Of course that’s fair. But it’d also be a nightmare to impliment/calculate/enforce.
1 Like
But it’d also be a nightmare to impliment/calculate/enforce.
I would think, in its most basic form, it simply requires knowing the original basis and year of purchase and indexing up your cost basis, annually, due to the CPI.
Seems no more difficult than tracking the basis, as-is.
1 Like
You could off load that work onto the brokers for example for almost all stock trades. Like every year has a CPI adjustment number, like if you owned it that year, multiply your actual cash basis by 1.03 or whatever (and keep multiplying for the next years, ie Basis * 1.03 * 1.05* 1.01).
And then just apply it to anything that qualifies for long term based on all the years except the year of sale for which you owned it. Sure it’s a bit messy around the edges of years, but if your inflation rates are swinging wildly between year to year, you’ve got bigger problems than tax calculations.
You’d leave people to do it themselves for things like houses or private equity or whatnot, but those are rare, one-off things and not a huge burden if you just look up the years with their CPI numbers in an IRS table. Of course, like Social Security, it gives the federal government one more incentive to understate inflation to avoid paying benefits or to collect higher tax revenues all else being equal.
2 Likes
This was a good article on several topics, but broadly how people and politicians react to external stress predictably and how you can end up with, among other things, inflationary spending and entitlements.
2 Likes
What is the purpose of your comment? Are you suggesting it’s going to be another 20% higher next October?
Mocking the Fed in their own words when they lie to our face.
2 Likes
The difference this time that is being ignored by the Fed is that workers are getting higher wages. The experience of the 1970s shows that inflation persists due to the wage price spiral. With increasing prices, workers demand and can get higher wages and this leads to higher prices and etc.
Where did you get the 20% number?
The price of the pizza in the graphic.
1 Like
[quote=“xerty, post:68, topic:4327, full:true”]
To be fair, that graphic shows that inflation exists, not that it is or isnt transitory.
And a lot of the prices that are increasing are prices that have been pretty static. Walking through the grocery store, the stuff with large price increases are stuff that I had memorized the previous price - because it had been that price for years. And locally, some restaurants are raising prices, but they’ve been working off the same menus (with the same prices) for 5+ years. So there’s a lot of ‘catch-up’ increases, too.
1 Like
Exactly my point.
Which words? Transitory? I understood this to mean that inflation is temporary, meaning it (the inflation rate) will go back from the current 5.5% to the usual and expected 2-2.5%. I did not think they meant that the actual prices will go back down to what they were a year ago.
The Fed is in a difficult position since the congress keeps blowing money like crazy and the Fed trying not to blow up the post-covid economic recovery by raising interest rates prematurely and correspondingly tanking the stock market and consumer confidence, while at the same time risking rising inflation as the massive printing of dollars together with the government direct payments to many people both pushed up commodity prices as well as artificially shrank the labor pool and drove up wages substantially.
To thread this needle, they choose to tell the markets that inflation wasn’t a medium or long term threat, ie that it was “transitory” and strongly implying it wouldn’t last very long even in the absence of Fed actions on rates. They hoped that markets would ignore it and they could get away with keep rates lower for longer, thereby continuing the stock market bubble and helping the government inflate away a bit more of their massive spending debts.
So you have a massively inflationary setup, but people were not (yet) consuming as much as normal due to covid related restrictions and/or hesitancy to return to normal life, but as soon as that ended, demand explodes and suddenly no one can hire people fast enough, the supply chains are a mess, and inflation is everywhere.
Well, markets aren’t ignoring it and you can barely read a financial publication these days without some coverage of inflation and its front and center in many people’s minds and investment asset allocations. I would expect the current levels of inflation to continue for the next year or so as I don’t see much in the way of fully resolving the supply chain problems until late 2022.
The Fed was already forced to start slowing (“tapering”) their money printing in response to the inflationary environment and hence the time is coming sooner when they’ll be forced to raise rates, maybe a year out or something. And as soon as they start raising rates, you don’t want to be long stocks. So in this way, inflation is a ticking time bomb for equity markets.
ps macro economic speculations are worth every cent you pay for them, mine especially so
3 Likes
New indicators developed by Bloomberg Economics underscore the extremity of the (supply chain) problem, the world’s failure to find a quick fix, and how in some regions the Big Crunch of 2021 is still getting worse.
The research quantifies what’s apparent to the naked eye across much of the planet — in supermarkets with empty shelves, ports where ships are backed up far offshore, or car plants where output is held back by a lack of microchips. Looming over all of these: rising price tags on almost everything.
Central banks, already retreating from their view that inflation is “transitory,” may be forced to counter rising prices with earlier-than-expected interest-rate hikes. That poses new threats to an already stumbling recovery, and could take the air out of bubbly equity and property prices.
1 Like
Idiot senior management at companies have been lying to employees that that’s what it meant, so they didn’t need 6% to avoid a pay cut, and higher for an actual raise.
This current Biden inflation tax is a remarkably regressive tax. It is harming most those among us least able to pay the ubiquitous higher prices. And that is the game plan, as more and more families at the lower end are forced to rely on government assistance of one sort or another. For Biden: mission accomplished.
1 Like
Transitory comments from the Fed this am
BULLARD: MAY SEE JOBLESS RATE WITH 3-HANDLE IN 1Q 2022
BULLARD: SEE 2 RATE HIKES IN 2022
BULLARD: WE HAVE QUITE A BIT OF INFLATION
BULLARD: EXPECT SUPPLY CHAIN DISRUPTIONS TO EXTEND THROUGH 2022
FED VICE CHAIR CLARIDA: BENCHMARKS FOR RATE HIKES COULD BE MET BY END OF 2022, THOUGH FED STILL “A WAYS AWAY” FROM CONSIDERING LIFT OFF FROM CURRENT NEAR ZERO LEVEL
Fed’s Clarida Says Extended Spell of Higher Inflation Would Be Problematic
Clarida: Most Fed Officials See Risks of Higher-Than-Anticipated Inflation
Clarida: ‘We Are Clearly a Ways Away From Considering Raising Interest Rates’
FED’S BOWMAN: THERE’S A RISK THAT FOOD, ENERGY PRICE SPIKES CAN HAVE A BIGGER-THAN-THOUGHT IMPACT ON INFLATION EXPECTATIONS
4 Likes
This is probably the biggest problem for the length of the “transitory”. Like I mentioned multiple times in various threads, inflation manifests itself when people start thinking that there’s going to be inflation. And they’re starting to because that’s all everyone has been talking about.
Gotta load up on some more long term fixed low interest rate debt I guess? Or maybe tulips? 
Last thing you need in your inflationary period driven in part by high energy prices is to lose 3% of US oil supplies. Draws gun, aims at your foot…
4 Likes
There must be smart women somewhere in Michigan. But it’s certainly not Gretchen or Jennifer.
Of course Jennifer has an excuse:
She was born in BC and graduated from Berkeley and Harvard. So she never has lived in the real world. You could feel sorry for her except that her liberal ivory tower thinking has already done inestimable harm . . . . and she is still relatively young.
Both women are the stuff of nightmares.
1 Like
Transitory
3 Likes