume that inflation then runs 1% above the pre-pandemic 2% level, or 3% going forward after experiencing (6+9=15%) inflation initially during the first two years.
I am not going to tell you my monthly annuity, so as before let's just use an example -- a nice round 50K per year for the pension.
Case A is what was expected when the pension was rewarded at retirement (2% inflation). Case B is what actually happened after Congress went on a spending spree and the Fed abandoned its inflation target.
Total purchasing power (in present day dollars): $1,142,219.
Average Annual Value: $38,074
Total payment (in present day dollars): $933,548.
Average Annual Value: $31,118
Total Loss (in today's dollars): $209,671
Annual Loss (in today's dollars): $6,956
You can scale these numbers up or down based on what you think my pension might be. Any way you slice it, this is terrible, and unfair. A person getting a 50 K$ annual pension loses roughly $7,000 in purchasing power in today’s dollars for every year of retirement. Overall, it's like having the government step in and take your house.