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

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

#251

Earlier quoted context omitted.

I’d consider equities and real property separate from savings.

That's the wrong way of looking at it, which is why you arrived at the wrong conclusion.

Savings is explicitly idle money. Illiquid holdings are very different from cash that can deployed immediately. You certainly don’t hold 100% property and by definition that unspent money is savings.

Savings can certainly be used to purchase securities, commodities, property, but then it’s no longer savings and is an investment.

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

#252

Earlier quoted context omitted.

That's the wrong way of looking at it, which is why you arrived at the wrong conclusion.

Savings is explicitly idle money. Illiquid holdings are very different from cash that can deployed immediately. You certainly don’t hold 100% property and by definition that unspent money is savings. Savings can certainly be used to purchase securities, commodities, property, but then it’s no longer savings and is an investment.

Savings is not idle money. Savings is stored value. Currency is an intentionally lossy short-term store of value designed to incentivize allocation of capital into long-term savings vehicles like stocks, bonds and real estate that are productive and help the economy.

Idle cash hurts the economy. That's why even in a savings account, idle cash isn't idle, it's collateralizing loans. A savings account is more of a bond than it is currency. As such, in your model, money in a savings account is an investment - not savings. In your model the only thing that would qualify as savings would be literal dollar bills stuffed under your mattress.

Liquidity is a different axis.

And as for myself, I hold more than 100% of my net worth in assets, the cash in my bank account is borrowed against my asset portfolio.

This is also an extremely common position for anyone with a mortgage to be in.

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

#253
post #9

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…

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.

It's one thing to say that every country experiences inflation a few times in history, which might or might not be the case, depending on your definition of high inflation.

Argentina's Consumer Price index rose 6.7% during March. No, not YoY, but MoM. And if you look at history, it's not even a particularly high number. So I'd say that by the definition of most people, the country has a very big, long lasting and structural problem with inflation.

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

#254
post #250

So there is something to be said for keeping your savings in a stable currency or asset but that doesn't necessary protect you from negative government action. Some examples: 1. Many Russians held funds in currencies other than rubles. Faced with sanctions, Putin instituted forced conversion to rubles. So far the ruble hasn't been decimated but this could still go south; 2. Venezuela essentially prevents conversion o…

> So far the ruble hasn't been decimated but this could still go south

The ruble was worth 0.14 dollars before the war and now is worth 0.12, which is just below a 0.014 reduction in its value, so it has quite literally and almost exactly been decimated, as it was done in roman tradition.

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

#255

Earlier quoted context omitted.

Most people who want to secure family wealth and have the option of trickle incompe buy real estate

2008 is calling and wants to talk to you.

I agree, we as a society have learnt nothing

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

#256

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.

Where would I suggest for you to get a real education in economics or where would I suggest you go to become another armchair economist like me? :)

Personally I'd stick with Boglehead type advice and focus on your career(assuming you're in tech). My day job is the only thing that's ever consistently generated wealth for me.

I am in a special situation having to make up for lost time being out of the market and being divorced, so I am trying riskier things that I really wouldn't recommend for anyone else.

Once you go down the rabbit hole of trying to understand macroeconomic trends and betting accordingly, well, it becomes rather distracting. I can't recommend it.

If you really want to 'go there' well... I don't know. I follow a random collection of FinTwit folks. Lately I like Doomberg and "The Maverick of Wall Street". I also follow folks like Mohamed El-Erian, Buffett/Munger and Jeremy Grantham

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

#257
post #228
post #225

Earlier quoted context omitted.

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... ;)

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

#258

Earlier quoted context omitted.

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.

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…

Sure, gold can be used as a token to represent work, but it has utility beyond just that. The only way to inflate gold is by actual labor. Fiat is inflated by whim and has no value except as a store of work/time. Any hyper-inflationary story from the last 100 years makes it reasonably obvious how fiat can go to zero value while gold held from the same period has approximately the same value in trade (100oz of gold could buy you a car in 1950; 25oz of gold could do the same today, 400oz for a house vs 200 today, etc.).

The US literally stole gold from the population in 1933. A $20 bill was literally a certificate for an ounce of gold.

I’m not advocating a gold standard or any other monetary peg, just saying that removing a peg and moving to fiat is never in the benefit of those holding the fiat and always in the benefit of those printing.

I’m not sure I follow the last sentence. Inflation requires time, so sure, aging and holding fiat results in lost value. Borrowers are on the positive side of inflation, so except for the literal tax that may be incurred by debt forgiveness the repossession of property by the lender is approximately neutral. That’s really the point of fiat currency, the printer is the borrower of real property and the note is a promise of repayment, ultimately in real property, securities, or labor.

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

#259
post #54

Earlier quoted context omitted.

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…

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 situation…

I'm not quite sure what your point is here; you are making several different arguments that don't really make sense.

> I don't understand the mindset that losses aren't real until you convert them back into cash.

stocks, cash, real estate, etc are all assets, but they behave very differently. in particular, there are some very special attributes to cash: it can be directly exchanged for almost any other type of asset, and the prices of those assets are almost always denominated in cash. simple example: my lease says I owe $1000 each month in rent, not $1000 worth of any asset, but cash specifically. if I have $10k in cash, I can definitely pay rent for the next ten months. if I have $10k worth of some s&p 500 ETF, I a) can't pay rent without converting to cash first and b) risk being forced to sell at a time when my shares are worth less than $10k. I have a good chance of making rent for roughly 10 months, but there's a lot more that could go wrong. of course, cash itself does fluctuate in value just like other assets, but we are mostly insulated from that in the short term by the fact that most legal agreements are denominated in nominal dollars, and that the prices of most material things are much stickier than financial instruments. in short, this is why the concept of unrealized vs realized gains/losses makes a useful distinction.

> 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.

nothing is 100%, but different assets have sufficiently different risk profiles that it's worth distinguishing between them. cash is an extremely safe asset in the short term, but almost guarantees a loss in the long term. if you can identify buckets of money that you probably won't need for a long time, it has historically been a good bet to invest them in bonds/stocks/whatever based on your tolerance for risk. it doesn't guarantee a good outcome, but it avoids the guaranteed bad outcome of holding a lot of cash for a long time.

> 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).

agreed, and this is a common mistake that people make. but this is more people applying the sunk cost fallacy to the concept of unrealized vs realized than an issue with the concept itself.

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

#260

Earlier quoted context omitted.

Savings is explicitly idle money. Illiquid holdings are very different from cash that can deployed immediately. You certainly don’t hold 100% property and by definition that unspent money is savings. Savings can certainly be used to purchase securities, commodities, property, but then it’s no longer savings and is an investment.

Savings is not idle money. Savings is stored value. Currency is an intentionally lossy short-term store of value designed to incentivize allocation of capital into long-term savings vehicles like stocks, bonds and real estate that are productive and help the economy. Idle cash hurts the economy. That's why even in a savings account, idle cash isn't idle, it's collateralizing loans. A savings account is more of a bond…

Idle money is literally the definition of savings:

- https://www.investopedia.com/terms/s/savings.asp - https://www.wellsfargo.com/goals-investing/saving-vs-investi... - https://financial-dictionary.thefreedictionary.com/saving

I agree that fiat is intentionally lossy. I also have no problem with the idea of my idle money being, in fact, borrowed out at no risk to myself (and at recent interest rates there wouldn’t be much difference between sticking it my cushions except for the insurance provided by holding in a bank). From the saver’s perspective, it’s idle.

If you are holding more than 100% of your total net worth in assets, the cash in your bank account isn’t yours, nor is anything else above that 100%. As a borrower inflation is a great way to take advantage of that position. I have mortgage debt for exactly the same reason. Mortgage debt, however, is typically net worth positive (except for 2008-2014), so I doubt most people with mortgages are leveraged higher than their net worth. In most cases market value of a house is greater than mortgage debt a few years after the loan is made.

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