Happy Days Are Here Again. The Inflation Monster Has Been Defanged. NOT!

Kaight | Dec 13, 2023 | 1,192 posts since 2011

Let's look at the year over year numbers for core inflation:

December 2020 through November 2021 4.9%

December 2021 through November 2022 6.0%

December 2022 through November 2023 4.0%

That's three solid years so far of significant purchasing power erosion. And let's make a huge leap of faith and assume the above BLS core inflation numbers are honest and accurate:

So how are your 5.5% APY and 6.0% APY CDs working out for you . . .

AFTER TAXES!

But wait, let's not forget the contribution all those extra inflatodollars you're earning, on those "high yielding" CDs, make to bracket creep.

It's a sad state of affairs for us savers as the purchasing power of our nesteggs shrinks faster than a snowpile on a warm, sunny day!! By the time core inflation finally gets down to 2%, assuming that ever actually happens and speaking in terms of our purchasing power, we'll all be virtually broke!

7

sams1985 | Dec 13, 2023 | 781 posts since 2022

Good points but still better than doing nothing with the money. As prices rise, so does my net worth and in many instances more than enough to cover the rises.

4

Robb | Dec 13, 2023 | 324 posts since 2018

Terrible loss of purchasing power over a 3 year period but for those who’s single source is CD income not too bad considering the first $13,850 of income for single filers is tax free on the Federal side thanks to the standard deduction in 2023. And moves up to $14,600 in 2024. And if you live in a state with no tax it’s even better. This bump up in rates the past year has helped many to both extend/build a nice bridge towards social security.

3

fliegeroh | Dec 13, 2023 | 116 posts since 2022

I agree. Our Federal Government happily goes on borrowing and spending billions on foreign wars which will cause inflation to remain high. To call our government "broke" is a vast understatement. It's downright financial larceny. Unless we get some political relief, our dollars will be worthless. Nevertheless, I enjoy coming here to talk with MyDepositAccounts buddies about the search for CD's. It's a small comfort.

6

w00d00w | Dec 14, 2023 | 360 posts since 2012

there are so few options for getting a guaranteed positive real return on "safe" money. buying an I Bond with a positive fixed rate and holding at least 5 years is the main one, but that still might not get it done if core inflation rather than CPI-U is used as the inflation benchmark. as we've witnessed, nominal safe investments like a CD can get trounced by surging inflation. looking back at a Mountain America CU offering from early 2019...core inflation then was 2.1% and the certificate yield 3.5%. at the outset, looked like a good deal with a likely positive real return over it's duration. as it turns out, held to maturity it will produce roughly 2 years of positive real returns and 3 years of negative.

4

Kaight | Dec 14, 2023 | 1,192 posts since 2011

Exactly. Very well stated. Today's declining interest rate situation, with a POTUS election less than one year hence, is shocking . . Shocking!!! It's about as shocking as the disingenuous shock we observe in this nineteen second clip:

https://www.youtube.com/watch?v=SjbPi00k_ME

Yet many people continue to buy into this stuff. They schnarf up those five year CDs, locking themselves in, and then recoil in horror and dismay after the election when interest rates skyrocket.

2

betaguy | Dec 14, 2023 | 181 posts since 2022

please advise how you think the election may affect rates.
JP is a republican by the way.

1

Kaight | Dec 14, 2023 | 1,192 posts since 2011

Well, the entire House, one third of the Senate, and the office of POTUS will be on the ballot. Leading up to the election all politicos will be on their best behavior. But afterwards it'll be Katie bar the door!

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