(03-02-2021, 10:12 AM)Otter Wrote: The bubonic plague in Medieval Europe is a dramatic example of what can happen economically after a population decline (admittedly far more severe than the demographic issues currently facing the U.S., Japan, and Europe). Afterwards, with the labor pool vastly reduced, peasants enjoyed some of the largest wage/crop price gains of the pre-industrial era. There was a lot of inflation, but the reset of the labor market still resulted in substantial overall gains. There was also a massive increase in debasement of currency at that time (clipping coins, minting of silver vs. gold coinage, etc.).

(03-02-2021, 09:50 AM)fenders53 Wrote:

(03-02-2021, 09:18 AM)ken-do-nim Wrote:

(03-02-2021, 08:21 AM)fenders53 Wrote:

(03-02-2021, 07:59 AM)ken-do-nim Wrote:

(03-02-2021, 12:02 AM)crimsonghost747 Wrote: I believe the word "growth" in dividend growth investing is my main hedge against inflation.
My plan is to live off the dividend income, so as long as my portfolio's annual dividend growth rate is higher than inflation, then that should lead to a situation where I have more purchasing power each year compared to the last one.

The other option is to live off of the dividends after inflation is accounted for.  Let's say the inflation rate in a given year is 2.4%, and you are 100% invested in AT&T with its 7.4% dividend.  If you only draw 5% of those dividends and allow the rest to reinvest, you'll keep up with inflation.  If you say draw 4% and allow 3.4% to reinvest, you'll have more purchasing power each year as well.  

It might be an approach worth considering if someone's nest egg at retirement isn't quite high enough to go into the typical 2-2.5% range of the dividend growth stocks to have enough income.

Pull up a long-term chart on T.  It doesn't give one the comfort to bet the farm.  They are the king of bad M&A.  If I wasn't playing option interest tricks to boost the income I'd have little interest in it.  A basket of DGI stocks that grow the dividend can work against inflation, but you do need a very large port if this will be your only source of income. 

It depends where you desire to live during retirement of course.

Good point.  I sometimes think too highly of AT&T because they are such a huge company; I wonder how many people realize they own CNN, Time Warner, HBO, etc.  The DirectTV purchase is heavily weighing them down but I'm hopeful they will throw that off and start to grow again.  That said, it may be possible to build a dividend portfolio that comes to the same average of 7.4% yield that you can have more confidence in.

I don't hate T, and occasionally even own 500 shares on a very hard dip.  See above comments, I game it for additional income because I expect the capital may continue to erode.  I can find 100 solid stocks with a growing 2.5% yield that have outperformed T over most any time period in total return.  T stock price is down maybe 25% over the past 20yrs?  AVG S&P stock is up maybe 8% annually over that period.  So cut that in half and subtract it from the 7.4%.  Just diversify with some actual lower yield dividend growers and the end result will likely be better.  It's proven and will certainly be safer.  There is no safe 7 1/2% yield when short-term rates are about zero.  There is always a catch when the market turns sour.  A March 2020 or 2008 lookback will clearly illustrate that.

(03-02-2021, 09:57 AM)Otter Wrote:

(03-02-2021, 07:06 AM)fenders53 Wrote: We aren't paying this debt down.  We do not have the political will to come close to  balanced budget.  Inflation and growth are our current options.  Better have some growth in our ports too.

Growth results in a paying down of the debt through increased tax receipts on the added economic activity. 

I think long term, inflation will take care of the bulk of debt reduction. There are some long-term demographic issues (aging population, population stagnation/decline) that aren't really compatible with traditional methods of growth. In the absence of a growing working-age population, other factors have to pick up the slack (like productivity gains). Maybe AI and other technological advances will be sufficient to sustain growth despite demographics, but that remains to be seen.

(03-02-2021, 12:55 PM)jalanlong Wrote:

(03-02-2021, 09:57 AM)Otter Wrote:

(03-02-2021, 07:06 AM)fenders53 Wrote: We aren't paying this debt down.  We do not have the political will to come close to  balanced budget.  Inflation and growth are our current options.  Better have some growth in our ports too.

Growth results in a paying down of the debt through increased tax receipts on the added economic activity. 

I think long term, inflation will take care of the bulk of debt reduction. There are some long-term demographic issues (aging population, population stagnation/decline) that aren't really compatible with traditional methods of growth. In the absence of a growing working-age population, other factors have to pick up the slack (like productivity gains). Maybe AI and other technological advances will be sufficient to sustain growth despite demographics, but that remains to be seen.

In order to inflate the debt away, wouldn't the rate of inflation have to outpace the growth of debt?  In the last 30 years the debt has gone up 800%.

(03-02-2021, 01:26 PM)Otter Wrote:

(03-02-2021, 12:55 PM)jalanlong Wrote:

(03-02-2021, 09:57 AM)Otter Wrote:

(03-02-2021, 07:06 AM)fenders53 Wrote: We aren't paying this debt down.  We do not have the political will to come close to  balanced budget.  Inflation and growth are our current options.  Better have some growth in our ports too.

Growth results in a paying down of the debt through increased tax receipts on the added economic activity. 

I think long term, inflation will take care of the bulk of debt reduction. There are some long-term demographic issues (aging population, population stagnation/decline) that aren't really compatible with traditional methods of growth. In the absence of a growing working-age population, other factors have to pick up the slack (like productivity gains). Maybe AI and other technological advances will be sufficient to sustain growth despite demographics, but that remains to be seen.

In order to inflate the debt away, wouldn't the rate of inflation have to outpace the growth of debt?  In the last 30 years the debt has gone up 800%.

No serious economists recommend eliminating the entire federal debt. Issuance of treasuries (federal debt instruments) are vital to the functioning of the modern financial system and various sectors of the economy. Sudden elimination of federal debt would probably have serious negative consequences. The only time we've done it in our history (1835), a massive depression happened afterwards, and that was well before huge portions of the global economy were tied to America's sovereign debt issuance. 

Keeping the Debt/GDP level manageable, so that interest rates can eventually (long-term horizon) rise back to more normal historical levels without destroying the ability of government to function would be the likely goal.

(03-02-2021, 01:51 PM)fenders53 Wrote:

(03-02-2021, 01:26 PM)Otter Wrote:

(03-02-2021, 12:55 PM)jalanlong Wrote:

(03-02-2021, 09:57 AM)Otter Wrote:

(03-02-2021, 07:06 AM)fenders53 Wrote: We aren't paying this debt down.  We do not have the political will to come close to  balanced budget.  Inflation and growth are our current options.  Better have some growth in our ports too.

Growth results in a paying down of the debt through increased tax receipts on the added economic activity. 

I think long term, inflation will take care of the bulk of debt reduction. There are some long-term demographic issues (aging population, population stagnation/decline) that aren't really compatible with traditional methods of growth. In the absence of a growing working-age population, other factors have to pick up the slack (like productivity gains). Maybe AI and other technological advances will be sufficient to sustain growth despite demographics, but that remains to be seen.

In order to inflate the debt away, wouldn't the rate of inflation have to outpace the growth of debt?  In the last 30 years the debt has gone up 800%.

No serious economists recommend eliminating the entire federal debt. Issuance of treasuries (federal debt instruments) are vital to the functioning of the modern financial system and various sectors of the economy. Sudden elimination of federal debt would probably have serious negative consequences. The only time we've done it in our history (1835), a massive depression happened afterwards, and that was well before huge portions of the global economy were tied to America's sovereign debt issuance. 

Keeping the Debt/GDP level manageable, so that interest rates can eventually (long-term horizon) rise back to more normal historical levels without destroying the ability of government to function would be the likely goal.

Who's goal, because that's sure as hell not what I am reading and hearing?  I'm on record here for supporting a living wage be paid to those who are willing to work fulltime.  It's overdue.  What I am hearing today on the news is scary.  Recurring payments?  Large unemployment kickers with no end date?  Why in the hell would anyone low skilled even want to add to our GDP by being productive?  

Back to my previous statement.  I see no sign whatsoever of the political will to even dream of a balanced budget.  I'll stick around for the liquidity ride and try to figure out when to jump off the train.  Very good subject BTW jalanlong.

(03-02-2021, 02:46 PM)Otter Wrote:

(03-02-2021, 01:51 PM)fenders53 Wrote:

(03-02-2021, 01:26 PM)Otter Wrote:

(03-02-2021, 12:55 PM)jalanlong Wrote:

(03-02-2021, 09:57 AM)Otter Wrote: Growth results in a paying down of the debt through increased tax receipts on the added economic activity. 

I think long term, inflation will take care of the bulk of debt reduction. There are some long-term demographic issues (aging population, population stagnation/decline) that aren't really compatible with traditional methods of growth. In the absence of a growing working-age population, other factors have to pick up the slack (like productivity gains). Maybe AI and other technological advances will be sufficient to sustain growth despite demographics, but that remains to be seen.

In order to inflate the debt away, wouldn't the rate of inflation have to outpace the growth of debt?  In the last 30 years the debt has gone up 800%.

No serious economists recommend eliminating the entire federal debt. Issuance of treasuries (federal debt instruments) are vital to the functioning of the modern financial system and various sectors of the economy. Sudden elimination of federal debt would probably have serious negative consequences. The only time we've done it in our history (1835), a massive depression happened afterwards, and that was well before huge portions of the global economy were tied to America's sovereign debt issuance. 

Keeping the Debt/GDP level manageable, so that interest rates can eventually (long-term horizon) rise back to more normal historical levels without destroying the ability of government to function would be the likely goal.

Who's goal, because that's sure as hell not what I am reading and hearing?  I'm on record here for supporting a living wage be paid to those who are willing to work fulltime.  It's overdue.  What I am hearing today on the news is scary.  Recurring payments?  Large unemployment kickers with no end date?  Why in the hell would anyone low skilled even want to add to our GDP by being productive?  

Back to my previous statement.  I see no sign whatsoever of the political will to even dream of a balanced budget.  I'll stick around for the liquidity ride and try to figure out when to jump off the train.  Very good subject BTW jalanlong.

Post-WWII, Debt/GDP levels were higher than they are now. The situation was different, as we were a net creditor nation and the only developed country on Earth with an intact manufacturing sector (and essentially had no meaningful competition on that front among capitalist economies for nearly two decades). 

The largest rises in our debt/GDP ratio occurred just after the 2008 financial crisis. COVID-related stuff barely merits a blip on the debt/GDP chart compared to what happened after 2008:

https://tradingeconomics.com/united-states/government-debt-to-gdp

Just before COVID happened, the Fed was in a slow, regular rate rise regime, with occasional taper tantrums. Debt/GDP had leveled off and was essentially flat. It doesn't take much debt reduction to get us back to where we were pre-COVID, with the stock market enjoying the longest (and most hated) bull market in history. The bond market hadn't returned yields to historical norms yet, as the Fed still had a lot of planned unwinding to do. I'm pretty confident that, without too much effort, Debt/GDP ratio can be maintained at current levels, and slowly reduced over time as the Fed begins to unwind. 

The second Clinton term saw the largest draw-down in the Debt/GDP ratio since WWII, from 65% to 55% in four years, with a backdrop of one of the best periods of economic growth since WWII (likely enhanced by the collapse of the Soviet Union opening new markets, China initially opening its markets to the U.S. due to Deng's reforms, as well as all of the productivity gains from personal computing). 

You'd need roughly double the proportionate reduction in Debt/GDP ratio as was achieved in 1996-2000 to get us back to where we were pre-2008 (federal funds rate of 5.25%). So, assuming the U.S. economy can continue to grow at even modest rates, that sort of scenario ought to be achievable within 15 years. 3% should be doable well before that.