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One major point you seem to have missed, most people have very little of their wealth held as raw currency. Most people have wealth held in real estate, stocks
by mschy 17y ago
One major point you seem to have missed, most people have very little of their wealth held as raw currency.
Most people have wealth held in real estate, stocks, bonds, cars, businesses, retirement accounts, etc... and a comparative few bucks of cash.
So even if you take the view that it's compound annual interest to the central bank, you're only paying it on the amount of money that you float as cash and non-investment accounts. And in return you get a managed, reasonably predictable currency.
- jamesbkel 17y agoA good point. Could be taken even further to view it as a regressive tax... Chances are if one can afford to hold your wealth as you described, she is not living paycheck to paycheck. Especially relevant in an economy where many may have been forced to drain their savings and now indeed are trying to save raw currency to re-establish.
- jackowayed 17y agoI don't have too much money (I'm 16), but basically all of my wealth is, though not cash, basically in the same situation. I have a checking account earning 0.1%/year and a "savings" account earning 0.2%. So the interest is negligible, and my money is still depreciating just about as fast as cash. Yeah, when I get older I'll buy stocks, maybe buy a house, etc. But I have a decent amount of wealth, and I'm "paying interest" on all of it. If interest rates weren't in the toilet right now, I'd look for a savings account paying real interest, a CD, or something of that sort. Luckily the "interest rate" levied on cash is low right now, so it's not worth it to me to bother.
- WingForward 17y agoIt's not luck that interest rates and inflation are both low. Inflation is a key factor that influences interest rates