Is cash trash?

Harpon wrote: »

If all this liquidity and qe results in high inflation, is cash really a bad thing to have? Surely interest rates would go way up and would be higher than inflation, so you could put your money in a deposit account and see it grow in real terms? Or would interest rates still likely be lower than the inflation rate?

QE started in the eurozone in 2014.

Has it caused much inflation since then?

Harpon wrote: »

No.

Does that mean we will never get much inflation again?

Is it possible we could get deflation?

Page 26 and 27 here lists the CPI and interest rate numbers from 1933 to 2012. You can work out the inflation rate year to year from the CPI numbers.

https://centralbank.ie/docs/default-source/publications/research-technical-papers/research-technical-paper-07rt14.pdf?sfvrsn=8

Also if you google something like Historical deposit interest rates Ireland, Historical inflation rates Ireland you will get results like these which you can compare.

https://tradingeconomics.com/ireland/deposit-interest-rate-percent-wb-data.html

https://www.macrotrends.net/countries/IRL/ireland/inflation-rate-cpi

Zenify wrote: »

Are you talking about a pandemic, a recession or QE?

Serious recessions usually bring deflation, pandemics bring deflation (using the Spanish flu as an example) and QE has been struggling to keep inflation up even during an economic boom. Anything is possible but my money is in cash (prize bonds) right now and I'm not worried about hyper inflation. The ECB target is near 2%, if we see more than that interest rates will increase.

All the money to bring hyperinflation has been printed. It’s just velocity is near zero so it hasn’t shown up. If something happens to change that we will have very high inflation and unlike the 70s central banks have no tools to fight it.

Also for those saying the CPI shows little inflation, the CPI doesn’t include health expenses and housing all of which have shown huge inflation over the past few year. House prices have doubled since 2012 but it won’t show up in official data.

And for the CPDE which the central banks use, that doesn’t include food and energy. It also ludicrously undercounts health expenses too. They barely give any weight to education either despite this going up in costs significantly in the past decade. In other words the inflation data we get is manipulated and not to be trusted. That’s before we talk about hedonic adjustments and shrinkflation.

pearcider wrote: »

All the money to bring hyperinflation has been printed. It’s just velocity is near zero so it hasn’t shown up. If something happens to change that we will have very high inflation and unlike the 70s central banks have no tools to fight it.

Also for those saying the CPI shows little inflation, the CPI doesn’t include health expenses and housing all of which have shown huge inflation over the past few year. House prices have doubled since 2012 but it won’t show up in official data.

And for the CPDE which the central banks use, that doesn’t include food and energy. It also ludicrously undercounts health expenses too. They barely give any weight to education either despite this going up in costs significantly in the past decade. In other words the inflation data we get is manipulated and not to be trusted. That’s before we talk about hedonic adjustments and shrinkflation.

You would need to come up with your own figures to justify your claims about health and education in the index.

https://www.cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexmay2020/

The index has to conform with EU law.

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32016R0792

Unlike health and education a lot of households could go for years with no activity in the housing market. So I see the sense of keeping that data separate from the CPI, and measuring it with its own index. Which is what happens. But rent prices are included in the CPI.

pearcider wrote: »

It’s in the interests of governments to manipulate the indices. I didn’t say rent was in not in the CPI I said it was underweighted. It’s around 5% which is around the same as footwear. Health expenses are about the same weighting as books and stationary. It’s a joke.

I'm only able to go with what is published. They say that the weightings are based on a 5 yearly household expenditure survey. The one for 2020 has been suspended.

I don't recognise your numbers from what they found in 2015. E.g. an average of €47 for rent as opposed to €34 for clothing and footwear seems entirely possible. Taking the much higher number of people who buy clothes and shoes compared to the number who rent. But the rent would be a more expensive item than most clothes or shoes.

https://www.cso.ie/en/releasesandpublications/ep/p-hbs/hbs20152016/

pearcider wrote: »

My point to the original post by zenify is that government money printing (QE) has actually caused massive inflation for the working class. Money printing has the function of taking away from them and giving it to the speculators and the rich. It had this function that Wall Street does well but not so much the ordinary person. So my rent has doubled but hey the Christian Louboutin shoes are on sale.

What we will have is further centralisation of economic power and the continue hollowing out of the middle class. The fact that governments continue to try and cover this up is pertinent. This fact should be deeply disturbing to all of us.

I don't see how the non working class could avoid the effects of such inflation if it exists. But there certainly is a gradually increasing transfer of wealth in society from the working age population to the retired from work population.

Whenever I see middle class or low to middle earners, I always ask for real numbers. To me a middle earner household would be combined gross income (wages and welfare) of €75K to €95K a year. What would you make it?

dxhound2005 wrote: »

Whenever I see middle class or low to middle earners, I always ask for real numbers. To me a middle earner household would be combined gross income (wages and welfare) of €75K to €95K a year. What would you make it?

Table 2.4 average gross income, equivalised per person

6th decile = 592 pw
7th decile = 674pw
8th decile = 883 pw

Harpon wrote: »

If all this liquidity and qe results in high inflation, is cash really a bad thing to have? Surely interest rates would go way up and would be higher than inflation, so you could put your money in a deposit account and see it grow in real terms? Or would interest rates still likely be lower than the inflation rate?

Cash is trash imo if you plan on holding cash indefinitely... But cash is king in times of crisis if you are only holding to take advantage of opportunities.