2023 Inflation - Canada | Page 2 | General financial discussion | Discussion forum

Alexandre said

Let's talk about hypothetical person who has a decent amount of cash on hand, enough to earn income from HISA and 1yr GICs alone. That person retired few years ago. In January 2021 he realized that his household budget balanced itself, based on that year interest rates.

Fast forward to January 2024. HISA and 1yr GIC rates doubled for many FIs, while inflation, even if it were in fact 10% annually, is not there yet.
At this moment of time income from his savings account can beat inflation.

In the long run, inflation will catch up with income from savings and that person will start feeling loss of purchasing power. You are right about devaluation.
But, at the long run, that person and we all will be dead.

If your objective is to die rich, take risks.
If that retiree objective is not to outlive his money and die with ideally just above $0 in net worth, then he could be just fine without taking risks. Even with devaluation of principal.

if you put $100 in a HISA 100 years ago and spent the interest, your HISA balance shrunk to less than 6% of what you used to have.

If/when they invent medicine extending life expectancy to 150-180 years, then that would become a real concern for retirees or about to be.  

Sure, if someone has so many $s that devaluation of his capital does not matter. Or if he is sufficiently close to end of life. But then the interest rate should not matter either.

Many retirees are in their 50s or 60s and may need their money to last for 40 years. For them ignoring inflation and/or messing up basic maths would be dangerous.

cgouimet said
Inflation is up December 2023 to 3.4% vs December 2022 but the Consumer Price Index has been rather stable through 2H2023 ...
  

The message in your initial post got lost in the rhetoric that followed. The actual CPI Index numbers mean more to me than the YOY data because it depicts the more recent trend to watch, albeit had you added the seasonably adjusted data column, both Nov 23 and Dec 23 data points had significant upticks to 159.5. We will have to wait and see what that means over the next few months.

YOY data may mean more for BoC monetary policy but it is rather meaningless for the consumer which is what many of this thread's posts are really about. Dec 2022 is ancient, beyond the rear view horizon for the consumer. What matters for current cash flow spend and forecasting are current trends.

At a macro level, my cash flow spend is based on the CPI Index which, at 158.3 is only 45% more than April 2006 (109.2) when I retired. That feels about right in the overall scheme of things.

Alexandre said

2001, FutureShop, JVC CRT TV 27" - $1,300 before taxes.
As it is CRT, probably 720p maximum.

2024, BestBuy, Samsung 65" 4K UHD HDR QLED Smart TV - $1,300 before taxes.  

Fine, but my TVs still work!

Whereas my stove blew a main burner (and that shut down all power to the house). The stove's new replacement cost a thousand $, and came with what sounds like a bird chirping inside whenever the stove is turned on, caused by the thinnest gauge paper thin metal possible expanding and contracting. Oh, and a new clothes washer (also cost a grand) has zero insulation, and requires noise cancelling headphones whenever getting close to it!

So the moral is, how we fare with inflation depends on luck, or in my case, the lack of it!