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02-07-2022, 01:41 PM
(This post was last modified: 02-07-2022, 01:42 PM by weijian.)
Me as well just remember the high level story - as learnt from Warren Buffett's discussion of interest rates changes from the 1960s to 1980s. But I do know that real life is more complicated than using narratives alone. There is convolution of factors and then interactions that produce 2nd order/3rd order effects...
And as usual, the cure for high prices is high prices. So the cure for inflation, is high inflation (and as we have seen that the cure for deflation is deflation that lures everyone to believe it will last for a long time)
Volcker and Inflation…
Of course, everyone knows the high-level story; Volcker broke the back of inflation by taking rates into the stratosphere, inducing a recession, taking the heat from politicians and the populace, and sticking to his principles. He had only one mission; defeating inflation. Nothing stood in his way, and he kept at it until the mission was accomplished. As a result of Volcker’s sacrifices, we’ve since experienced four consecutive decades of economic boom. Or that’s how everyone seems to remember the situation today. What if there were other contributing factors?
https://adventuresincapitalism.com/2022/...inflation/
I am not a certified financial advisor and so nothing of what I say should be construed as financial advice. Please consult a certified financial advisor for advice instead.
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16-07-2022, 08:48 AM
(This post was last modified: 16-07-2022, 08:48 AM by weijian.)
Of course, Munger is rich enough to afford to ignore inflation (in fact, most of us are too - we are not going to go lose our basic needs because of inflation). But I guess some Mungerism is always good for some reminders. If 98year old Munger intends to live through inflation, me too!
Investors should look beyond the inflation spike, back fossil fuels and renewable energy, and “never touch” cryptocurrencies, the Berkshire Hathaway vice-chairman says.
“I’m 98½ years of age, and I’ve seen a lot of inflation. I intend to live through inflation.
https://www.afr.com/markets/equity-marke...705-p5az7y
I am not a certified financial advisor and so nothing of what I say should be construed as financial advice. Please consult a certified financial advisor for advice instead.
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16-07-2022, 11:52 AM
(This post was last modified: 16-07-2022, 04:25 PM by CY09.)
In my view, interest rates are going to keep rising for medium term. What causes inflation is the age old saying: "too much money chasing too few goods". The most effective solution is to take away the money by extreme QT instead of throwing in the kitchen sink of 75 or even 100 basis points.
As an investor, I am preparing for this scenario where interest will only rise for 1 year with the Fed raising rates as their (ineffective) policy of choice but will eventually reduce rates in 2-3 years time once they realize the use of a wrong policy tool and will switch to QT.