Repo rate cut by 50bps

cr@zydude

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Joined
Jul 20, 2008
Messages
7,431
Absolutely. But, market linked investments also took a severe knock lately.

The traditional model is you are in volatile investment markets while you are young to middle-age-ish. Then when you are retiring you want to be in something more secure. As in more cash based.
Yip. The rule of thumb is to buy stocks when you're young. Each time that a new actor is cast as James Bond, move more of your money from stocks to bonds.
 

krycor

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Aug 4, 2005
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16,182
Whats interesting to me about this graph is that when i bought a car.. i chose a fixed interest.. and while it's only really counting against me this year.. I am now in a position to settle it quickly if i want as owe(2nd hand, well maintain, loan amount was 2/3 value of vehicle) less than 1/5th of the current value which is less than current per month salary. So yah.. i think i made the right decision back then.
 

NarrowBandFtw

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Feb 1, 2008
Messages
18,076
What does a link to the quantity theory of money have to do with a definition of inflation?
Because that is the name of the commonly accepted economic theory that inflation of money supply is directly correlated to prices and therefor only the money supply needs to be monitored / tweaked. The dominant theory for over 300 years before Keynes came along and said nah we can mess with one without affecting the other. CPI as a term did not exist up until that point, inflation as a term DID however exist for centuries already.

And no, Japan was doing everything in their power to get out of sustained deflation. Any comment to the contrary is either ignorant or malicious.
They gave it the wrong name, they should have known better, and so should you by now.
 

newby_investor

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Aug 8, 2018
Messages
2,215
Inflation, the actual definition of inflation, is growth in the money supply only.
I'm going to nit-pick, but this isn't true.

Inflation is the fact that, in real terms, over time your money becomes less useful. You can look up any definition. At the end of the day, the man reaching into his wallet for R200 to pay for groceries does much less with that R200 today than he could a year ago. My parents still go on about how when they moved into their first flat after getting married, they spent R200's worth of groceries to completely stock their pantry and get a few household bits and pieces. This morning at PnP I spent R200 for bread, milk, apples, bananas and eggs. Didn't even fill a basket.

There are various drivers for inflation. Yes, monetary supply is one of them, but there are lots. Demand-Pull is identified as an increase in demand increasing faster than production capacity. Cost-Push occurs when stuff gets more expensive to make - e.g. a poor wheat harvest means we have to import, and the exchange rate means import gets more expensive, i.e. the price of bread goes up. One bread is still worth one bread, it's just the randelas in your pocket that are now less able to buy your bread than previously.

The focus on interest rates is because reserve banks have only one knob that they can turn. Their goal is to try and keep inflation to manageable levels (usually they try for low positive numbers), and they only have one way to do it. (Controlling interest rates and controlling money supply is virtually the same thing, i.e. only one knob to turn.)

Also you can't say "deflation isn't bad, just show me one historical example but the great depression doesn't count." Because that's one of the main reasons we think deflation is bad. It's like saying "communism isn't bad, and you can't show me a counter-example because I've arbitrarily excluded the Soviet Union".

That being said - you're correct in thinking that deflation is the symptom rather than the actual problem. It's also something that can be measured and which has been shown to respond to stimulation via control of monetary policy by the reserve bank.

That being said, most reserve banks do a relatively good job given their limitations and the fact that most stuff is out of their control.

Edit: it's also worth noting that CPI can be manipulated. There's no perfect system of course. You have to measure inflation somehow, and any metric that you pick can be jimmied somehow.
 

rietrot

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Yip. The rule of thumb is to buy stocks when you're young. Each time that a new actor is cast as James Bond, move more of your money from stocks to bonds.
Americanized advice and mostly outdated.
 

rietrot

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Joined
Aug 26, 2016
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I'm going to nit-pick, but this isn't true.

Inflation is the fact that, in real terms, over time your money becomes less useful. You can look up any definition. At the end of the day, the man reaching into his wallet for R200 to pay for groceries does much less with that R200 today than he could a year ago. My parents still go on about how when they moved into their first flat after getting married, they spent R200's worth of groceries to completely stock their pantry and get a few household bits and pieces. This morning at PnP I spent R200 for bread, milk, apples, bananas and eggs. Didn't even fill a basket.

There are various drivers for inflation. Yes, monetary supply is one of them, but there are lots. Demand-Pull is identified as an increase in demand increasing faster than production capacity. Cost-Push occurs when stuff gets more expensive to make - e.g. a poor wheat harvest means we have to import, and the exchange rate means import gets more expensive, i.e. the price of bread goes up. One bread is still worth one bread, it's just the randelas in your pocket that are now less able to buy your bread than previously.

The focus on interest rates is because reserve banks have only one knob that they can turn. Their goal is to try and keep inflation to manageable levels (usually they try for low positive numbers), and they only have one way to do it. (Controlling interest rates and controlling money supply is virtually the same thing, i.e. only one knob to turn.)

Also you can't say "deflation isn't bad, just show me one historical example but the great depression doesn't count." Because that's one of the main reasons we think deflation is bad. It's like saying "communism isn't bad, and you can't show me a counter-example because I've arbitrarily excluded the Soviet Union".

That being said - you're correct in thinking that deflation is the symptom rather than the actual problem. It's also something that can be measured and which has been shown to respond to stimulation via control of monetary policy by the reserve bank.

That being said, most reserve banks do a relatively good job given their limitations and the fact that most stuff is out of their control.

Edit: it's also worth noting that CPI can be manipulated. There's no perfect system of course. You have to measure inflation somehow, and any metric that you pick can be jimmied somehow.
You can't measure inflation in terms of "good and bad." It is just the natural cycle. Stuff go up and down. Inflation is just as bad as deflation.
 

newby_investor

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Messages
2,215
You can't measure inflation in terms of "good and bad." It is just the natural cycle. Stuff go up and down. Inflation is just as bad as deflation.
Agree but with a qualification. Either of these things, in the extreme, is bad. Either one with small numbers is manageable.
 

Forum Reader

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Joined
Aug 25, 2019
Messages
348
I.e. getting unearned income. Nope, don't feel sorry for them.
To be clear, there is a difference between saving money and getting interest just to keep up with inflation (unfortunate by-product of a parasitic financial system) and investing money just to earn interest as an income. The latter parasites can get rekt, hopefully the former don't lose.
Great. My retired parents are now parasites because they managed to save and put away money for retirement. They are living off the interest from those savings which has taken a massive hit this year.
 

Johnatan56

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Aug 23, 2013
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26,580
You can't measure inflation in terms of "good and bad." It is just the natural cycle. Stuff go up and down. Inflation is just as bad as deflation.
Disagree, inflation is near always better than deflation, but "runaway" inflation is bad.

You want to always avoid deflation as people are going to mass withdraw their money from the bank and sit on it, since if you're putting it back in the economy as investment you take risk.
 

rietrot

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Disagree, inflation is near always better than deflation, but "runaway" inflation is bad.

You want to always avoid deflation as people are going to mass withdraw their money from the bank and sit on it, since if you're putting it back in the economy as investment you take risk.
Why is inflation good? It just erodes away your spending power.

I'm loving the definition as I'm able to buy some bargains. It's good for me.
Deflationary periods are exactly the time to buy assets.
 

rietrot

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Generally fixed rates on home loans also apply for much less time, 5 years or less, from what I have seen.
Normally 5 years or less and they will fix it at a rate slightly higher than that of the day.

It's only useful if you think rates are going to increase by a lot in the near future.

It has become a lot less popular, banks don't really do it anymore. But they might if interest rates become volatile in the future.
 

3WA

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Joined
Sep 25, 2012
Messages
8,463
Generally fixed rates on home loans also apply for much less time, 5 years or less, from what I have seen.
Yeah, if there was a ten year fixed rate product, I would be on the phone with them right now.
 

TEXTILE GUY

Honorary Master
Joined
Oct 4, 2012
Messages
10,391
Disagree, inflation is near always better than deflation, but "runaway" inflation is bad.
I think its important too, to understand why the deflation.

If there is over supply of consumer good, maybe a drop in demand or is there less credit available, is it exchange related .... or a short term dip?

Depending on the reason - I suppose one would take different decisions.

As prices drop, the question is, do consumers hold out for even lower prices or better deals, or do they snap up the deal at hand .....

Right now, the economy needs people to start spending again - ironically the government in SA seems hell bent on restricting that ..... and so rates fall, encourage credit so folks can start putting cash back into the economy.

Inflation - yeah it is better in a way - because its s sign of economic growth. But runaway inflation - hyper inflation isnt good. The problem in SA, with inflation, is that our currency is weak (and the underlying causes) - and as a nation in general, we dont save or invest, but spend more than we can afford. These factors drive inflation, sure, but again also show a demand which is good for economic growth.
 

Speedster

Executive Member
Joined
May 2, 2006
Messages
9,309
I'm going to nit-pick, but this isn't true.

Inflation is the fact that, in real terms, over time your money becomes less useful. You can look up any definition. At the end of the day, the man reaching into his wallet for R200 to pay for groceries does much less with that R200 today than he could a year ago. My parents still go on about how when they moved into their first flat after getting married, they spent R200's worth of groceries to completely stock their pantry and get a few household bits and pieces. This morning at PnP I spent R200 for bread, milk, apples, bananas and eggs. Didn't even fill a basket.

There are various drivers for inflation. Yes, monetary supply is one of them, but there are lots. Demand-Pull is identified as an increase in demand increasing faster than production capacity. Cost-Push occurs when stuff gets more expensive to make - e.g. a poor wheat harvest means we have to import, and the exchange rate means import gets more expensive, i.e. the price of bread goes up. One bread is still worth one bread, it's just the randelas in your pocket that are now less able to buy your bread than previously.

The focus on interest rates is because reserve banks have only one knob that they can turn. Their goal is to try and keep inflation to manageable levels (usually they try for low positive numbers), and they only have one way to do it. (Controlling interest rates and controlling money supply is virtually the same thing, i.e. only one knob to turn.)

Also you can't say "deflation isn't bad, just show me one historical example but the great depression doesn't count." Because that's one of the main reasons we think deflation is bad. It's like saying "communism isn't bad, and you can't show me a counter-example because I've arbitrarily excluded the Soviet Union".

That being said - you're correct in thinking that deflation is the symptom rather than the actual problem. It's also something that can be measured and which has been shown to respond to stimulation via control of monetary policy by the reserve bank.

That being said, most reserve banks do a relatively good job given their limitations and the fact that most stuff is out of their control.

Edit: it's also worth noting that CPI can be manipulated. There's no perfect system of course. You have to measure inflation somehow, and any metric that you pick can be jimmied somehow.
Excellent explanation, although I don't think he wants to understand.
 

Speedster

Executive Member
Joined
May 2, 2006
Messages
9,309
Because that is the name of the commonly accepted economic theory that inflation of money supply is directly correlated to prices and therefor only the money supply needs to be monitored / tweaked. The dominant theory for over 300 years before Keynes came along and said nah we can mess with one without affecting the other. CPI as a term did not exist up until that point, inflation as a term DID however exist for centuries already.
I still don't get how linking to that page changes anything about the definition of inflation? Yes, that is a theory about the causes of inflation but has nothing to do with the definition of inflation. You are correct, inflation as a term existed for centuries (which invalidates your prior claim that inflation started when banks started issuing paper money). You are also correct that in earlier times there weren't people going around benchmarking prices and thereby constructing a Consumer Price Index as a means to measure inflation. Neither of those points changes the fact that inflation is by definition the increase in the general price level and NOT by definition an increase in the money supply.
They gave it the wrong name, they should have known better, and so should you by now.
What on earth do you mean?
 
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