[paulpauper]

It depends on your individual consumption preferences. Just because the CPI is 7%/year does not mean you are losing 7%. If you have $1 million in cash and your expenses are $40k/year and CPI goes up 10%, then all you need is to invest the $960,000 in fixed income to negate the increase of $4k due to inflation, which is easily doable. If you are taking that $1 million and buying only energy or only food with it, then you would lose a lot of potential purchasing power but most people do not do that. Food and energy are only a small % of one's wealth beyond a certain amount.

[terminalcommand]

Another perspective, we have 83.45 %/year CPI inflation in Turkey. This is the official number an independent research group of academics claim it is nearing 200%. The official interest rate is 10.5%/year. You get maximum 20-25%/year interest on savings accounts. Real estate market and rents go up 220%/year (by the official numbers).

Before doing FIRE purchase your own home or sign a really long term lease with upfront payment and no increases, inflation caused by corruption (as in my country's case) wreaks havoc on savings. It is simply not possible to invest in anything that can keep up with the inflation, you get poorer by the day.

[luckylion]

I've watched the numbers in Turkey over the past year, and it's mind-boggling. What I don't understand is: how do people get by?

Lots of Germans have little savings, don't own their home, and have relatively small margins with their income. The ~10% (or maybe 15, if you exclude some of the wonky things that keep them down) are being felt. I cannot imagine how lots of people would get by with 80% or 100% inflation in a year.

How do Turks do it? Are young people moving back in with their parents or getting more room mates? Are they taking on debt, or selling valuables to pay for rent and food? From afar, it looks surprisingly stable. Germans are said (and correctly so, imo) to submit to authority, but I'd expect a lot more action here with the level of inflation Turkey is seeing. Am I just not hearing about the instability it causes, or are Turks just weathering it but aren't rising up yet?

[terminalcommand]

We lower our standards, lots of middle class families don't eat red meat anymore for example. We don't eat out. We sell assets, take on debt.

Young people don't move out in the first place. Lots of people move back in.

We got immensely poorer, it is tough out here. You see beggars everywhere, especially low income families were hit the worst.

We live under Erdogan, if we try to rise up, we get shut down. All public protests are de facto banned, with the new disinformation act I am risking a jail sentence even by writing this comment. You can even go to jail if you like a tweet of a whistleblower for example.

[luckylion]

That sounds bad. Granted, I don't keep up with the news that much, but what I do see (in Germany) is mostly stories on the "I won't buy that car I've been wanting to"-level, absolute poverty is rarely shown (unless with an upbeat story about e.g. enterprising metal collectors). While Erdogan certainly isn't praised, the chilling effects and the expanding authoritarianism are barely mentioned.

Fingers crossed that the next elections will bring some change.

[terminalcommand]

Yeah buying a car is not possible for many. The minimum wage is around 5500 try. An entry level car costs around 850k try now. More than 60% of the population works at minimum wage. So you have to work for 154 months without having any expenses and saving all your salary just to buy a car. Car prices are much higher than europe because of exorbitant taxes. (We have 175% tax on cars, same goes for phones, alcohol etc.)

[pitsnatch]

"We lower our standards, lots of middle class families don't eat red meat anymore for example. We don't eat out."

"Young people don't move out in the first place. Lots of people move back in."

Sounds like Canada

[Rufbdbskrufb473]

> It is simply not possible to invest in anything that can keep up with the inflation

Why not just invest in diversified real estate rather than betting on a single property and its local market? In expectation, the returns should be similar on average but with lower volatility.

I'd rather rent and put capital in a real estate investment fund. I guess something could be said for buying a property if you're very certain that you'll live there for the rest of your life, but if you would ever like to move, you'd be highly exposed to fluctuations in the value of a single asset, your home.

[terminalcommand]

That's a good idea, real estate investment funds accepting investment from retail investors don't really exist in my country. There are real estate investment companies which I can buy shares in. I am afraid of buying stocks, but I may consider that.

Principally speaking you are right to think that real estate investment funds should bring on par profit with real estate increases but during times of very high inflation as in Turkey, you lose some because funds don't 100% invest in their base asset, a significant part (around usually 20%) stays liquid. From that 20% you lose the ability to cope up with inflation, as the official interest rates are negative. (In Turkey's case above -70% a year).

[nonameiguess]

I swear I don't ask to be snarky but out of genuine curiosity, but what prevents you from buying USD or USD-denominated assets like TIPS or TIPS ETFs? Do Turkish banks ban such purchases to prevent capital flight?

Obviously, all other things being equal, whether a retiree gets crushed or not by CPI change is going to differ a lot if that change is 7% versus 83%.

[terminalcommand]

To be blunt I never thought of this. We can invest in US equities but US government bonds, I never thought of this.

We can buy eurobonds of Turkish Republic if we don't care about liquidity in short to mid term.

However usd is another battle. The government utilizes strange tactics (ranging from making it mandatory to convert export proceeds into TL, offering government backed USD adjusted savings accounts in TL, bringing cash from "unknown" sources (it gets listed as "net faults and misses" under Central Banks balance sheet.) So there is inflation but usd doesn't keep up with it always. There are news that the government is highly active in narcotics trade for personal gain of ministers, so I presume we get some black money there as well. The government also gives away any asset the country has in exchange for dollars to foreigners. Most of our national reserves (around 130 billion USD) was sold covertly to unknown purchasers at an unknown price during erdogan regime, so I guess some of that quasi-stolen reserves is also making a comeback. With all that said, they manage to keep usd exchange rate flat for now. So TIPS would only benefit us if we invest for a long term. Look at usd/try to see how crazy it is. Nothing is predictable now. When you lose the rule of law and your democracy, anything is possible.

We can easily invest in Us and European stock markets through funds.

As long as we pay income tax, we can invest in whatever we want, there are no country restrictions.

[reducesuffering]

Yes, it is underappreciated in urban circles how much owning physical assets (land, reliable fuel-efficient vehicles, fruit trees, tools, wood for construction & heat) help weather rough times. They're very frequent in history, but a scant memory for many in the west. Digital IOU assets will not completely cut it.

[bombcar]

It’s a scenario that has happened many times in many countries, which means it can be studied and investigated.

John T Reed wrote a book on it which has decent amount of research and ideas - https://johntreed.com/collections/john-t-reed-s-book-on-hype...