You Don't Lose Money by Saving from Inflation

Metaverseguy: Some people claim you are actually losing money by saving because of inflation. If you have $10,000 and inflation is 2% per year then after one year that money is actually worth about $9,800 afterwards even though your bank account would still say $10,000. This means that it has the buying power of $9,800 after inflation. So some people claim that you should spend your money because you can buy $10,000 worth of items now rather than $9,800 in the future.

This is a terrible argument. If you spend all the money you will have $0. $9,800 is much better than $0.

ghostgeek: The rich don't put their money in bank accounts. Only the poor do that. The rich expect to earn a return on their wealth, and squeal if they don't. The poor know they are going to be shafted, and shrug their shoulders.

Why is it that the rich buy things that appreciate in value while the poor spend on things that depreciate? Because the rich know that spending money on the right possessions will save them from the ill-effects of inflation. The poor, on the other hand, have yet to kick the habit of eating.

And the right things to buy? High priced baubles. A Picasso or two, and a Jeff Koons, for starters.

Metaverseguy: I didn't mean to open up an argument about class warfare, but just strictly talk about inflation. All those items lose value as well. If you pay $50,000 for a painting and expect to sell it for $100,000 in one year you have to find the right buyer. If then you become desperate and lose most of your finances over the course of that year you may only get $45,000 or less.

ghostgeek: It's called Sod's Law. You start a thread, and before you know it some bastard has shot it to hell.

ghostgeek: Still, it is the poor who suffer from inflation, while the rich profit from it.

ghostgeek: Consider the current situation. The banks go bust so the authorities print money. That money ends up with the "haves," who promptly buy assets with it. "Ta very much," they say, as they jet off to exotic locations. And as for the "have nots?" All that extra money induces asset price inflation and a fall in interest rates. They can't afford to buy a house and their savings become worthless. In other words, they're buggered.

Metaverseguy: People can still afford to apply for a mortgage for a house. Sure, they might be denied for the more expensive houses, but if there's vacancy they can probably buy regular 2-3 bedroom houses. Yes, of course not everyone can afford to live in a giant mansion, but it's not like the ultra-rich stay that way forever.

ghostgeek: That's not quite how it is in the UK. Here prices are high, and you need a large deposit before you can get a mortgage. You read of many young people, well educated, middle class, who now believe they will never own their own house.

Metaverseguy: Houses are expensive to maintain and repair anyways. Young people need something to do other than work so complaining about mortgage and rent is not so bad. If someone inherited their parents' house right out of highschool they'd probably be very bored and distanced from their peers.

mattmcdaddy: Actually I would put it this way. if you have $10k in the bank today you can buy $10k worth of goods today. In a year if inflation is 2% then the cost of those goods has increased to $10,200 so you can no longer afford it if you still have $10k in the bank. Banks will only pay 2-3% in cash or term deposits so this will just keep up with inflation. However if you take into account the tax one has to pay on that $200 of interest they are still behind.
Secondly there is no such thing as a get rich quick scheme anywhere unless you win lotto or steal a fortune. People were still buying homes when interest rates were at 21% 20 yrs ago because they had incomes that were in line with the level of debt at the time. Today financial culture is different for young people as everyone has become "entitled" to everything everyone else has but don't want to do anything to work for it. That's why so many young people have more careers in their 20s than others have their entire lives. If people have the right mindset to save money taught by parents and educators society would be far better of across the board.
That's my 2 cents...without inflation.

Captain Canada: just keep enough money in banks to pay your monthly bills but never keep extra funds in bank as saving you end on paying taxes on that ridiculous interest rates bank gives you
Buy gold ,REAL GOLD not some worthless piece of paper that says you own gold ,
Never rely on those plastic cards your bank gives you for ATM machines to access your hard earned money,always carry cash,power failures due to weather or political turmoil like Greece restricting cash withdrawals so remember CASH is KING and so is REAL GOLD
When I was younger I used to buy gold rings and other gold items from drug addicts hurting for a fix ,some were stolen from people but that's not my problem
I am not proud of it but its business if I didn't buy it someone else would

Metaverseguy: Gold goes up and down with the daily market. Most companies offer 401k's, IRA's and other retirement accounts. You'll have to work 20 years to earn anything but it's worth it. You can retire rich, own a house, and a boat near a lake with your wife. Probably not reasonable to expect everything, like those tv shows where old men swap out old wives for younger prettier ones, and have personal private jets with plans to tour space.

Captain Canada: Yes gold goes up and down,but if you buy gold cheap from the crackheads below market value and sell days later around the corner at your local jewelry store at market price,you make a good chunk of cash and your friendly taxman don't know a thing

ghostgeek: Sounds like a good business opportunity, for the young and violent.

Captain Canada: You don't have to be young or violent
Just adventurist and greedy

Metaverseguy: CC, you mean actual gold rather than gold stock? In my geology class I met a guy who knew everything about the minerals in the mountains for 3 states radius or so. He showed me how to use Google Earth and USGS to locate claims/ minerals in mountain ranges. Unfortunately he's too busy to respond to my emails at the moment. I wanted to get put on his claim as a guest so I could grab a pickaxe and start mining for it. He said there's plenty there and USGS backs him up. Local jeweler says they pay $1,000 per ounce so I wish he'd respond.

I'll have to manually look up mining laws myself pertaining to claims etc.

ghostgeek: What you need to find is something rarer than hen's teeth. Do that and you'll be richer than croesus.

Captain Canada: Yeap real gold ,like rings,earrings,teeth,kneecaps real gold
Those gold stocks or any other kind of stocks are just as good as toilet paper tissue to wipe your ass if the stockbroker goes bankrupt