> Inflation is increasing (and increasingly under-reported), investment returns just--to put it bluntly--suck.
This is nearly a self contradictory statement. That is, if inflation were getting out of control, we would see high interest rates accompanying that change.
I'm not saying your advice it bad (savings are a good idea), although maybe a little extreme sounding (too much doomsday feel for my taste). I do, however, wish people would stop it with the "inflation is scary" rhetoric.
The issue is USD is losing its status as the reserve currency and declining exchange rate with BRIC countries are making consumer goods more expensive. Chinese RMB used to be 8:1 in the late 90's, now it's 6:1 and declining.
Also due to several rounds of quantitative easing, the Fed injected a lot of money into the money supply. However, banks are not lending as much money to stimulate the economy which doesn't trickle down to ordinary folks; part of the reason being big banks such as BoA and Citi needed to bolster their capital reserve against their illiquid toxic assets from the real estate speculation bubble. As a result, QE1/2/3 caused real inflation to money supply while the stock market and personal savings account returns have remained anemic.
I remember I was excited when I got a six-figure job, then I realized that 80K in 1998 amounted to 110K in 2011 and realized that inflation was real.
Inflation is what happens to prices, by definition. "Inflation to the money supply" is nonsense, like if you said int x = "foo" or talked about installing new RAM to store your photo album.
Also, the notion that banks can cause inflation by not spending reserves is baffling.
Not at all. There are several different definitions for inflation, each of which is equally valid depending on the context. Consumer price inflation is one type. Other types include producer prices or money supply (including debt marked to market).
This is wrong. CPI is not "inflation" except by common mis-usage. Inflation is defined to be an expansion in the money supply. You can have inflation and falling prices at the same time.
This is nearly a self contradictory statement. That is, if inflation were getting out of control, we would see high interest rates accompanying that change.
I'm not saying your advice it bad (savings are a good idea), although maybe a little extreme sounding (too much doomsday feel for my taste). I do, however, wish people would stop it with the "inflation is scary" rhetoric.