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I don't think you can blindly take the regional inflation rate and blindly say "Our inflation rate is 3%" or "Somebody smarter than me said the inflation rate is 3%", people do this, and think that 3 is the number.
Inflation is based upon the individual, and your buying habit and daily consumerism. "YOUR" core inflation, and the inflation for Canadians based upon the World Bank, not the Federal Reserve is not the same as some Americans as stated here.
The World Bank states that the average inflation rate for the next 10 years will hover around 2%. Our core inflation rate is about the same, if not less. Therefore, all the investments made, based upon future value calculations using today's NPV, to PV, should use 2%. Now, if you insert 3, 4 or 5% and still come out with a PV number that meets your needs then you're gold.
Now, that the inflation rate is established and that you should be looking at your personal core inflation rate, you can begin to gain real wealth.
One big problem. The Chinese are having an annual growth rate of 6.5%, down from 12%!! This is a problem, the reason is that it will create an additional 25 million unemployed people. The Chinese need to ensure that the American bonds and treasury notes they own and will purchase are of value. If they inject more stimulus into their economy based upon American notes they hope the annual growth will stay in double digits.
This isn't possible. Unfortunately, for all of us the Chinese economy rules the world and we just have to hope it doesn't falter.
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