How to Beat Inflation

Wise Bread just ran a post on How to Understand and Protect Yourself From Inflation. I often think pieces on inflation are obvious. But perhaps I am just showing my age.

Since 1984 (when I graduated high school) inflation has averaged about 2.9%. And it has been pretty stable, falling outside the 1.1% to 4.6% range onlyChicklet-currency twice. (0.1% in 2008 and 6.1% in 1990.) That is almost 30 years of smooth sailing, a period when inflation was an easily ignored background hum.

Indeed, inflation of 3% is not something you usually notice directly. Prices for things change all the time, some up, and even some down. Only when the government totals it all up do we find out prices were up 3% on average.

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The Mortgage Interest Deduction Does Not Subsidize Lenders

There are days when I think I could rename this blog Stupid Things In SmartMoney and concentrate my efforts solely on that ironically Victorian House named publication. Today’s inspirationally bad offering is Mortgage Deduction Pads Lender Profits, in which we learn that “A tax perk aimed at homeowners ends up raising mortgage rates, research shows.”

Apparently, the mortgage interest deduction has the unintended consequence of driving up interest rates, harming those poor American homeowners it was meant to help. How does this happen? Well, here is where the story gets a little fuzzy.

Standard economics theory holds that consumer subsidies raise demand for goods, thereby shifting prices higher. With mortgages, the "price" is the interest rate.

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Student Loans Should be Dischargeable in Bankruptcy

Flipping channels over the weekend I stumbled on the fabulous Suze Orman’s TV show. I could only stand watching for a few minutes, but in that time I got to see her give an overwrought soliloquy on the outrage that student loansGrads Kit are not dischargeable in bankruptcy. She is working to fix this, she tells us.

I do not think she has as much pull in Washington as her followers imagine. But I am happy to throw my weight behind the effort too. I imagine that Suze would be alarmed at my motivations, but on this particular issue I find myself agreeing with her. Could be a first.

Discharging debt is the essence of the bankruptcy process. What the bankruptcy petitioner owes is either wiped out entirely (in Chapter 7) or has its terms and/or amounts modified (in Chapter 13.)

However, there are a few exceptions. Actually, more than a few.

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401k Fees are Not the Problem

Park Bench Crop Dēmos is one of those lobbyist think tank organizations. I do not know if there is a better term for that kind of outfit, but I think we all know what I am talking about. They raise money, issue reports, and generally attempt, constructively or not, to influence debate on one or more issues. There are hundreds, maybe thousands of them, filling a spectrum from far right to far left.

Dēmos  (the bar over the e tells you it is pronounced deemos and that they are hugely sophisticated) describes itself as “a non-partisan public policy research and advocacy organization.” A quick scan of their website will make it clear that they are towards the left end of the political spectrum. That is not where you will find me, but this is, last I looked, a free country. They can write about the tragedy of declining union membership and the subversive nature of Louisa May Alcott’s Little Women, and I can ignore them.

But last month they put out a “report” entitled The Retirement Savings Drain: The Hidden & Excessive Costs of 401ks. Sadly, it was not as universally ignored as it deserved to be.

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Ode to The Wealth Report

Turns out, that post from the WSJ’s Wealth Report that suggested that the rich work harder, which I discussed last month, was the last ever Wealth Report post.

I will miss it. Although not the largest producer of grist for my mill, it contributed its fair share. And I never did quite figure out who its intended audience was. Apparently, the blog aspired to being something for theKeyboard a-Michael Maggs wealthy to read. I am betting that is what the WSJ editors, salivating over potential ad revenue, had in mind. But in practice it had more of a gawking tourist in Richistan tone.

It inspired posts from me such as The Truth About the Economics of Investment Help and Millionaires as Role Models. I even got a little mileage out of the Wealth Report’s shocking revelation that people who make $300K do not feel rich.

Alas, no more.

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