Problem with predictions

You do your best with the information available at the time. It can be frustrating trying figure out what’s going to happen.

Here’s an example. Right now the smart money appears to be on the US experiencing inflation for at least a few years. On the other hand, the Federal Reserve Bank is serious about bring it down to 2%. Their tool for doing that is a planned series of interest rate hikes. The thinking is that higher rates will cause a recession that will bring down prices. 

Yeah sure, but I’m old enough to remember stagflation which was even more entraining than inflation alone. At least there’s pretty solid employment currently. 

High interest rates are expected to bring even oil prices down. There might be something to that. Oil companies are very hesitant to invest in bring more oil to market. Why invest if the current demand is short term? Of course, it’s easy not to invest, raise prices like crazy, and make a ton of money anyway. 

So what’s a reasonable person to do? In the short and mid term I’m going to bet on inflation. I’m not betting the farm mind you, but that’s my current guess. Let’s see where we stand by the end of the year and then maybe readjust.

Being on a fixed income we can really get pummeled by inflation. My firefighter pension can only be increased by an act of the state legislators. In the last ten years I’ve gotten one 1.5% raise. NH is in no hurry to raise benefits. 

Theoretically I’d profit in a deflationary environment. My guess is that the state would quickly jump into action to reduce pensions. At any rate, while it’s tough to make predictions it’s a good guess that reducing my expenses is the way to go. You situation will probably be different than mine -or not.  

As tough as it is for the average Joe to make long term plans the FED screws up pretty badly too and that’s their their job. Those guys are supposed to know what they are doing. It would not surprise me if they did such a good job cooling the economy that we slip into a depression. Remember, it doesn’t even matter who’s President as the FED is independent. Sometimes it seems like a funny way to run a country’s economy but what do I know?

-Sixbears