[HN Gopher] The money I saved as a child would buy one picogram ...
___________________________________________________________________
The money I saved as a child would buy one picogram of gold today
Author : diego
Score : 255 points
Date : 2022-04-17 17:20 UTC (5 hours ago)
(HTM) web link (twitter.com)
(TXT) w3m dump (twitter.com)
| cat_plus_plus wrote:
| Cash should be seen as medium of exchange rather than store of
| value. If you saved for a bike, the bike was probably worth much
| more to you than a picogram of gold. Even if you ended up
| forgetting about your penny jar and finding it in the attic as an
| adult, the act of saving itself gave your valuable lessons about
| planning and delayed gratification.
|
| On the other hand, if you made even a conservative investment
| like a thin silver chain or a popular book with author autograph,
| I bet you will get more than your money's worth for that today.
| If you bought a share of Apple stock - woah, but I guess we
| couldn't have all known back then.
|
| As adults, yeah we should know better than to keep our wealth
| essentially in the pockets of politicians. Invest in something
| that will be useful to your or someone else even many years
| later, or profit-generating businesses. But there is nothing
| wrong with children play-learning a simplified version of life
| rather than immediately having to know the difference between
| mutual funds and ETFs.
| [deleted]
| MarkusWandel wrote:
| The point missed in most save/invest vs. spend arguments is this:
|
| If you've been raised to be a saver, you are well trained at
| living cheaper/less frivolously. Note that this presupposes that
| you make enough money to live reasonably and save; I'm not
| talking about the extreme poverty cases where immediately
| spending the rare windfall actually makes sense.
|
| By cheaper, I mean one car instead of two, simpler vacations,
| less eating out, less fancy house, "using up" quality consumer
| goods instead of constantly replacing them with the latest
| fashionable stuff (e.g. second complete kitchen makeover in 15
| years).
|
| Suppose person A makes X and spends X and saves nothing. Person B
| makes the same, but spends 0.5X and saves 0.5X. Now suppose an
| economic disaster where all those savings are wiped out and A and
| B additionally end up taking a 50% pay cut. Who will continue to
| live in comfort, albeit with misgivings about not being able to
| save up again?
| ip26 wrote:
| It's protective against downside, but can constrain your
| upside. I was raised a saver, and it's been very hard to hire
| out simple tasks & let go of trifles, which in turn constrains
| how much time & energy you have to focus on increasing your
| earnings. As a low earner, it's better to focus on efficiency &
| DIY, but as a high earner it's irrational to spend an hour
| getting bent out of shape over a few dollars.
| MarkusWandel wrote:
| Absolutely agree, which is why, for example, I don't do my
| own car repairs any more. But you can still have a less fancy
| car and keep it longer. And I don't _want_ to focus on
| increasing my earnings. I 'd much rather be fixing something
| around the house.
| paganel wrote:
| When Ceausescu's regime fell in late 1989 a piece of bread was
| costing 3.75 lei. About 10 years later, late '90s-early 2000s, a
| piece of bread was costing 3,000 lei. Hight inflation is a bitch.
| bombcar wrote:
| An, but it wasn't the same piece of bread. :)
|
| I've always wondered what happened to mortgages and loans
| during those periods. Did borrowers effectively get free
| houses? Did borrowers not exist?
| ronyfadel wrote:
| That has happened in many countries, like Argentina and
| Lebanon. Borrow before crash, and your house would
| practically cost you as much as a car.
| oblio wrote:
| 1. Scams. Romania had a lot of banks defaulting.
|
| 2. Yes, the number of loans and mortgages was minuscule.
|
| 3. Do you think anyone gave out fixed interest loans? :-)))
| nabla9 wrote:
| The work one did decades ago would not be worth of the same today
| due to increased total factor productivity.
|
| When people think the money they earned in past should be worth
| same today assume that value of money should grow.
| clamprecht wrote:
| I'm from the US but I lived in Argentina for about 5 years
| (2013-2018). It was a great lesson, and I'm seeing things in the
| US now that I used to see in Argentina. At the bank recently,
| they had a sign about the national shortage of coins. That was
| common in Argentina. Sizes of products getting smaller in order
| to keep the price the same - "inflacion escondido" (hidden
| inflation).
| once_inc wrote:
| Shrinkflation is such a visible invisible sign.
| gpgn wrote:
| "inflacion escondidA"
| clamprecht wrote:
| Gracias.. mejor comentario hasta ahora ;)
| robocat wrote:
| la inflacion escondida. "Shrinkflation".
| ghaff wrote:
| The ostensible reason for the coin shortage was COVID-related
| supply chains. Stores were also trying to minimize handling of
| cash especially early-on in the pandemic.
|
| This is overlaid with the fact that, in the US:
|
| 1. A lot of people (though certainly not everyone) don't use a
| lot of cash these days
|
| 2. Coin denominations have basically been unchanged since I was
| born--which was... not recently. So you have lower denomination
| coins that cost more to make than they're worth.
| MerelyMortal wrote:
| On reddit, I'm seeing people hoard coins because they believe
| the metal it is made of is more valueable than the currency
| it represents.
| ghaff wrote:
| In some cases, that may be technically true but I suspect
| that the costs of turning bags of pennies into cash that is
| > than the face value of the pennies is iffy at best.
| Sebguer wrote:
| It's also illegal to melt down pennies or nickels, which
| are the coins where the margins are closest: https://www.
| federalregister.gov/documents/2007/04/16/E7-7088...
| raunak wrote:
| Shrinkflation
| shadowgovt wrote:
| The single greatest difference between the United States and
| Argentina is the world's debts, as tracked by the IMF, aren't
| denominated in any of the pesos or peso variants Argentina has
| used over the past several decades.
|
| Were the us to try and trade out dollars for NuDollars, they
| would find the dollar won't go away because the world will
| still be using it to trade and pay down its debts.
|
| The dollar being the world's international trade currency has a
| significant anchoring effect that makes it extremely difficult
| to extrapolate from lessons learned in other countries to the
| United States.
| gus_massa wrote:
| If the US decides to replace 10 Dollars with 1 NuDollars,
| then the IMF and everyone else will just search and replace
| and fix all the paperwork. It's not hard at all.
|
| The problem may be if there is for many years a high
| unpredictable inflation that is higher than most developed
| countries. In that case other countries may decide to use
| Euros, Swiss Franc, Yuanes, Yens or whatever has a more
| stable value.
| shadowgovt wrote:
| There's nothing in international law that makes that
| automatic.
|
| It would create an interesting open question how the IMF
| would respond. In practice, it won't happen because raising
| the question would (as you noted) bea colossally stupid
| move for the US for global influence reasons. They have a
| lot of leverage from being the printer of the world's
| currency-of-record.
| Capira wrote:
| bitcoin fixes this
| narrator wrote:
| A friend of mine lives in Argentina. He pays his living
| expenses in Bitcoin to other Argentinians. They are very happy
| to take it, even without legal tender laws because it doesn't
| rapidly regularly devalue like the Argentinian currency.
| UncleMeat wrote:
| That would be true if the only way to create a failed currency
| was to print it to death. But we've observed cryptocurrencies
| with mining caps collapse to $0 in the same way as a fiat
| currency.
| datadata wrote:
| Fair to say bitcoin fixes this particular large and important
| class of currency failure, by taking away the power to print
| it to death?
| albntomat0 wrote:
| That it does, but I understand that Bitcoin's deflationary
| by default nature has also been criticized.
|
| Bitcoin also adds new failure cases such as irreparably
| losing money through address typos and lost/failed hard
| drives, not to mention the numerous & exciting failures in
| DeFi.
| UncleMeat wrote:
| Yes, while introducing a host of other very serious
| problems.
| [deleted]
| dukeofdoom wrote:
| Saving and buying collector edition video games might be a good
| purchase for a kid that might pay off later. A corvette might be
| a good investment too, if they stop making gasoline cars in the
| near future.
| quantumcrypt wrote:
| Corvettes are mass produced. German ICE import like Porsche is
| far more likely to hold value.
| oblio wrote:
| Porsches are mass produced, too.
| teddyh wrote:
| Ah, the magic of interest:
| http://www.threepanelsoul.com/comic/at-the-bank
| imtringued wrote:
| Why exactly do we want to reward already rich people at the
| expense of poorer people? Somehow, people convinced themselves
| that giving money to those who don't need it is efficient.
| FabHK wrote:
| If everyone puts their money in the bank and gets 5% (say),
| then the proportion of wealth will remain unchanged. (FWIW, a
| similar argument against Proof of Stake (that it will
| inevitably lead to greater and greater inequality) is
| similarly flawed. (This doesn't mean that PoS is a good
| idea.))
| randyrand wrote:
| It's not that we want to. Its not our choice. It's decided by
| the people, or the foreign countries, that have the money to
| lend. It's the rate they are willing to lend at. Most don't
| lend it for free.
| dlivingston wrote:
| Do you understand why the system is set up the way it is? By
| which I mean the actual financial mechanisms.
| lottin wrote:
| You don't have to reward anyone. Just don't borrow. But if
| you want to borrow the lender will expect a reward. Simples.
| MisterSandman wrote:
| It's a lot easier for the rich to "just not borrow" that it
| is for the poor. Capitalism was _designed_ so people HAVE
| to borrow money to do things, so saying that you can just
| avoid things by not borrowing is elitist at best.
|
| University, Medical Bills, Housing - all are things that
| many people (in NA at least) need to borrow money for.
| Borrowing money is an integral part to move up the social
| and economic ladder for most people alive today.
| infamouscow wrote:
| Because economists without even an undergraduate
| understanding of mathematics say the right things to those in
| power.
| renewiltord wrote:
| Zeihan in tears. I really enjoy his description of geopolitics,
| but the man definitely overestimates Argentina repeatedly for no
| bloody reason.
|
| When I was a child, I saved a little of my allowance to start
| with, but then rapidly realized that every year I was blowing
| away (in earnings) my savings from the previous year. Soon my
| porn and bootleg music high-school business was beating all the
| savings of the previous year. Then my ad fraud "business" plus my
| fake reviews "business" was beating that.
|
| I dropped all of that stuff, went to uni for other things and
| then eventually started engineering later in life than most
| people and the pattern repeated in earnings. Through sheer luck I
| happened to make choices that aimed at growth rather than
| savings.
|
| Pure savings are over-rated. You should hold nearly everything in
| inflation-protected assets. And loads of these are crazy liquid.
| Plus, I have friends with whom I have a de-facto liquidity pool.
| It's sort of a liquidity insurance mechanism: we'll just help
| each other over temporary liquidity humps.
|
| One of my friends had to leave the US temporarily because of a
| green card processing delay due to COVID and he knew that I'd
| cover his mortgage if he needed me to. Helps you sail closer to
| the wind knowing that only broad-based economic failure can hurt.
| nanomonkey wrote:
| What are some examples of these crazy liquid assets?
|
| In the past I've spent extra money on tools, a house and some
| gold and silver (as I have a goldsmithing hobby). The house is
| difficult to unload, at least mentally, pretty good market. The
| tools have kept their value, but finding a buyer is difficult.
| The gold and silver are a similar story, but tend to fluctuate
| in value rapidly.
| reducesuffering wrote:
| Global stock and precious metals ETF's are inflation-
| resistant and quite liquid. You'll pay only 0.02% spread to
| liquidate them and have the cash in your bank account within
| a few days. As opposed to a house which is generally 6%
| spreads and a couple months to liquidate. Only in exceptional
| liquidity crises (August 2008 - March 2009, and March 2020)
| are you at risk of cashing out for 30-50% losses. 80% of the
| time it's at value or higher. So you just need a small
| percentage of assets that are deflation-resistant (cash &
| bonds) for the small periods of time deflation happens, to
| pay your expenses.
| mensetmanusman wrote:
| That's still 3 billion atoms:
|
| https://www.wolframalpha.com/input?i=one+picogram+of+gold+in...
| marcodiego wrote:
| Brazil had its own share of problems with hyperinflation during
| the 80's and early 90's. I remember the behavior it conditioned
| people.
|
| Once people got their paychecks, they would rush to the
| supermarket to buy as much as they could, by the end of the month
| they wouldn't be able to buy that much with the same amount of
| money.
|
| People ran ahead supermarket staff which updated prices so they
| could buy the same product at a previous price.
|
| Gas stations had long queues during the night when there were
| news about about gas prices rising.
|
| My father developed and interesting habit: whatever he bought, he
| would write in the box how much it cost in gasoline liters. That
| way we could have a good idea of how much each thing really cost.
| It was somewhat funny many years later finding old boxes written
| "Custou dez litros de gasolina".
| [deleted]
| me_me_mu_mu wrote:
| Thinking about money and its hypothetical worth in X years is a
| waste of mind resources, at least for me. Instead, I'm going to
| just save 20-25% and spend the rest on being happy. If things go
| south, so what? I've got an expiry date and one day these things
| won't be a problem.
| cko wrote:
| That's a pretty decent savings rate. When you say save, though,
| do you mean putting it in the bank or a diversified portfolio
| of factor tilted global index funds?
| me_me_mu_mu wrote:
| Index fund
| [deleted]
| rkuester wrote:
| "May the sign of the exponential be ever in your favor." --
| @dbasch, a great tweet concluding that thread
| dredmorbius wrote:
| https://threadreaderapp.com/thread/1515737443395383299.html
| tehlike wrote:
| As a grateful person with sufficient income, we are contributing
| IRS gift limit of 15-16k per parent to kids account. Eventually
| when the time is right we will get her practice investing also
| with the hope that she will see how much her account has grown by
| the virtue of compounding. Before then we are planning to get her
| do chores for neighbors and learn to earn money and get her save.
| t43562 wrote:
| I remember my dad encouraging me to save my dollars and not spend
| them on choc-99 double ice-creams ($2.13). These were soft whip
| ice-creams with 2 cadbury's flake chocolates stuck in the side
| and they seemed like the closest thing to heaven on earth to me.
| What my dad said seemed logical though and I saved. When I was 16
| I had a holiday job that earned me many ice-cream-worths but I
| kept it - didn't buy a bicycle or anything. "Save your money."
|
| These were Zimbabwe dollars, however, and in the late 1990s it
| all inflated away to nothing. So much for conscientious saving.
| supersync wrote:
| Thanks for sharing. A book "The Psychology of Money" talks
| about this. How people handle money (successful or not) is very
| different depending on whether or not they experienced
| inflation as a child.
| Bolkan wrote:
| throwawaybsd wrote:
| anonporridge wrote:
| Never store your long term savings in a thing that someone who
| isn't you and never will be you can theoretically print an
| infinite amount of.
|
| Even if you completely trust the people in charge today, you
| just can't ever be certain that they'll be in charge forever or
| that the environment won't change in a way such that they break
| your trust.
| magicalhippo wrote:
| My parents encouraged me to save money, but for my birthdays so
| I could buy a new cool Lego kit. My parents and relatives would
| chip in on the day, but I would keep count during the year to
| make sure I was close enough.
|
| Looking back I think that was a good middle ground. At least as
| a 5-10 year old it was a quite concrete target yet also showed
| me the benefits of saving money.
| kingcharles wrote:
| Funny side note: the State of Illinois spent a decent amount of
| public funds trying to decide whether to charge me with $100
| trillion in currency fraud. The state crime lab said the
| currency I owned was the "most sophisticated piece of currency
| forgery" they had ever encountered.
|
| It was a single (real) $100 trillion bill from Zimbabwe that I
| carried in my wallet for fun. I assume they thought for some
| reason it was US dollars?
|
| https://www.banknoteworld.com/zimbabwe-currency/100-trillion...
| MerelyMortal wrote:
| Did they at least give it back to you?
|
| I don't know how much they sell for now, but I was lucky to
| get one for $20 when they were normally going for $40 on
| eBay.
|
| I forgot the exact result, but I once calculated the value of
| a 100 trillion Zimbabwe dollar bill when it was printed, and
| it came to something like 0.06 USD (6 cents).
| Jiro wrote:
| I just checked ebay. Real ones sell for $100-200 US.
|
| There are also fakes, most of which admit in the
| description that they are fakes, and include extremely
| large numbers like 10^33.
|
| The highest number that you can get cheaply and that is not
| fake seems to be the 50 billion. They sell for about five
| dollars, which given the economics of ebay is probably as
| low as you can expect.
| bombcar wrote:
| The one trillion ones are more rare, as Germany if I
| recall correctly stopped printing them for Zimbabwe soon
| afterwards.
|
| At one point I had a hundred stack of them somewhere.
| jjeaff wrote:
| That sounds insane. Did no one just do a quick Google search
| and see that you can buy them all day long all over the
| internet? I think we need some more details on why they were
| going through your wallet and how and why they even
| considered a charge in this case.
| chiph wrote:
| I bought a couple of those and got them framed as a gift. The
| owner of the frame shop was concerned about me leaving them
| with him, until I pointed out that I was going to pay him
| more for the frame than they were worth.
| vmception wrote:
| Should taught you how to dollar cost average on assets instead
| of just hoard the currency
|
| Maybe next gen parents will
| xiphias2 wrote:
| I did the same thing for many years, until in 2013 the Cyprus
| bailouts woke me up...at that point I went all in on Bitcoin
| out of anger of the banking system, and haven't changed
| anything since.
| shadowgovt wrote:
| I hope this works out for you in the long term; BTC isn't the
| most stable platform, but it could certainly be more stable
| than some national currencies.
| WanderPanda wrote:
| In fact it is ,,more stable than some national currencies"
| xiphias2 wrote:
| If you don't look at the price, it's the most stable and
| predictable service and protocol in the existence of the
| internet (maybe after the internet / IPv4). It's uptime is
| 99.987%, last time it was down in 2013, and the cool thing
| is that even if it gets down, it has self healing property
| in the case of network separation / sybil attack.
|
| https://www.buybitcoinworldwide.com/bitcoin-uptime/
|
| I dare you to find another internet service (or even
| banking service) with the same stability.
|
| Also the same software that I downloaded in 2013 still
| works (although I'm not using it, I have the option to not
| upgrade).
|
| There was a bail in last month in my country (Hungary) as
| well: all people who stored their money in Russian banks
| lost their money over $100000, just like in Cyprus in 2013.
| They did't even know that their bank was Russian owned. I'm
| not playing the game of russian roulette with my money
| anymore.
| FabHK wrote:
| Well, I've had BTC transactions drop out of the mempool
| (so, they were not executed, but you don't know that
| immediately, you only know days later), and transactions
| that worked took between a few minutes and more than half
| a day. The fees ranged from virtually nothing to around
| 50 USD. I certainly would not call that predictable and
| stable. I mean, you don't even know when the next block
| will arrive.
| xiphias2 wrote:
| I would be suprised if a valid normal transaction with 50
| USD would drop out of a mempool. What was the transaction
| weight? If you send the transaction data, I would be
| interested to look at it.
|
| I'm usually overpaying (20 satoshis/byte, usually under
| $1 for a $2000 transaction), and I always get into the
| first block, but I never pay $50 fee.
| [deleted]
| SahAssar wrote:
| > If you don't look at the price, it's the most stable
| and predictable service and protocol in the existence of
| the internet
|
| Well, when you put it like that you just convinced me to
| put my savings into SMTP. Obviously you've identified the
| key features of a store of value.
| kkdaemas wrote:
| The problem is Bitcoin Core may have (will have) unknown
| vulnerabilities and those might not get patched correctly
| once discovered.
| xiphias2 wrote:
| Yes, this is true, I'm mostly worried about the elliptic
| curve signature part, as everything else could be fixed
| with an emergency hard fork (except SHA256).
|
| Sadly OP_CAT operation is disabled (or substring equality
| operation), which would make lamport signatures available
| again for high value transactions. I would love it if
| lamport signatures would be enabled again (it would be
| quite easy to do), but I'm afraid that there isn't enough
| concensus to do it at this point, because some people
| would think that it's wasteful, and also lamport
| signatures are dangerous, as they can be used only once.
| anonporridge wrote:
| Bitcoin is an unbelievably stable platform with an uptime
| of 99.98% with only 13 years to draw from. It's been
| sticking with it's algorithmically defined inflation rate
| with perfect predictability, unlike any other currency or
| scarce asset like gold, which depends heavily on incentives
| to mine and accessible reserves.
|
| Don't mistake the volatility of the USD price of bitcoin
| (which is based on the erratic, unpredictability of human
| emotions and massively distrusted market decision making)
| with the complete and utter lack of volatility of the
| actual underlying system.
| SahAssar wrote:
| Inflation (at least in it's common usage) tracks the
| price of goods, not the supply of currency. While those
| traditionally affect each other strongly you cannot say
| that bitcoin has a stable or well defined
| inflation/deflation curve because the price of goods
| denoted in bitcoin are extremely volatile.
|
| You can say that the monetary supply is very predictable,
| but that doesn't do much good if the price of goods
| fluctuate.
| anonporridge wrote:
| The word is 'inflation' is overloaded to mean both
| depending on the context.
|
| It can mean inflation of the price of things, which may
| be driven by supply constraints OR demand changes OR
| currency debasement. This is notoriously difficult to
| calculate a single value for, because all goods and
| services can oscillate wildly in prices in both
| direction. Electronics and mass produced things are a
| strongly deflationary good because they're constantly
| becoming less scarce while food, education, health care,
| and housing are significantly inflationary in price,
| because they're not getting less scarce at faster than
| demand.
|
| It's impossible to give single CPI style inflation number
| that isn't deceptive in some way, because to do so, you
| have to put every person in a box and declare a
| "standard" basket of goods that everyone is expected to
| consume. But reality is messy, so my basket of good is
| likely going to be quite different from yours. Everything
| from diets, the types of education and housing we choose,
| the transportation choices available to us, our
| reproductive choices, and the hobbies we pursue can be
| radically different, which can mean that your "true price
| inflation" can be radically different from my "true price
| inflation" and both radically different from official and
| heavily manipulated government CPI numbers.
|
| Inflation can also mean the inflation of the currency
| supply. This is the more traditional definition, and it
| gives a simpler way to understand whether prices for
| goods and services are rising because of changes to
| supply and demand, or if the prices of goods are rising
| because there's suddenly a lot more units of currency
| available to chase those scare real things. And of
| course, when it becomes clear that it's the currency
| getting rapidly debased, people start hoarding the
| actually scarce goods and resources, because the money is
| becoming toilet paper, and that's bad for all of us,
| because hoarding scarce real world resources that we
| don't need right now is bad for all of civilization.
| SahAssar wrote:
| > This is the more traditional definition
|
| In this sentence traditional can either mean "old" or
| "common". If you meant "old", then I agree, but currently
| it is not the more common one.
|
| For the sake of clarity, if you only meant the more
| narrow definition of currency supply inflation in you
| parent comment then it's probably good to say so.
| UncleMeat wrote:
| The mathematical certainty of the issuance of BTC won't
| really mean much if nobody wants to trade it for goods.
| BTC's volatility is not just volatility w.r.t. USD.
| anonporridge wrote:
| The value of anything as a medium of exchange and store
| of value always depends entirely on whether or not a
| critical mass of people want to use it as such. Once you
| establish that a thing satisfies all the properties of
| money, or close enough, then the only question is network
| effect. Even if minor theoretical improvements could be
| made, it has to be 10-100x better to overcome runaway
| network effect.
|
| Sea shells and bags of salt were drastically better money
| than mentally keeping track of favors owed in a small
| tribe, because we could expand our exchange of favors
| beyond dunbar's number to cooperate with people we don't
| intimately know. Gold was much better than sea shells and
| salt because it's globally scarce and durable. Paper
| backed by gold was much better than raw gold, namely
| because it is drastically easier to trade, transport, and
| fractionalized.
|
| The technical nature of bitcoin isn't special and it can
| be trivially forked, modified, and a new network started
| for near zero cost. That's exactly what coins like
| litecoin and dogecoin did. Copy paste bitcoin code,
| change the name and some constants, and boom, new money.
| What makes bitcoin special, and why there can only be one
| dominant cryptocurrency long term, is network effect. I
| don't care about litecoin and dogecoin, because barely
| anyone uses them relative bitcoin. Barely anyone is
| developing and building on them as a foundational layer.
| The only reason anyone cares about dogecoin these days is
| because one eccentric billionaire has a hard on for it,
| and that's way too small of a bus number to store a
| significant amount of my wealth in.
|
| The same holds true for any network protocol. I can copy
| paste libraries for TCP and make modifications that I
| think will make it far superior to the current form and
| release it to the world! And nobody except hobbyists will
| use it because standard TCP has an unassailable network
| effect. You have to have an extraordinarily compelling
| reason to change, and even then it will take decades (see
| IPv4 to v6 transition for example).
|
| The thing about bitcoin, is that it is the first truly
| digital money. Fiat currencies like the USD have been
| trying for decades to pretend to be digital, and they'll
| probably try harder to use blockchains to make it better,
| but ultimately it's still fundamentally stuck with an
| analog foundation defended by guns and tight cliques of
| trusted human gangs, which makes it globally weak
| relative to bitcoin. That's why bitcoin has a 10-100x
| advantage over dollars long term. It's natively digital,
| open, and permissionless from day one.
| seoaeu wrote:
| Saying that bitcoin has a stable algorithmically defined
| inflation rate is a hilarious redefinition of terms. Over
| the last year, one Bitcoin lost approximately 40% of its
| purchasing power relative to a basket of consumer goods
| and services. The year before, the opposite happened with
| bitcoin increasing in purchasing power by a factor of
| 5-10x.
| xiphias2 wrote:
| ,,A historical look at the origin and uses of the word
| inflation, arguing that although the term has become
| nearly synonymous with "price increase," its original
| meaning - a rise in the general price level caused by an
| imbalance between the quantity of money and trade needs -
| is the definition driving many of those who advocate an
| anti-inflation policy for the Federal Reserve.''
|
| Austrian economics still uses the original meaning of
| inflation (increase in monetary supply), while Keynsian
| economics uses the change in consumer price index, or
| more broadly the change in prices.
|
| I prefer to always distinguish the two by writing
| monetary supply inflation and price inflation instead of
| just writing inflation, as this conflict between
| definitions always comes up.
| m0llusk wrote:
| According to legendary quant Nassim Nicholas Taleb so
| called cryptocurrencies are so fundamentally volatile that
| they cannot be considered currencies:
| https://arxiv.org/abs/2106.14204
| ttoinou wrote:
| Parents didnt call it a currency..
| throwawaybsd wrote:
| Pff tell me about it. I made the choice of buying real estate
| instead. My tenant has everything serviced for them. They
| lost half on the stock market, but fortunately own crypto.
| Also lost a bit on crypto but they earn plenty. My estate
| doubled in 10 years and the rent they pay paid for two more
| properties, but i have to deal with the hassle of fixing
| pipes and such - all in all i pay in maintenance a month
| worth of rent, but the stress of calling contractors is too
| much - sometimes i need to get my arse out of the pool to
| dial people. Also have to spent few hours total a year. I
| just cant. Should sell everything and invest in crypto. My
| Porsche is too boring - need a lambo so it loses value
| sooner. After all what else can you do other than keep money
| in the bank. Buy estates and turn highly paid tech serfs into
| tenants? Hah. Best chase nfts.
| throwuxiytayq wrote:
| Certhas wrote:
| I looked up the definitions:
|
| Theft: an unlawful taking (as by embezzlement or burglary) of
| property.
|
| Inflation: a continuing rise in the general price level
| usually attributed to an increase in the volume of money and
| credit relative to available goods and services.
|
| There you go, proved you wrong.
| ehejdud wrote:
| spawarotti wrote:
| I think they meant that "a continuing rise in the general
| price level usually attributed to an increase in the volume
| of money and credit relative to available goods and
| services." is theft.
| zmgsabst wrote:
| In definition 1:
|
| > as by embezzlement
|
| In definition 2:
|
| > attributed to ... volume of money and credit
|
| We'd be able to conclude that "inflation is theft" from
| noting that inflation is driven by "printing money",
| whether paper or credit, and that the benefits illicitly go
| to those in control of the financial system to the
| detriment of others -- which the other poster would likely
| characterize as "embezzlement".
|
| So you proved that person right -- at least to people who
| view the Federal Reserve and large banks as in a self
| interested cabal.
|
| By embezzling the funds they print, eg giving special
| access to friends, they engage in theft towards society at
| large.
| ajross wrote:
| > from noting that inflation is driven by "printing
| money"
|
| It's not. Or it can be, in the case of the linked article
| referencing Argentine hyperinflation. But what we're
| seeing right now isn't. The US government does not, as a
| rule, "print money" to create funds. That happens in the
| banking system. Like for example the government can sell
| a bond; existing holders of statically invested dollars
| (foreign governments who sold stuff here, say) give the
| federal government a bunch of cash in exchange for the
| promise of interest paid over time. Now the government
| spends that money (on a pandemic relief bill, say),
| putting it into circulation among a different demographic
| (poorer people and not money market investors) who do
| different things with it (buy consumer goods). Well, now
| demand for those consumer goods is higher than it would
| have been. If you're in a pandemic trying to keep the
| economy afloat, that's a good thing. But if you overshoot
| by a bit, then there's too much money for the goods
| available. Inflation! Despite no money having been
| created; it just changed hands.
|
| Now do the same thing for a supply shock: if
| manufacturers scale back production (due to a pandemic)
| and then can't scale it back up fast enough (chip
| shortage!) then prices... go up! Inflation again!
|
| Likewise trade goods can create supply shocks too. Maybe
| some product (Russian petroleum) can't be obtained
| anymore. Less fuel to go around, but all the existing
| consumers have the same requirements and start bidding
| against each other for it. Yup, inflation!
|
| People who repeat this "bitcoin can't inflate because
| mining" idea are selling you a line, basically. And the
| proof is, in fact, that crypto has been _basically flat_
| vs. traditional currencies at this very moment where we
| 're seeing global inflation. If you could _ever_ see this
| effect, this would be the time to measure it. And it 's
| not there.
| [deleted]
| jonhohle wrote:
| I don't disagree that it's not, by definition, theft. It
| is, however, an obscured tax on savers, a transfer of
| wealth from lender to debtor. At least in the US inflation
| is the result of decoupling dollars from gold and the
| direct theft of gold and silver from the citizens by the
| government.
| jhgb wrote:
| > a transfer of wealth from borrowers to debtors
|
| What's the difference between a borrower and a debtor?
| jonhohle wrote:
| Sorry, s/borrower/lender
| Retric wrote:
| It's a tax on people holding the currency not all savers.
| Hold stock, a different currency, copper, paintings etc
| and you avoid losing out to US inflation.
| jonhohle wrote:
| I'd consider equities and real property separate from
| savings.
| imtringued wrote:
| Let's assume 50% of the population is retired and has
| saved money. The other 50% is working full time. A deadly
| virus wiped out 50% of the working population. All
| products are now twice as expensive.
|
| >. At least in the US inflation is the result of
| decoupling dollars from gold and the direct theft of gold
| and silver from the citizens by the government.
|
| No, it is caused by ignoring the fact that labor cannot
| be stored. Gold is just a token, it is like an entry in a
| balance sheet but harder to forge. It doesn't actually
| store anything other than itself. You can't store labor
| by turning it into gold. Gold was already in the ground
| and was dug out by labor. There is no way to get that
| labor back. People age. They can't be stored like gold.
| The inherent mismatch between gold and people is what
| causes inflation. The only difference is that due to its
| limited supply gold then swings back to deflation and
| then inflation again but simply introducing a gold
| standard doesn't solve the inflation problem, it is the
| origin of the inflation problem. Fiat currency is just a
| stretched gold standard. They are still tokens, they are
| easier to forge and more importantly fiat money doesn't
| age either. So inflation must still happen as a
| consequence.
|
| > It is, however, an obscured tax on savers, a transfer
| of wealth from borrowers to debtors.
|
| By this logic aging is a tax on savers. Defaulting on
| debt is also a tax on savers. Savers deceiving themselves
| is a tax on savers.
| slv77 wrote:
| High inflation usually goes hand-in-hand with some degree
| of corruption that immensely benefits the connected and
| powerful.
|
| In Venezuela the government implemented exchange rates
| controls which were much more favorable then market based
| rates. Those with privilege and connections could purchase
| dollars at the official rate and then sell them at market
| rates at 10x what they paid for them. By this method an
| immense measure of the nations wealth could be
| expropriated.
|
| Commodities can be siphoned from producers with price
| controls and then liquidated at market rates. Eventually
| asset owners can be forced to sell when they can't produce
| what is demanded at below market prices.
|
| Those that are close to decision makers can front run
| markets as the everything degenerates into a command
| economy.
|
| While not all inflation is theft inflation can facilitate
| theft on an epic scale. At some point all economic and
| political power shifts to those that benefit from inflation
| and it becomes politically impossible to "fix" inflation as
| power derived from it.
| Retric wrote:
| There are two ways of looking at money. In the case of
| physical tokens you have just as many before and after
| inflation so that's not theft.
|
| The other way is to consider it as an abstraction of value
| independent of these tokens. But who then pays to maintain
| the system, prevent counterfeits, and issue replacements for
| used tokens etc? It's the government that issues these tokens
| and as such the loss of value over time is simply a payment
| for use of the system. You might disagree with how large the
| fee is, but it's a medium of exchange so you can trade your
| tokens for something else.
| imtringued wrote:
| >The other way is to consider it as an abstraction of value
| independent of these tokens.
|
| What I honestly can't comprehend is that people somehow
| want this but then they twist their brain somehow into
| wanting something even more contradictory. Humans are loss
| averse, so the first thing they do when they hear of a loss
| is to shoot the messenger. In economics that messenger is
| the interest rate. The price signal known as the interest
| rate isn't allowed to fall into negative territory. The
| price signal that tells everyone in the economy that there
| is too much financial capital is now gone. People will now
| accumulate financial capital i.e. money and money like
| assets (bonds) above and beyond what debtors actually want
| because the debtors have been silenced. Their opinion
| doesn't matter. Only the opinion of the saver who wants to
| shove the losses and risks onto someone else is being
| listened to. At the end, people are surprised to hear that
| they have accumulated way too much financial capital than
| the economy can handle and that their financial capital is
| actually worth much less than they thought.
|
| Why didn't anyone warn them that this is occurring? Oh
| right, they shot the messenger. An interest rate below zero
| means that there is too much financial capital, nobody
| wants your bloody money rich guy, and that the biggest
| savers should reduce the amount they are saving, yes, that
| means the rich must spend off a greater portion of their
| savings than the poor which decentralizes money into the
| hands of those who need it the most.
|
| I am honestly tired of this. Conservatives and hardcore
| capitalists shout "central planning!?!" or "price
| controls!?!" at everything but the moment you point out
| that a 0% interest rate is an artificial price control they
| will fall silent or think they are genuinely owed the
| enslavement of the young.
| staticautomatic wrote:
| FYI I down-voted you because making a bare assertion and then
| saying "prove me wrong" is hostile and intellectually lazy.
| UncleMeat wrote:
| An important question is "what is inflation?"
|
| A ton of the discussion of inflation ties it in a 1:1 way to
| money printing. Like the government says "I'd like some more
| money please", prints money, and this evenly inflates the
| price of every good and "steals" from people's bank accounts.
| While this can be a component of inflation, the truth is much
| more complex.
|
| Looking at the published CPI numbers it becomes extremely
| clear that inflation is extremely varied. Natural gas way way
| up. Medical commodities up only a small amount. Prices can
| rise for an absolutely enormous number of different reasons
| and the price of a good going up obviously cannot be
| considered "theft" in the abstract. The people who insist
| that governments are unjust if they allow any inflation above
| 0% are being unreasonable, in my opinion.
|
| That said, it is _also_ the case that public policy,
| especially public policy in authoritarian or failed states,
| can cause a currency to collapse and wipe out any wealth
| their citizens hold in that currency. But I 'm not even sure
| I'd call this "theft". It is a different sort of abuse
| entirely and it comes in many more forms than just devalued
| currency.
| [deleted]
| renewiltord wrote:
| MMT-caused inflation just an effect of an alternative to
| taxation and is an effective means to keep spending moving.
| Like any other outcome of monetary policy it has winners and
| losers
| tengbretson wrote:
| I don't believe it can be considered theft if your
| participation in the US dollar system is consensual, which it
| is.
| imtringued wrote:
| >Inflation is theft. Prove me wrong.
|
| Money is a claim on people's time and we haven't invented
| cryogenic chambers and demanded that the unemployed enter
| those cryogenic chambers during their time of unemployment to
| prevent them from aging, ahem, I mean stealing the value of
| your money.
|
| As it stands right now, labor cannot be stored. Your money
| must age at the rate people age if nobody is hiring the
| unemployed for investments. What I personally find
| particularly amusing is that there are so many branches of
| economics (I could Marxism as one) that postulate that money
| is just a medium of exchange and thus can't be harmful.
|
| Yet internet forums are filled with angry savers that want to
| use their money for anything other than a medium of exchange.
|
| > Right now I'm looking at Turkey - I honestly can't tell
| whether Erdogan is just a trickster, or actually fucking
| retarded. Likely both.
|
| If he introduces a debt brake then lowering interest rate for
| government bonds is the right strategy. The interest that you
| don't have to pay can be used to pay down the principal and
| reduce debt faster than paying interest could ever achieve.
| The problem is that he isn't doing a debt brake at all.
| memish wrote:
| It's a hidden, regressive tax.
| Certhas wrote:
| As a childhood lesson you don't need crazy inflation for this
| to hold true though. Anything that takes more than a few of
| months to save up to just doesn't make sense as a kid. Your
| disposable income goes up by factors of ten every few years.
| You have 2$ to spend at 5, 20$ at 10, 200$ at 15. Then it slows
| down but you might still get to 2000$ at 25.
|
| Saving as a kid really never seemed worth it to me.
| Consultant32452 wrote:
| Time preference is a big component in life success. There's
| not a lot of practical ways to discuss this with a small
| child, so "save up for the bigger/better toy" is what you
| get. If you have better ways to teach this lesson to your
| kids, I highly recommend doing it.
| ClumsyPilot wrote:
| As an adult, 'wait a year' is quite reasonable, but kids
| live in dog years, when i was a kid 'wait a month' felt
| like i have to wait untill i grow old and get reincarnated
| Consultant32452 wrote:
| Start with shorter time horizons. Do your kids earn an
| allowance? Pay them interest. Every dollar they still
| have at the end of the week, give them a dime. Be
| creative.
| Swizec wrote:
| Wow I wish I had $200 to spend at 15
|
| The rest of your comment makes sense. I didn't really start
| saving until my late 20's. It just made waaaay more sense to
| invest any disposable income in myself.
|
| So far so good. Thanks to those early investments in myself
| I've been able to save more in the past ~5 years of my career
| than my cumulative earnings of the first 10 years.
| Taek wrote:
| It's about the lesson more than anything else. I really want
| my kids to learn how to save and be well practiced at it,
| even though the utility function doesn't make a ton of sense.
| nobrains wrote:
| We put our children's savings (money for good school
| results, birthday money, eid money, etc.) into 3 separate
| envelops, equally: SPEND, SAVE, CHARITY.
|
| SPEND: They are encouraged to spend 1/3rd of the money.
| Whatever they want to buy. They have become online discount
| shopping experts, whether getting rubiks cubes, roller
| blades or harry potter merchandise.
|
| SAVE: 1/3rd goes into savings, which we will let them tap
| once they need it. Not sure when: once they are 17/18
| perhaps? In all cases, it will be a big payout compared to
| the amounts they are used to "spend".
|
| CHARITY: And 1/3rd goes to charity envelop. So whenever an
| opportunity comes up, they can use that towards any charity
| event. Good thing is that they usually spend it all in one
| go. Great!
| scarface74 wrote:
| I hope by "charity event" you mean "an opportunity to
| give" and not an actual "event".
|
| https://www.socialvelocity.net/the-problem-with-
| nonprofit-ev...
| xivzgrev wrote:
| My mom had a similar system. She had also split savings
| into long term and short term. So
|
| LT - 40% ST - 30% Spend - 20% Charity - 10%
|
| I don't recall what the term was for short term, maybe a
| few months.
|
| Something about it worked. Today I follow a similar
| system, tho percentages are different (spend obviously
| higher) and no charity.
| judge2020 wrote:
| I guess this is the type of modelling CNBC used for
| millenial spending in their infamous tweet[0]; I don't
| know many people that actually donate >10% of their
| income to charity.
|
| 0: https://twitter.com/CNBC/status/1076173906455810050?s=
| 20&t=Z...
| photochemsyn wrote:
| What you want to do is set up a charity in a Third World
| country and give them a steady stream of money that goes
| to the governmental leaders for their own personal
| projects, like a school or something. Do this for a few
| years and then you're positioned to get control of the
| country's natural resources at well-below market prices
| due to, ah, corrupt local leaders willing to sell out
| their country's interests in exchange for more 'charity'.
|
| See: Bill & Melinda Gates Foundation, etc.
| oblio wrote:
| I get the first part of your plan, but do you have some
| sources for the second part?
|
| How is that foundation exploiting the first step, in
| practice?
| gcheong wrote:
| Nice given the time frame do you plan on further dividing
| save into save/invest at some point? In other words is
| the big payout coming only by the total amount saved +
| interest or by potentially greater returns through
| something like an index fund?
| foobarian wrote:
| I like that this balances out the usual puritanical "must
| save at all costs" attitude. I feel my family was way in
| that direction due to circumstances (own a place to live
| with zero property tax, but very little pension/income).
| But now even though I do well for myself, I end up doing
| illogical things like never using an unopened set of oil
| paints. I feel that teaching to spend money/resources is
| also important (I could have used it at the very least!).
| jasonhansel wrote:
| IMHO the saving you do as an adult is a very different kind
| of activity from the saving you learn to do as a child.
| Saving as a child is more about delaying gratification by
| not acting on one's desires; saving well as an adult is
| more about taking action by making prudent financial
| decisions. I'm not sure if learning the former really helps
| you much with learning the latter, though it is a useful
| lesson in its own right.
| nitrogen wrote:
| Even among people who seem financially stable, I've been
| surprised how many of my peers spend money as soon as
| they see it and have never had more than $X000 at the
| same time ever. The lesson of delayed gratification is
| actually a pretty big factor in being able to save up
| money as an adult.
| krastanov wrote:
| I feel most of my saving habits came from RPG games, not
| from my parents (although they did try to teach me that
| too).
| Spivakov wrote:
| Your comment reminds me of this interesting article:
| https://crpgaddict.blogspot.com/2010/06/game-
| economies.html?...
|
| In many rpgs as you progress through the game the need
| for expenditure diminishes to zero. Different case if it
| is mmo or designed around grinding though.
| ItsMonkk wrote:
| Feel like you would like this[0] article that goes
| extremely into MMO economies.
|
| [0]: https://www.desogames.com/virtual-labor-and-lessons-
| from-eco...
| bee_rider wrote:
| Spending all your money on health potions and in
| preparation to fight (the|your) boss, accidentally over-
| leveling, and not needing them at all?
| foobarian wrote:
| Perhaps we're getting a lot of that lesson from games like
| Royale High in Roblox. I was amazed at what a detailed
| budget/spending plan the kid wrote up in her journal for
| all the things she was hoping to buy for the in-game
| currency. And how many days it would take her to save up
| for it. Oh well, at least the inflation or opportunity loss
| from not investing is not as much of a factor there.
| drbojingle wrote:
| If the utility isn't there why teach it? Feels like it
| won't connect. Better to teach them to have self
| disciplined and minimalistic isn't it?
| Jiro wrote:
| Learning to manage money includes making correct decisions
| about whether a course of action is worth it. Forcing a
| child to save when he'd be better off not saving teaches
| the right lesson about what saving is, and the wrong lesson
| about when you should save.
| jjeaff wrote:
| Not saving comes natural to most people. Learning to save
| is the hard part. Most children don't ever make enough
| money that saving would make financial sense. The reality
| is, teaching kids to save their money is more a lesson in
| delayed gratification than it is a financial lesson.
| epgui wrote:
| I don't understand why so many people "save money" but then
| just keep cash under a mattress or in a savings or checking
| account.
|
| If you want to win at life, you "save money" by purchasing
| non-cash assets like stocks.
| klyrs wrote:
| Sure, saving money isn't the best strategy, but it sure
| beats "spend every dime the minute you get it" which is
| what children are naturally inclined to do. Teaching kids
| to save money is the first step towards financial
| literacy.
| sidlls wrote:
| It _is_ a bad step as it is usually taught, though (that
| is, as and end goal itself rather than, for example, as a
| means to better investments). Any astute kid is going to
| look at the "compound interest" argument as laughable. It
| only works if there is sustained, substantial additional
| contributions over a lifetime. This is especially true
| for people in lower income brackets. Try convincing a kid
| with even modest arithmetic skills that saving $2 (or
| $20, or even $200) and letting it compound is "smart."
| andai wrote:
| But $2 of BTC... ;)
| klyrs wrote:
| > It only works if there is sustained, substantial
| additional contributions over a lifetime.
|
| That's literally how I was taught about compound
| interest: saving money means making weekly/monthly/annual
| contributions. And that was a regular (non-honors) class
| in an inner-city middle school.
|
| > Try convincing a kid with even modest arithmetic skills
| that saving $2 and letting it compound is "smart."
|
| No, that's idiotic. I think you're beating on a straw
| man.
| capableweb wrote:
| > If you want to win at life, you "save money" by
| purchasing non-cash assets like stocks.
|
| "Win at life" == "save money" == "owning stocks" ???
|
| Winning at life is about everything that is not about
| money. Winning at life is being able to be happy no
| matter how much or how little money you have. Sure, up
| until one point, more money can help you get happier, but
| if you don't have the baseline happiness, you will never
| become happy and "win at life" no matter what. And up
| until a certain point, not even more money can make you
| happier if you're already miserable.
| epgui wrote:
| I believe you're doing what is called an equivocation?
| (edit: not sure exactly what it's called, but you're
| arguing against something I did not say or mean)
|
| We're talking about money, in a thread about money, on a
| post about money. At no point did I suggest that money
| makes unhappy people happy.
| mjochim wrote:
| It's called a strawman argument.
|
| And I think you did not mean "win at life" in as broad a
| sense as the other person interpreted it. Either that or
| you two have very different ideas of what "winning at
| life" could mean.
| mc4ndr3 wrote:
| Banks can fail. Stocks can fail. Currencies can fail. I'm
| not saying it makes sense on the whole to bury your worth
| in cash. But there is an amount of paranoia that confuses
| things.
|
| The interest in my savings account is laughable. It's
| _marginally_ better than keeping in a mattress.
|
| The mattress doesn't charge bullshit fees. The mattress
| doesn't arrest you for being the wrong color.
| skinnymuch wrote:
| If you're in the west. A major bank failing and Govt +
| insurance not covering the losses for customers means
| something we have not encountered as a modern society.
| That's as close to a break down of modern society as you
| can get. Sure it's possible. Cash will def be great then.
| However this is such an extreme situation that there's no
| way to know what will be good in that situation.
|
| I would think in a situation like that, we would have
| something similar to what happened to job losses and the
| stock market cratering like in March and April 2020.
| Except that cratering and job losses would continue while
| riots and protests all across would get bigger and
| bigger. Crime presumably would go up a lot too.
|
| It slips out that your family has $20K in cash at your
| home...who knows what'll happen in this dystopian
| situation.
| ClumsyPilot wrote:
| 'you're in the west. A major bank failing and Govt +
| insurance not covering the losses for customers means
| something we have not encountered as a modern society.'
|
| It's a common occurence u developing countries, people
| hedge against it by holding foreign currencies and
| tangiable assets like land. Its not that rare for people
| to live through multiple devaluations and currency
| collapses. Ofcourse you don't go around telling people
| about tour wealth
| plandis wrote:
| > If you want to win at life, you "save money" by
| purchasing non-cash assets like stocks
|
| Just be born wealthy enough to have free money to invest
| as a child!
| epgui wrote:
| I hope I did not come across as _that_ out of touch.
|
| The reality is, most people barely can meet their basic
| needs. If you hate that as much as I do, then vote for
| politicians that care about wealth inequality.
| nurettin wrote:
| While generally true, there's the problem of what to buy
| and when. Then there's the problem of hindsight and the
| problem of that one stock everyone thought was going to
| the moon crashing and burning away your life savings.
| Then there are strategies and strategies that decide
| which strategy to apply and when, then you realize it
| isn't as easy as "just buy stonks".
| UncleMeat wrote:
| It is more complicated, but the rule of "if you are more
| than 10 years from retirement, buy VTI when you have
| available money" works well for an absolutely huge number
| of people. You can optimize things, but there are
| effective strategies that fit on note cards.
| epgui wrote:
| The fact that it's more complicated, or difficult, than
| the treatment I gave the subject in a passing comment
| doesn't change the fact that it's true generally
| speaking.
| cat_plus_plus wrote:
| Depends how much money and for how long. Saving dollar
| bills for a coffee maker rather than buying a cup of
| Starbucks is a good start if that's your current station
| in life. If the market takes a dive and you don't have
| cash equivalents, you have to sell at a loss to cover
| your living expenses and can't buy more stock to
| capitalize on eventual recovery. Maybe a credit union
| checking account that pays a little interest is not so
| bad for someone with limited time / knowledge to manage
| too many types of assets?
| saagarjha wrote:
| Because investing is non-trivial and nobody tells you how
| to do it.
| ozim wrote:
| There is a lot of people that really want to tell others
| how to do it.
|
| Bad part they are mostly scammers or charlatans that are
| looking how to get that money for themselves.
| epgui wrote:
| I recommend "A Random Walk Down Wall Street" for a
| safe/conservative, no-bs and simple introduction.
| kevinmchugh wrote:
| There's lots of advice out there and it is almost all as
| useful as it is expensive
| logifail wrote:
| > If you want to win at life, you "save money" by
| purchasing non-cash assets like stocks.
|
| Except when you don't.
|
| Between 1995 and 2000 I lived in a student house in the
| UK and one of my housemates (who was also a student, and
| from my recollection almost as broke as I was back then)
| was really into investing into the stock market during
| the dot-com boom.
|
| He bought both Lastminute.com (IPO March 2000 @
| 380p/share[1], sold to Travelocity in 2005 @
| 165p/share[2]) and Railtrack (IPO 1996[3], went bankrupt
| 2001[4])
|
| [1] https://money.cnn.com/2000/03/14/europe/lastminute/
| [2] https://www.theguardian.com/technology/2005/may/13/bu
| siness.... [3] https://www.railwaysarchive.co.uk/docsumma
| ry.php?docID=740 [4]
| https://www.independent.co.uk/news/uk/home-
| news/railtrack-go...
| epgui wrote:
| I'd suggest that for most people, buying diversified
| index funds are a more appropriate strategy.
|
| Nothing you do in life is risk free, even keeping cash
| under your mattress: the fact that there is risk involved
| does not change that this is how you make money. When you
| know that you're guaranteed a loss of ~2%, at best, on
| cash, and that your expected real return on stocks is
| positive, well... That's the point.
| logifail wrote:
| > I'd suggest that for most people, buying diversified
| index funds are a more appropriate strategy
|
| At least in the UK, buying into index funds was
| substantially more expensive back then. I held shares in
| a retail bank for a time not long after that, for which I
| had an actual paper certificate! No wonder trading was
| expensive....
| kache_ wrote:
| Well, you don't buy individual stocks; you buy slices of
| slices of everything to dissipate your risk towards
| variance. And you definitely don't hold cash. Holding
| cash has a lot of risk as well
| logifail wrote:
| > And you definitely don't hold cash. Holding cash has a
| lot of risk as well
|
| (Sorry, genuine questions) risk of what and compared to
| what?
| epgui wrote:
| Risk of loss, theft or physical degradation. Then there's
| the costs of holding cash, which are known to give you a
| negative yield due to inflation (nevermind bank fees or
| insurance costs, etc)
| tmn wrote:
| You hold cash for short or mid term optionality. If you
| want long term stable store of value buy gold or treasury
| bills
| ClumsyPilot wrote:
| Most people who want to secure family wealth and have the
| option of trickle incompe buy real estate
| ghaff wrote:
| I assume cash was being used in the normal financial
| accounting sense of the word as opposed to dollar bills
| in the mattress.
|
| Yes, there's inflation negative yield. But especially in
| the low interest and inflation rate environment that has
| been the case until possibly recently, the difference
| between "cash" (i.e. default investment at a brokerage)
| and other very low-risk investments (e.g. high quality
| corporate bonds) has been pretty minimal.
| lostlogin wrote:
| The strategy you suggest is clearly good, but the
| percentage of people who can afford to think beyond 'if
| the car breaks down I need some money' and imagine a
| retirement is probably smaller than we both think.
| ozim wrote:
| Because most of people can only do that. So saving small
| amounts of money to build up some buffer.
|
| When you have a buffer only then you can start buying
| assets.
|
| Until web brokers started I did not even know how to buy
| stocks. I think most people still don't know how to buy
| stocks unless they are from really well-off family.
|
| My parents were also not "financially literate" so I had
| to figure out all kind of stuff on my own.
|
| Downside was for example that I got supper shitty
| "investment product" so I did not loos much money but if
| I knew better I would put my money in a better place.
|
| Fortunately I did not get outright scammed but for a lot
| of people that have to learn as they go it is a real risk
| so "just saving" and losing some value to inflation might
| be best option for many.
| ClumsyPilot wrote:
| > Until web brokers started I did not even know how to
| buy stocks. My parents were also not "financially
| literate" so I had to figure out all kind of stuff on my
| own.
|
| Same
| markdestouches wrote:
| Well, if you are not a professional investor, you'd
| better stick to savings accounts or invest in a index but
| not in individual assets. Investing as a non-professional
| is akin to doing surgery on you own body while not being
| a surgeon.
| epgui wrote:
| I think a particularly determined and curious non-
| professional can reasonably expect to be successful at
| stock picking, but yes, for the vast majority of folks, I
| agree.
| dijit wrote:
| I mean, liquid asset vs variable and tied up asset?
|
| I'll be the first to admit to being fiscally
| conservative: money I can't spend and that is sunk into
| something else does not guarantee that I get my money
| back.
|
| I'm losing money on the savings I have every year, which
| is why I put nearly all my savings into a fund, but then
| that fund dropped in value almost immediately by 30%, if
| I had done nothing with my money and bought a top of the
| line MacBook Pro with 64G of ram, I would have more
| "money" than I have today; but it all depends on what the
| value is when I sell out of the fund, there's no
| guarantee that I'll even get what it currently says I
| "have" back either.
|
| Savings and investments are different things.
| ALittleLight wrote:
| I don't understand the mindset that losses aren't real
| until you convert them back into cash. If you had turned
| your money into casino chips and were sitting at a poker
| table, and had just lost 30% of your chips, would you
| consider that your losses weren't real until you cashed
| out your chips? Of course, you might win your money back,
| and if you were a good poker player who usually came up
| net-positive from situations like this, you'd be well
| advised to keep playing.
|
| I'm not giving you financial advice - I don't know
| anything about you or your investment. It just seems
| fundamentally wrong to me to consider different forms of
| money (cash, shares of an investment fund, casino chips,
| etc) as being distinct. Changing forms may have tax
| implications but it's not like the form protects you from
| loses in some way. If you keep your money in an
| underperforming investment it should be because you
| expect it to go up in the future, not because you are
| afraid of realizing a loss (which you have already
| suffered).
| gillytech wrote:
| Money is a representation of energy. If you used it like
| you would electricity you would be better off. Sure,
| store some in batteries but know that they dissipate over
| time. Stocks should only be purchased when you want to
| literally invest in a company or industry because you
| think it has major growth potential, not for speculation.
| Non-cash assets could also mean precious metals as they
| have conversion power over any fiat currency. As we're
| watching the neo-liberal global world order collapse with
| the war in Russia I think gold and silver will win out
| over any other non-cash asset. However it still doesn't
| make any money. The way to make money with money is to
| buy things that appreciate in value over time. Real
| estate is one of the most available things that fit this
| category. My parents bought a house in Florida last year
| at the "top of the market" and their property is now
| worth about 20% more. And if they rented it out they
| could recuperate some of the capital outlay that they
| invested.
| JumpCrisscross wrote:
| > _you "save money" by purchasing non-cash assets like
| stocks_
|
| Bonds aren't great for building wealth. But they're fine
| for preserving it. Saving money via a mix of inflation-
| indexed and fixed-yield debt will generally preserve your
| purchasing power over long time intervals.
| markvdb wrote:
| While that has been true for the US the past ~250 years,
| the US are to some extent an anomaly.
|
| Most of the world has seen bond owners get eaten almost
| completely really. Almost all of Africa, large swathes of
| Asia, much of Europe including Germany and Russia, most
| of South America...
| JumpCrisscross wrote:
| > _all of Africa, large swathes of Asia, much of Europe
| including Germany and Russia, most of South America_
|
| Were any of these seen, contemporaneously, as low-risk?
|
| The backfire sovereigns in the last 100 years were
| limited to Austria-Hungary and the Dutch, trading
| economies derailed by war. The others aren't trading
| nations, or were well-established basket cases when they
| issued their debt.
| rileymat2 wrote:
| There should be a giant disclaimer, this somewhat true
| for inflation indexed bonds, if you can hold bonds to the
| maturity date. If not, all bets are off.
| seanmcdirmid wrote:
| Or real estate. But in times when interest rates were
| higher, saving in the bank made more sense.
| PheonixPharts wrote:
| > even though the utility function doesn't make a ton of
| sense.
|
| What if it never makes sense?
|
| One thing I didn't realize until embarrassingly too late in
| life is that savings should only function as a buffer for
| emergencies. Anything else is just burning your money since
| there haven't been savings accounts that consistently beat
| inflation even in the US.
|
| I was fed these same myths as a kid, and earnestly believed
| that part of success in life was to have a huge savings
| account one day. I remember well all those "power of
| compound interest" talks in grade school, about how working
| hard and saving was the path to wealth. But that's all a
| complete myth.
|
| The real irony is that anyone who has built themselves
| serious amounts of wealth typically does so by making high
| risk/high reward choices. Teaching kids to play it safe and
| building saves, different desires to the future etc.
| doesn't make any sense in the world we live in. It's
| ultimately _bad_ advice. No one I know who ended up very
| successful did so by living conservatively and within they
| 're means. They're people who aggressively pursued
| improving their conditions, often times because they were
| forced too precisely because they didn't have a savings.
|
| The lesson of "save money, life within your means and make
| conservative choices" sounds nice, but in the world we live
| in today this is a recipe for short terms austerity and
| long term decline.
| sacrosancty wrote:
| > that anyone who has built themselves serious amounts of
| wealth typically does so by making high risk/high reward
| choices.
|
| You have the logic backward. If it was "typically, anyone
| who made high risk/high reward choices has built
| themselves serious amounts of wealth", it would be good
| advice, but what if most of those people failed terribly?
| An example is pursuing a career as an artist/sportsman
| which are common high risk/high reward aspirations of
| children which most people fail at.
|
| I also had that same late lesson in saving being useless.
| Luckily, I learnt it by buying a house which appreciated
| fast and showed what a disaster savings would have been.
| grog454 wrote:
| > Luckily, I learnt it by buying a house which
| appreciated fast and showed what a disaster savings would
| have been.
|
| The better way to learn this is to be able to look at a
| graph like this: https://inflationchart.com/spx-in-m3
| understand it, and make an informed decision taking in to
| account your personal risk tolerance.
| sacrosancty wrote:
| Probably, but that's why it's luck, not sat down and
| planned life.
| endless1234 wrote:
| I don't think people really mean savings accounts when
| talking about saving money consistently instead of
| spending it as an adult. Same goes for compound interest.
| Regardless, even just putting it in a savings account
| surely is not "burning your money" if the alternative,
| spending it directly, brings little utility.
| grog454 wrote:
| > No one I know who ended up very successful did so by
| living conservatively and within they're means. They're
| people who aggressively pursued improving their
| conditions, often times because they were forced too
| precisely because they didn't have a savings.
|
| This also seems like bad advice. You can aggressively
| pursue higher earnings and simultaneously spend
| conservatively (on anything that does not contribute
| directly to higher earnings). You seem to be setting up a
| false dichotomy.
|
| That said, I agree that at least in free market
| economies, high risk / high reward + tremendous luck is a
| requirement for extreme wealth generation.
| luckydata wrote:
| yeah, it's a bad lesson. We should teach kids to be smart
| with money, not doing something just because.
| shadowgovt wrote:
| But it's a lesson in the same category as "You'd better
| learn how to do equations on paper and long form because
| you won't always have a calculator with you." If the
| underpinning is obvious bunk, it does nothing to reinforce
| the desired behavior and can in fact be counterproductive.
|
| The reason to do long form math on paper is to get a
| feeling for the mechanics of math so that you can
| extrapolate it to more complicated math. The reason to save
| is that there are minimum barriers to cost for investiture
| in capital, and capital pays dividends and grows in a way
| consumables don't (unless it doesn't! Nobody wins in a
| civil war).
| Nasrudith wrote:
| Really saving makes sense then in a contextual way of
| keeping some in case there is something you want. It gets
| across ideas of opportunity cost.
| moonchrome wrote:
| >Saving as a kid really never seemed worth it to me.
|
| Also saving during 20s for this reason - if you're just
| starting out in a career and expecting your income to rise
| rapidly the money you save on interest is going to be
| irrelevant.
| Nasrudith wrote:
| Depending upon a rapid rise of income is a very good way to
| wind up buried in debt at the slightest complication makes
| it not come when expected. There are a few times when it
| can work like say medical school's debt stack.
|
| Saving in my twenties gave me good returns despite issues
| starting my career but that involved some exceptional
| circumstances from getting in on Tesla relatively early.
| NoLinkToMe wrote:
| It's pretty universal as a kid, as someone in their 20s?
| Much less so. Sure, if you're getting a degree in CS and
| will land a 150k a year job soon, saving anything
| significant from your $14 an hour parttime job as a student
| makes little sense. But I was making $50k in my late
| twenties and was not going to jump in income significantly,
| I saved quite a bit and was able to buy a house and later
| stocks which have appreciated a few hundred thousand since
| then. Now starting my 30s with around $80k salary. Saving
| is a lot easier now, but the housing market got a lot
| harder, too. Inflation-adjusted I don't even make that much
| more. But with the few hundred thousand equity, at a 7%
| annual return my retirement at age 65 could be reasonably
| locked in at >$3 million, even without saving an extra
| penny. Saving in my 20s made a big difference. Outside of a
| few fields like tech, most people don't see crazy income
| growth to not have to bother with saving/investing in their
| 20s.
| mlyle wrote:
| One of the biggest factors for success in life is the ability
| to cope with delayed gratification and to show restraint.
|
| Yes, opportunity cost is huge for kids, and they might
| rationally spend all money immediately. But that's still not
| what we encourage...
|
| So we'll put our finger on the scale and adjust situations to
| make saving beneficial.
| Spooky23 wrote:
| Childhood savings is about encouraging discipline and
| responsible thinking about money.
|
| My kid saved about $200 in savings in elementary school. He
| parlayed that into a diversified stock portfolio, now around
| $4k several years later.
| bombingwinger wrote:
| It'd make more sense if your parents directed your savings to
| the stock market or in some other asset. Saving by itself is
| worthless if you can't put the money to work.
| wmanley wrote:
| The lesson isn't how to invest, it's how to not spend.
| WanderPanda wrote:
| As a first order approximation they should maybe offer you
| a bond with 5-10% yield per week, month or year (depending
| on your age)
| [deleted]
| jjice wrote:
| Wish I had this logic when I was 16 and working my awful
| minimum wage jobs. Sure, that money ended up in an IRA
| eventually, but $1k gets made much faster as a software
| engineer than it does frying chicken wings for minimum wage,
| to the point where the trade off from having a bit of fun in
| high school or college would vastly outweigh the small gains
| I made.
|
| I remember thinking my friends and peers were wasteful for
| spending their earned money on a new graphics card or even
| buying a $2 drink when they stopped at the gas station
| instead of saving what was required for necessary expenses,
| setting aside a little bit for fun, and saving everything
| else. Turns out I was the fool.
|
| I am happy for that habit of saving, but I wish I had more
| perspective and reduced my savings rate to focus on having a
| buffer instead of saving for retirement at 16. I guess that's
| what growing up is for.
| lr4444lr wrote:
| It's not about maximizing utility or ROI: it's about learning
| delayed gratification.
| aqsalose wrote:
| Isn't the "go up by a factor of ten" pattern you describe
| more of your parents spending behaviors (until you are old
| enough to get odd jobs by yourself) than anything else?
|
| The concept of "save money and put your loose change coins
| into a piggy bank" could be much older than how much
| disposable income kids[1] today have. My hypothesis: Maybe
| the intended lesson was more coherent with the reality a
| century ago.
|
| Here is the first graph I found with a search engine of USD
| purchasing power:
| https://www.statista.com/statistics/1032048/value-us-
| dollar-... . After the Napoleonic wars until WW2 or so the
| purchasing power of 1 U.S. dollar spend most of its time
| _increasing_ followed by sudden drastic drops in value during
| ... the Civil War and WW1.
|
| [1] Or a random HN user got as a kid.
| 01100011 wrote:
| We're seeing more and more economic focused posts making it to
| the front page lately. We're all thinking about it due to high
| inflation and few options to protect our cash savings. That said,
| the quality of HN comments regarding economics tend to be, in my
| experience, quite low. I'd suggest anyone interested go seek out
| more qualified analysis beyond a weekend HN thread full of people
| like me regurgitating half understood economics theories we've
| absorbed over the last two years.
| CamelCaseName wrote:
| Where would you suggest?
|
| I recently purchased a subscription to The Economist and have
| been listening to the top stories on a daily basis. That said,
| it seems to be more politics than economics.
| hnbad wrote:
| That paper's misnomer aside, you probably don't want to
| listen to economists to learn how economies work. The soft
| sciences tend to get a bad rep but economists tend to be the
| ones most resembling ideological fan fiction.
| seizethecheese wrote:
| It's quite the opposite. Economics is generally the most
| rigorous of the social sciences.
|
| Even the "worst" discipline, macroeconomics, tends to yield
| high quality predictions. Larry Summers was screaming from
| the rooftop about how the Covid stimulus would result in
| inflation
| routerl wrote:
| This is playing out currently, quite openly, as the FTC
| investigates whether companies have raised prices more than
| costs have risen from inflation. It's becoming increasingly
| clear that the academic economic consensus is, simply,
| disconnected from how markets actually operate. For
| instance, while each day has brought a new study of
| consolidated companies engaging in pandemic price gouging,
| academic establishment luminaries like Larry Summers
| continue to argue that antitrust is unrelated to inflation.
|
| We're in a true "Emperor's new clothes" moment.
| seizethecheese wrote:
| Larry Summers was 100% right about impending inflation.
| He's been totally vindicated. I'm suspicious of where you
| are getting your information and suspect it's politically
| motivated.
| PragmaticPulp wrote:
| Inflation topics can be particularly misleading to new
| investors who haven't yet realized that nobody actually
| "invests" in cash across decades like this example. At least
| not if they have basic financial education.
|
| It can also confuse new investors who might not realize that
| USD-denominated assets don't lose value like USD itself. This
| may seem obvious to anyone who has studied Econ or investing,
| but it's actually a very common misunderstanding among people
| who are new to the concept of inflation. Unfortunately, this
| misunderstanding is often misused to scare people into thinking
| their only options for avoiding inflation are gold or
| cryptocurrency, which isn't true at all.
|
| For 99% of us working our comfortable tech jobs in stable
| countries, it's more enlightening to consider how the author
| would have done with S&P 500 or gold (hint: Gold loses by a
| lot).
| dools wrote:
| This has nothing to do with gold. He is comparing the exchange
| rate of the Argentine peso and the USD.
|
| That exchange rate is appalling over time because Argentina
| relies heavily on USD denominated imports and issues debt
| denominated in USD to obtain them.
| gus_massa wrote:
| For comparison, from
| https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A...
| the monthly minimum salary in September 1976 was AR$11200 ~=
| US$45.34.
|
| So the AR$1228 of the author were like US$4.97 in 1976, that are
| like US$25.11 today
| https://www.in2013dollars.com/us/inflation/1976?amount=4.97 .
|
| Also, the price of gold was like $120/oz
| https://sdbullion.com/gold-prices-1976 so it was like 1.2 grams
| innagadadavida wrote:
| Are there any kids book that explain these money concepts to
| elementary school kids? I feel one the big failings of the school
| system is that these are not taught early on and instead a lot of
| time is spent teaching things that kids will never use in their
| lives.
| sdk16420 wrote:
| I was hoping most people would be familiar with the exponential
| chessboard story, of which this is pretty much the inverse.
|
| https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem
| unlog wrote:
| Reminds me of this excellent video https://youtu.be/HLIJkmy3vy8
| it's in Spanish, he tells the story of explaining a financial
| system crash to his daughter. Probably has subtitles in
| English, I recommend it
| MrFoof wrote:
| A book I read well over 30 years ago, and is still apparently
| updated today, is _" The Kids' Money Book"_ by Neale S.
| Godfrey, which you can certainly find secondhand for cheap.
| There are updated versions authored by Jamie Kyle McGillian,
| and so long as they are in the original vein they are probably
| excellent.
|
| However it's not something I would throw at a 6-year old. A
| sharp 8-year old should be able to grok all of it though.
| orangepurple wrote:
| Easily illustrated for children:
| https://www.youtube.com/watch?v=H4XL8s1BEdk
| thenoblesunfish wrote:
| So how much was it worth back in the 70s?
| [deleted]
| [deleted]
| zacherates wrote:
| 1228 pesos in 1976 was worth about $4.50 in 1976 USD [1].
|
| ... and if he'd bought into the S&P 500 (Vanguard launched the
| First Index Investment Trust now the Vanguard 500 Index Fund in
| 1976 [2]), it would be worth about about $190 in today's USD.
| Which you could sell to buy about 2.99g of gold today (3 trillion
| times as much as reported).
|
| While obvious you'd have to be extremely prescient to put your
| money in a completely different type of fund that had launched
| only just that year and at the time they would not have touched
| such small dollar investments.
|
| ... but today we now know that Bogle's idea was actually pretty
| good and you really can make such small dollar investments (eg.
| Fidelity's no-fee, large cap fund has no minimum to invest
| (FNILX), or you could buy a fractional share of a variety of
| large cap ETFs: SPY (SPDR), IVV (iShares), or VOO (Vanguard) from
| a variety of brokerages). Of course, a minor wouldn't be able to
| own shared directly... so, get your kids a UTMA account [4].
|
| [1]
| https://en.wikipedia.org/wiki/Historical_exchange_rates_of_A...
| [2]
| https://en.wikipedia.org/wiki/The_Vanguard_Group#Growth_of_c...
| [3] https://fundresearch.fidelity.com/mutual-
| funds/summary/31591... [4]
| https://www.investopedia.com/terms/u/utma.asp
| mattm wrote:
| For comparison if he bought gold directly - $4.50 would have
| bought about 1.13g of gold
|
| [1] https://sdbullion.com/gold-prices-1976
| slg wrote:
| Argentina has experienced multiple rounds of hyperinflation due
| to failed monetary policy. Saying this story is a "lesson about
| the power of inflation" is like saying "the sun is hot". Yes, it
| certainly is, but it is so far beyond normal definitions of "hot"
| that people will have a hard time understanding it. This is more
| a story about the failures of Argentina's governments over the
| last 50 years than a story about inflation.
| marcodiego wrote:
| In 2011, while still at my first job, I spent a few days
| touring in Buenos Aires. At the time, 1 Brazilian Real was
| worth 2 Argentine Pesos. It was enough to feel like a rich
| there.
|
| About ten years later, 1 Brazilian Real is now worth more than
| 24 Argentine Pesos. Of course, during the same period, Brazil
| had some crisis too. So, it is much harder for me today to save
| enough to spend a few days in Buenos Aires. Sad.
| treeman79 wrote:
| There are a lot of people that think we can print spend endless
| amounts of money without consequences.
|
| Heck an alarming amount of people don't understand that bonds
| need to be paid back.
| rmatt2000 wrote:
| Not to mention the stunning number of people with college
| degrees who don't think loans should be paid back.
| OGWhales wrote:
| > There are a lot of people that think we can print spend
| endless amounts of money without consequences.
|
| I've seen this said more than I've seen people who actually
| think that. Most people have heard horror stories of
| hyperinflation and, if anything, are overly weary of
| inflation than not.
|
| The comment above makes a good point. These types of
| hyperinflation situations are the result of serious
| mismanagement and deeper issues. When considering inflation,
| it's important to study real resource constraints and any
| debts that need to be paid back in foreign currencies. All
| the famous examples of hyperinflation involve issues with
| these factors.
| [deleted]
| UncleMeat wrote:
| That's true, but there aren't a lot of these people in
| positions of great policy power.
| sitkack wrote:
| /s naaap!
| slg wrote:
| I made that comment because I know people are going to use
| the linked example of what happened in Argentina as the
| predicted fate of what will happen in the US. That seems to
| be what you are implying here by drawing parallels between
| the two. But I simply want to make it clear that the US is at
| 8% inflation for the last year while Argentina spent decades
| with the average annual inflation rate measured in the
| hundreds. The two aren't close to the same.
| koolba wrote:
| > But I simply want to make it clear that the US is at 8%
| inflation for the last year while Argentina spent decades
| with the average annual inflation rate measured in the
| hundreds. The two aren't close to the same.
|
| "How did you go bankrupt?" Bill asked. "Two ways," Mike
| said. "Gradually, then suddenly."
| 542458 wrote:
| With all due respect, I feel the quote is a bit pithy
| here. Not all things which are gradual become sudden, and
| the quote doesn't give any proof that this is one of
| those things.
| slg wrote:
| Well I guess I shouldn't spend money on food this week as
| that is a gradual step towards bankruptcy.
| [deleted]
| H8crilA wrote:
| A lot of countries have experienced serious inflation at one
| point or usually multiple points in history - all countries
| that are not young (>300 years). It is not perfectly reasonable
| to expect that yours will not experience it during your
| lifetime, particularly if you're young. Volatility has this
| nasty property that it's only bounded from below, but not from
| above.
___________________________________________________________________
(page generated 2022-04-17 23:00 UTC)