patrick.net

Price of anything regular people need goes up = not inflation
Price of anything regular people DON’T need goes up = inflation

I have a better definition:

Inflation is the constant, 2.0%.

"Since many local governments were able to pull in excessive tax receipts out of both bubbles (Cap. gains and property tax assessments) and are on the verge of bankruptcy with this high income, what would happen if there is no other revenue generating bubble to inflate?"

Yes, that is something that concerns many of us. Depression, dramatically higher taxes, lower government benefits, municipal bankruptcies, revolution, etc., have all been mentioned in the past. Hopefully more people will contribute their thoughts on the matter here.

HARM,

Excellent cutting out the crap answer! That one belongs in the bubble definition thread.

hate to rent:

Based on astrids answer, I Will review some of the older threads on this board. I am new here, but the initial thought that struck out at me on astrid's answer was:

Now I understand why the legislation wants to legalize the illegal aliens. Maybe they can give them a scaled back government job at a scaled back wage.

Now seeing your response also, perhaps the illegals will be able to bring outsourced or re-patriated jobs to USA... That'd be more tax receipts than the under the table madness that presently goes on and some of the government jobs and benefits could be filled at a lower wage.

smb_gaiden,

There are several lines of thought that can be used to justify legalizing illegal aliens. One is to provide a cheap, pliable labor force. Another is fairness to the illegals. Another is to fuel this country's population growth.

I don't personally buy any of these arguments. Quite simply, illegals aliens are ILLEGAL. They broke the law when they came into this country without being approved by the INS. I think the discussion should end there.

I don’t personally buy any of these arguments. Quite simply, illegals aliens are ILLEGAL. They broke the law when they came into this country without being approved by the INS. I think the discussion should end there.

I agree. Crime must not pay.

We should allow guess workers, but that is a different issue.

Hello!
Anyone seen this bay area-centric zillow-like site? It appears to be in beta test (duh it says "beta" on the top left).

movoto.com

They even have a "No Obligation Home Advice" clicky button. I'm tempted to email & ask if it's a good time to buy :)

Now for a wacky business idea,

McMansion Challenge 2012.

Set in a $100/barrel oil universe. A reality television show where RE vultures buy foreclosed McMansions and turn them into something productive. Our camera crews follow them as they gut McMansions and take out granite counters, break up two floor living rooms, and subdivide master bathrooms into bunk style housing.

The result? A functional boarding house for 40 rent paying Mexican guest workers.

I'm ok with "Guess" workers (people making those designer jeans), but not "guest" workers. :-P

I’m ok with “Guess” workers (people making those designer jeans), but not “guest” workers.

Even guest workers are fine, so long as they follow the rules and obey the laws.

Sorry --bad pun. I'm also ok with a limited number of guest workers under those conditions too AND provided their sole purpose for being here is not to provide businesses a dirt-cheap labor pool to replace perfectly qualified Americans.

provided their sole purpose for being here is not to provide businesses a dirt-cheap labor pool to replace perfectly qualified Americans.

Come on, HARM, global labor arbitrage will occur anyway. ;)

Frankly, I think they will just do things that Americans do not want to do:

1. Restroom attendants (we need more of them, even 5-stars hotels here do not have them, this is unacceptable)

2. Live-in maids

The list goes on...

"2. Live-in maids"

Can we beat them like the Saudis do?

Can we beat them like the Saudis do?

Huh? Bad karma on them.

SJ_Jim,

Thanks for the movoto link. It seems a lot easier to use compared to other RE websites.

Peter P,

Just illustrating how guest worker programs almost inevitably lead to abuse of those workers.

Just illustrating how guest worker programs almost inevitably lead to abuse of those workers.

The karma police will get those people eventually.

For your consideration:

http://www.nytimes.com/yr/mo/day/business/retirement

New York Times special coverage of retirement.

Damn, is the inflation discussion over already? 2% eh?

smb_gaiden,

Also, don't be intimidated by some of the economics jargon and concepts. They're introductions to a whole specialize way of thinking about the world, so they take a little time to get used to. Just stay at it and don't be afraid to ask questions, people here are usually generous with their knowledge.

(I was a snippy to SoftestLanding because (a) he's been here for a while so he should know better and (b) he was just using this blog as his general education tutor).

I find basic economic knowledge to be a very empowering decision making tool and to be very useful for explaining how the world works.

Damn, is the inflation discussion over already? 2% eh?

Of course. Inflation can be safely _defined_ as 2% because

1. it is contained even though "resource utilization" is high
2. economic growth is solid

Don't worry, be happy, buy 6 condos and get a toaster free!

NOT INVESTMENT ADVICE

"Damn, is the inflation discussion over already? 2% eh?"

Peter P is probably in favor of a planned economy.

"Don’t worry, be happy, buy 6 condos and get a toaster free!"

And don't forget economic substitutes. You don't have to eat foie gras, duck liver is just as good! :P

The Economist poem

If you do some acrobatics
with a little mathematics
it will take you far along.
If your idea's not defensible
don't make it comprehensible
or folks will find you out,
and your work will draw attention
if you only fail to mention
what the whole thing is about.

Your must talk of GNP
and of elasticity
of rates of substitution
and undeterminate solution
and oligonopopsony.

I'd add that we really only care about the inflation rate we face as individuals as it locally compares to the relative inflation rates affecting us as consumers and savers. There's a lot of discussion on this board about "low cost" areas versus "high cost" areas, especially regarding home prices. If you live in say, Evansville, IN, then you have one of the lowest overall local inflation rates in the country. Is this good for you? Yes, when you buy local things locally priced (houses, gardening supplies, most groceries, etc.). No, when you buy things that are nationally priced (cars, long-haul airline tickets, cruise vacations, etc.). The same is true internationally. If the US inflates at a certain rate (overall), we don't care except for the effect it has on the value of the USD vis-a-vis other currencies. This creates a conflict. Inflation affects the USD exchange rate because inflation is tied to nominal interest rates (see previous threads for the theory that drives this--every 1% rise in inflation must result in 1% rise in real interest rates and eventually nominal interest rates).

So, if the USD devalues because of deficits caused by debt spending then we become a *more* price competitive global labor market, better exporters and worse importers. But, inflation will raise rates eventually, forcing the USD up against other currencies, reversing all the above. The problem we're in now is we're in a period of rising inflation but with low interest rates. Rates will go up, they have to eventually. But until then we are getting the worst of all worlds in a macro sense, but consumers are getting away with a lot they don't have to really pay for (yet). They will pay, though, eventually; probably with stagflation.

**Not economic advise. Consult your local neoclassical economist.

And don’t forget economic substitutes. You don’t have to eat foie gras, duck liver is just as good!

But they call duck liver foie gras here...

I will see if I can get peking duck foie gras. :-P

Peter P is probably in favor of a planned economy.

Huh?

You can't have set in stoned inflation figures without planning the economy to go with the inflation.

(what I just said is not true, all you have to do is get a head in the sand government...which we have!)

You can’t have set in stoned inflation figures without planning the economy to go with the inflation.

Just put the spin on and the "2% definition" will apply even to Weiner Germany. :)

Post-bubble investment ideas.

1. Booz, cheap booz. Alcoholics don't just quit it, they substitute the expensive stuff with cheap stuff, more two buck chucks, screw the french winemakers. I am thinking about bringing in Radler as a bottled drink in the US, lemonade watered down beer, yeah!

2. Casino, not the Vegas big player stuff, but the cheap Indian reservation casino outfits, just like pachinkos in Japan.

3. Anti-depressant.

4. Payday loans - any of those already public yet?

5. Yoshinoya - Yoshinoya is considered the ultimate counter-boom index in Japan, whenever Yoshinoya does well, the general economy sucks, whenever the general economy picks up, Yoshinoya becomes less popular. What's our Yoshinoya equivalent? McDonald's? YUCK!

any more to add?

why am I getting moderated again?

Astrid:

Thanks for the descriptions. I seem to be following the threads pretty well so far. Just haven't advanced to a level where I can make an educated guess that I am comfortable with. I will keep plugging away at it, I've learned stuff before and not afraid to again ;)

That exchange rates topic on this thread hit me where it hurts, I'm off to Korea this weekend. Their currency has been going haywire against my USD$ over the past 5 years I have been going there.

Just one perspective on Dent: He likes to derride economists for either getting predictions wrong or not making detailed predictions. I maintain that no economists make specific predictions, only fools do that.

Well, Dent made very specific predictions about the stock market hitting 40,000 (DJIA) by 2007. I offer this quote from one of the economists he has lampooned:

A devasting objection to Dent's theory, however, is that is has been for all intents and purposes been falsified. For the market to reach 40,000 in the year 2007 from this point today, the market would have TO HAVE AN ANNUAL RATE OF RETURN OF AT LEAST 25 PERCENT FOR THE NEXT FIVE YEARS. The odds of that happening are astronomical and has no precedent in stock market history.

Oh, by the way that was written in 2002. We're less than a year from 40,000 now, and what rate of return does that imply?

Owneroccupier,

"Yoshinoya - Yoshinoya is considered the ultimate counter-boom index in Japan"

That's really interesting psychological insight. The fast food group makes a lot of sense in hard times because people are more stressed and less careful about their diet. Fatty foods are a good therapeutic reducer of stress. Also, most people aren't responsible enough to cut out eating out altogether, so they'd probably just substitute with cheaper places.

Ramen and malt liquor will be huge.

And as much I dislike the fact, Walmart may also make a comeback in a bad economy. For most Americans, Walmart seems synonymous with cheap.

Walmart will be replaced by dollar shop. It is simply not cheap enough.

"Intel hired 14,900"

Good grief! Were all those hires in the SE and in India?

"Walmart will be replaced by dollar shop. It is simply not cheap enough."

LOL, good point.

I do find your original insight really interesting. From the mass consumer stand point, people do things not because they're optimal for economic reasons, but because they've been mentally trained by this culture to think in certain pathways.

One of the reasons why I don't shop at Wal-Mart is that I don't find it cheap, especially for the quality of goods they offer. Yet for most people, Wal-Mart and the Dollar Store are bywords for cheapness. Ditto the ramen and PB&J diet. Arguably, a bean and rice diet is much more healthy and even cheaper, but that sort of thinking wouldn't appear on most American's minds.