Fading of inflation helps buyers and borrowers

[TomCADem]

Source: Associated Press

WASHINGTON — It's a good time to buy a car or refinance a mortgage, thanks to super-low inflation and interest rates.

Invest in a savings account? Forget it.

Consumer inflation has all but disappeared, the government reported Wednesday. The Federal Reserve may now be emboldened to keep interest rates at record lows well into next year — and possibly into 2012.

As a result, banks' prime lending rate will stay at its lowest point in decades. That figure is used to peg rates on credit cards, home equity loans, some adjustable-rate mortgages and other consumer loans. Rates on fixed-rate mortgages remain low, too, thanks to a growing belief that the Fed will further delay any rate hike.

Read more: http://www.google.com/hostednews/ap/article/ALeqM5hn4UUi7T4BYSDsKoTIL2C4gzWgHAD9FQORQ00

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But, but, Glenn Beck told me to invest in gold to avoid hyperinflation! Are you telling me it was big giant pump and dump of gold???

[customerserviceguy]

1. Right now, it's a hell of a time to refi your mortgage

if you think you want to keep your house, no matter how much it drops in value. As for car purchases, I'm just going to keep driving my paid-for Hyundai for another 85K miles, that should get me through quite a few more years before it makes sense to replace it.

However, inflation is eventually going to rear it's ugly head. I thought it would be this year, but the euro crisis has postponed it for awhile.

[msongs]

2. people who work and save are being screwed by our economic system nt

[Devil_Fish]

3. Well then, it's a good thing that I work and spend. N/T

[TomCADem]

4. I Thought That No Inflation Was Good For People Who Save

Afterall, if you save $100 in the bank, and you have high inflation, then you have less purchasing power over time. Isn't the lack of inflation a good thing?

[mbperrin]

5. Yes, lack of inflation would be a good thing for savers. Wonder why,

in the last year,

our electric rate went from 11 cents per kwh to 20 cents;
insurance premiums rose 11%,
while out of pocket expenses on medical rose 340%,
gasoline went from $2.47 to $2.89,
gallon of milk from $3.49 to $4.59,

doesn't it?


I teach economics, and every semester, we have students track 40 items and their prices. From last year at this time to now, 39 items on the list increased in price. The big saver? Snicker candy bars in the large size went from $1.49 to $1.19.





Wow.

[Dr.Phool]

8. Yep, no inflation here.

There's only inflation on things that you actually buy. Been to the grocery store lately? Oh that's right, they have an adjustment for that. If you can't afford steak anymore, they substitute chicken instead! Voila! You still have meat, and no inflation.

My homeowners insurance jumped FORTY-SEVEN FUCKING PERCENT IN ONE YEAR!!! Nope, no inflation there. Electric rates went up 40%, and they want another increase. Nope, no inflation there either. Gas is higher too.

Stop believing bullshit government statistics, designed to make politicians look better. (Not you MB, but the OP). They've changed the methodology through every administration since LBJ to make themselves look good. It makes it easier to slow down increases in Social Security and pension payments.

If you think I'm full of shit, read a good book by Kevin Phillips, called "Bad Money". He was Nixon's Political Director, and one of the most honest, astute, observer and analyst I've ever read. He also hates the Bush Family with a passion.

Here's a snippet from an excerpt from Harpers and the St. Pete Times from two years ago.

http://www.tampabay.com/news/article473596.ece

Hard numbers: The economy is worse than you know

Kevin Phillips, Harper's Magazine
In Print: Sunday, April 27, 2008


Ever since the 1960s, Washington has gulled its citizens and creditors by debasing official statistics, the vital instruments with which the vigor and muscle of the American economy are measured.

The effect has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed.

The corruption has tainted the very measures that most shape public perception of the economy:

• The monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation;

• The quarterly Gross Domestic Product (GDP), which tracks the U.S. economy's overall growth;

• The monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity.

Not only do governments, businesses and individuals use these yardsticks in their decisionmaking, but minor revisions in the data can mean major changes in household circumstances — inflation measurements help determine interest rates, federal interest payments on the national debt, and cost-of-living increases for wages, pensions and Social Security benefits.

And, of course, our statistics have political consequences too. An administration is helped when it can mouth banalities about price levels being "anchored" as food and energy costs begin to soar.

(snip) more

[Lagomorph]

9. No kidding!

Everything I actually buy is far more expensive than even a year ago. We've had to make adjustments to our budget. It pretty much means no traveling, no going out, no vacations. Our state grabbed far more than our federal tax breaks.

[Statistical]

6. interest rates tend to rise faster than inflation.

If inflation was 3.5% the fed would try to cool economy some by raising rates. Your savings acount would be yielding 5.5% or 6% rather than <1% now.

What matters is "real" (adjusted for inflaiton). So gross yield - inflation rate.

[madrchsod]

7. my adjustable rate mortgage went down from 5.5 to 3.3%

i was looking at a 7% this year if the rates did`t drop.

[strategery blunder]

10. Low inflation helps borrowers? RLY? LOLOLOL

Well, it might if greedy banks didn't pocket a 30% spread on practically-0% fed funds rates. :grr: