The money I saved as a child would buy one picogram of gold today • Hacker News Board

Re: The money I saved as a child would buy one picogram of gold today

#221

Post by PragmaticPulp » Sun, Apr 17, 2022, 10:25 PM UTC

01100011 wrote: post #194

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 under…

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).

Re: The money I saved as a child would buy one picogram of gold today

#222

Post by ronyfadel » Sun, Apr 17, 2022, 10:29 PM UTC

bombcar wrote: post #210

paganel wrote: post #152

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.

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?

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.

Re: The money I saved as a child would buy one picogram of gold today

#223

Post by hnbad » Sun, Apr 17, 2022, 10:31 PM UTC

CamelCaseName wrote: post #207

01100011 wrote: post #194

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 under…

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.

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.

Re: The money I saved as a child would buy one picogram of gold today

#224

Post by nabla9 » Sun, Apr 17, 2022, 10:33 PM UTC

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.

Re: The money I saved as a child would buy one picogram of gold today

#225

Post by sidlls » Sun, Apr 17, 2022, 10:36 PM UTC

klyrs wrote: post #62

epgui wrote: post #33

Earlier quoted context omitted.

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.

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.

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.”

Re: The money I saved as a child would buy one picogram of gold today

#226

Post by SahAssar » Sun, Apr 17, 2022, 10:38 PM UTC

anonporridge wrote: post #215

SahAssar wrote: post #204

Earlier quoted context omitted.

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 fluctua…

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…

> 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.

Re: The money I saved as a child would buy one picogram of gold today

#227

Post by luckydata » Sun, Apr 17, 2022, 10:45 PM UTC

Taek wrote: post #12

Certhas wrote: post #8

Earlier quoted context omitted.

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.

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.

yeah, it's a bad lesson. We should teach kids to be smart with money, not doing something just because.

Re: The money I saved as a child would buy one picogram of gold today

#228

Post by andai » Sun, Apr 17, 2022, 10:47 PM UTC

sidlls wrote: post #225

klyrs wrote: post #62

Earlier quoted context omitted.

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.

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 arith…

But $2 of BTC... ;)

Re: The money I saved as a child would buy one picogram of gold today

#229

Post by Consultant32452 » Sun, Apr 17, 2022, 10:48 PM UTC

ClumsyPilot wrote: post #198

Consultant32452 wrote: post #178

Earlier quoted context omitted.

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.

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

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.

Re: The money I saved as a child would buy one picogram of gold today

#230

Post by klyrs » Sun, Apr 17, 2022, 10:51 PM UTC

sidlls wrote: post #225

klyrs wrote: post #62

Earlier quoted context omitted.

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.

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 arith…

> 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.