What Started Out as The Brazillian Protests/Riots, Oddly Morphed Into a Thread About Inflation

I think it's about the cost of everything. The preparations for the World Cup etc have cost the government a lot of money whilst the price of living has also gone up. Brasilians ain't seeing a lot of benefit from it.

A gov't spending public money on sporting events while there are still suffering humans in their country is really fucking heartless, stupid, and evil. (And I say that no matter which gov't is doing it, and despite liking some sporting events. Priorities.)

Oh, but the Keynesians will explain all about the mystical multiplier effect, whereby spending money one does not have on something (that produces nothing of value to the huddled masses) somehow creates actual goods and services, rather than simply increasing the overall supply of money, which is the textbook definition of inflation.

little_e said:

A gov't spending public money on sporting events while there are still suffering humans in their country is really fucking heartless, stupid, and evil. (And I say that no matter which gov't is doing it, and despite liking some sporting events. Priorities.)

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We got the Olympics last year, and Auld Lizzie's jubilee. It cost millions and millions of pounds. Meanwhile, sick and disabled people are committing suicide because the government is cutting or removing their benefits. We've got no money, you see.

Heartless, stupid and evil just about covers it.

I have every sympathy with the Brazilian rioters. I don't think rioting is necessarily the best way to make their point, but governments often ignore anything else. And FIFA is a thoroughly nasty organisation.

Scratches Brazil off the list of possible places to flee to in the event of....

Don said:

Oh, but the Keynesians will explain all about the mystical multiplier effect, whereby spending money one does not have on something (that produces nothing of value to the huddled masses) somehow creates actual goods and services, rather than simply increasing the overall supply of money, which is the textbook definition of inflation.

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I think the Keynesians do see a difference between jump starting an economy and just feeding the piggies at the public trough.

The first is public money used to both stimulate the economy through both employment and building public works that enhance the economy (highways, dams, education, etc.). The second is just lavishing money on the already rich: golf courses and bridges to nowhere. Especially when non-union, lower than prevailing wages are paid.

Sorry, not all public money is spent equally well. And I do believe in a common government for the common weal.

Seems like we're in one of those phases of global mass unrest, Arab Spring, Austerity protests, Occupy, and now Brazil. Hopefully it turns out better than 19th century Europe.

It's because the government is spending the money which should be going to education and other basic stuff in stadiums and shit we don't need to get by. It also turned into a protest against corruption within the government... Because not only our money is thrown away in stadiums and entertainment, it is also stolen. Cool uh?

Xelebes said:

I don't mind if they spend it on sporting events as long as they are making the obligatory investments into the country. I think the people are frustrated by the perceived myopia of the Brazillian government that growth in the economy must be reflected in how it holds its sports events. On the point of human suffering, there is human suffering anywhere and to abide by what you are suggesting would mean that no sporting event should be held.

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I would not go so far as to say that individual humans are required to give up all luxuries because of suffering elsewhere in the world. At the very least, there are some extremely large practical problems with that.
I will say that a government should prioritize the well-being of its people over luxuries like fun sporting events. I am agreeing with the perceptions of the protesters that their gov't has its priorities out of whack.
Unfortunately, I suspect my gov't's got its priorities out of whack, too. Probably most do.

Don said:

Oh, but the Keynesians will explain all about the mystical multiplier effect, whereby spending money one does not have on something (that produces nothing of value to the huddled masses) somehow creates actual goods and services, rather than simply increasing the overall supply of money, which is the textbook definition of inflation.

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Luckily, inflation is morally neutral.

Nonfic said:

Seems like we're in one of those phases of global mass unrest, Arab Spring, Austerity protests, Occupy, and now Brazil. Hopefully it turns out better than 19th century Europe.

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Things go round in cycles. It will work itself out.

little_e said:

Luckily, inflation is morally neutral.

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Not in my book. It's theft by devaluation of assets. Actually, it's a nastier crime, because most people don't understand how they're being robbed.

Xelebes said:

Devaluation of which assets?

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Any asset, but cash is the easiest to explain. Say you get $100 for a job, and you tuck it in your wallet and forget about it. After a year of 5% inflation, you find that $100 bill and go to the grocery store with it. If you want to buy the same things you would have bought a year earlier, it's gonna cost you $105. You've lost that $5 value in real goods thanks to inflation. You shoulda spent it the minute you earned it, apparently. Saving is for suckers.

Put money in a "savings" account at 2%, when inflation's running at 5%, and you're losing 3% of the purchasing value of that account every year.

Another example: Buy a house for $100,000 and sell it 20 years later for $200,000 and although you've doubled your money, if inflation's been running 5% over that period that $200,000 will actually buy much less in terms of goods and services than the original $100,000 would have. Yet most people would run around proud of having doubled their money. Great, but their money dropped by over half its value in that same period. They actually lost value in terms of goods and services.

Brazil, and particularly Rio, is home to some of the world's largest, poorest and most dangerous slums, known locally as "favela(s)". They are essentially lawless worlds unto themselves.

In advance of the World cup and Olympic Games, Brazil has been conducting what amounts to a harsh pacification campaign. By some reports, replace "jihadists" with "gang leaders" and the "clean up" effort is not far off what you might encounter in Iraq or Afghanistan. While there have been efforts to re-establish delivery of at least basic government services, which had been largely absent Depending on who you talk to (read), this effort is either ground-breaking or illusory (pure PR window-dressing).

Initially devised in 2008, Fabrés says pacification has three parts. First, elite military troops confront the traffickers who often sell drugs and carry weapons out in the open. After the soldiers are finished, a group of riot police patrol the favela for about a week, until a group of community police can be established.
These community police — the Pacification Police Units (UPP in Portuguese) — are permanently stationed in the pacified favelas and are charged with not only keeping the peace but also trying to help pave the way for improved local services such as better electricity grids, regular garbage collection and improved education opportunities

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http://www.wired.com/rawfile/2013/02/rafael-fabres-favelas/

http://www.huffingtonpost.com/2013/03/04/brazil-regains-control-of_n_2806328.html

http://www.bbc.co.uk/news/world-latin-america-13957096

Capital gains taxes (at least in the U.S.) are levied without any adjustment to the cost base for inflation. Failing to index capital gains taxes to inflation distorts the effective tax rate.

Don said:

Any asset, but cash is the easiest to explain. Say you get $100 for a job, and you tuck it in your wallet and forget about it. After a year of 5% inflation, you find that $100 bill and go to the grocery store with it. If you want to buy the same things you would have bought a year earlier, it's gonna cost you $105. You've lost that $5 value in real goods thanks to inflation. You shoulda spent it the minute you earned it, apparently. Saving is for suckers.

Put money in a "savings" account at 2%, when inflation's running at 5%, and you're losing 3% of the purchasing value of that account every year.

Another example: Buy a house for $100,000 and sell it 20 years later for $200,000 and although you've doubled your money, if inflation's been running 5% over that period that $200,000 will actually buy much less in terms of goods and services than the original $100,000 would have. Yet most people would run around proud of having doubled their money. Great, but their money dropped by over half its value in that same period. They actually lost value in terms of goods and services.

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Xelebes said:

On paycheques not redeemed, that paycheque is not redeemed. Cheques as far as I've seen only have a six month window to be redeemed. It is still a liability by the company, but the written cheque would not be redeemed. If the redeemed paycheque has resulted in cash that has been lost in a pocket, or a cushion in the couch, then that value is inexact in the first place.

On bank accounts, it is assumed that any balances that are being kept in accounts netting less than inflation are clearing accounts. Stores of value should be in investments that net more than inflation.

On housing values, what you are describing is falling housing values, not a loss in value due to money. Other comparative houses on the market will reflect that. That is why on capital gains taxes, the net gains are halved to get to your TCG.

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Nice deflection, but I said cash, and you're off on check redemption windows.

Here in the US at least, commercial bank offerings in "savings" accounts regularly pay less than the inflation rate, yet are touted as the first place to keep some semi-liquid assets, which is all many people have. When I was but a mere youth, the same savings accounts generally ran a point or two over inflation. Nice gig for the bankers, having the Central Bank keep interest rates near zero.

I said the house increased from $100,000 to $200,000, which has always been "rising" in my book. You're confusing an example about simple inflation by introducing conjecture about the impact of the housing bubble on my hypothetical example. Cool, but I don't see the point.

dfwtinman said:

Capital gains taxes (at least in the U.S.) are levied without any adjustment to the cost base for inflation. Failing to index capital gains taxes to inflation distorts the effective tax rate.

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Yeah, beside the theft in asset valuation, the government gets that handy advantage in capital gains, as well as the fact that your COLA salary increases to keep up with inflation get you bumped up the tax rate ladder. You're earning the same amount in terms of purchasing power, but the government gets a bigger slice. Clever.

It's not about only about the bus and subway fare (0,20 cents diff), lack of investment in health or education, corruption and certainly not about the sporting events. It's about all of that! It's a reflection of everything that has been going on and certainly about young people finally opening their eyes to what is wrong. We have done that before (not me, because I was barely born then) and it worked.

Don said:

Here in the US at least, commercial bank offerings in "savings" accounts regularly pay less than the inflation rate, yet are touted as the first place to keep some semi-liquid assets, which is all many people have. When I was but a mere youth, the same savings accounts generally ran a point or two over inflation. Nice gig for the bankers, having the Central Bank keep interest rates near zero.

I said the house increased from $100,000 to $200,000, which has always been "rising" in my book. You're confusing an example about simple inflation by introducing conjecture about the impact of the housing bubble on my hypothetical example. Cool, but I don't see the point.

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And in the UK, interest rates are being kept artifically low to keep the housing bubble going, and rates to savers are derisory. My savings account is linked to my bank's mortgage tracker, which is now irrelevant since I've been given a council flat (I believe you call it government housing over there, although my house is nice ) and therefore will never need to buy anyway.

My brother and sister-in-law bought their house at the top of the market. It's now worth £20,000 (roughly $30,000) less than they paid for it. Since they've bought that house they've had another child, and it's a tiny wee place. They're going to need to move again in the next five years, but unless they can come up with £20,000 they can't. It's either that or pay two mortgages, or find a mug who'll pay the top asking price. It infuriates me that the whole British psyche is geared towards home ownership, and so many people have over-stretched themselves. When interest rates go up - and they will - watch homelessness rocket.

So I agree with you, Don. It's all false money floating around in the ether. Most people only care about what's right in front of them, and that's their lovely house worth £X/$X - or so they think. We've got to the same answer from totally different political positions, but I'm with you.

Xelebes said:

Actually, I simply misread your post. However, I have mostly met people who have forgotten their paycheque than merely losing their pay in bills, what with working in and alongside payroll.

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Ah. Gotcha.

Xelebes said:

Then that is an issue with the bank. The banks that I know of have clearing accounts (which there are two available: chequing for clearing cheques and savings which is used for on-demand amounts. Sometimes they are rolled into one and sometimes at certain balances, they give immaterial interest.) These accounts are merely to be used for day-to-day, current purchases. If they are being used correctly, the lost amounts is immaterial: no more than the averaged running balance and the inflation rate. Say, average running balance of 2 000 dollars, at 1.0% inflation rate (current Canadian inflation rate) results in a loss of 20 dollars a year or 77 cents on the paycheque.

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Well, officially we're running a couple percent here, but they no longer include food or gas in the CPI. If you calculate it the way they did in 1980, we're nearer 10%. That's $200 on that $2000 running balance; a not-insignificant amount.

Xelebes said:

The point is measuring the value of your house with dollars from completely different periods does not tell you much; it tells you doodly squat. From a historical cost perspective, it may mean that you made a marginal gain but from the intrinsical value of the house went down.

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Precisely what I was saying. The dollar amount makes it look like you made a gain, but since the dollars you receive are buying less, you've actually lost ground. Most people see the dollar gain and don't take into account the loss in actual purchasing power.