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He's probably subtracting inflation to make the interest rate of Tesco relative to the rest of the economy. Stuffing money in a mattress is a pretty poor idea w

He's probably subtracting inflation to make the interest rate of Tesco relative to the rest of the economy. Stuffing money in a mattress is a pretty poor idea when it should be very easy to find an investment scheme that covers inflation.

simonh 10y ago
It's not like the rest of the economy is immune from inflation though. Do we adjust everything for inflation? It just strikes me as pointless complication. Really, the only point I can think of is comparing saving to outright immediate spending.
- DicksenZuider 10y ago
  Certain statistics are usually inflation adjusted, like GDP. Real Gross Domestic Product measures economic output adjusted for inflation or deflation. If inflation is 20%, and you're earning 3% interest, your losing purchasing power. If inflation is 1% and you're earning 3%, you're gaining. Real, not nominal, returns are what people care about.
  - rifung 10y ago
    > If inflation is 20%, and you're earning 3% interest, your losing purchasing power. Yes but I think the point the person you're replying to is trying to make is that it doesn't matter because the inflation rate is not dependent on where you put your money. Shouldn't the comparison be to the interest rates and risk with comparable places to put/invest your money? I suppose if inflation were extremely high or low compared to interest rates then it would affect your appetite for risk vs interest rate, but I don't think that's the case here.
  - foota 10y ago
    You need to consider real returns only if the inflation rate varies between things you're looking at, i.e., across countries or time.
pikzen 10y ago
When you're storing small sums of money (less than 10k €/$), the amount you lose from inflation from stuffing money in a mattress over a year is negligible.
verbify 10y ago
But investing in 'the economy' generally means investing in the stock market. Which introduces risk, which isn't great for an emergency fund - and you'll no longer be covered by FSCS.

simonh 10y ago

It's not like the rest of the economy is immune from inflation though. Do we adjust everything for inflation? It just strikes me as pointless complication. Really, the only point I can think of is comparing saving to outright immediate spending.

DicksenZuider 10y ago
Certain statistics are usually inflation adjusted, like GDP. Real Gross Domestic Product measures economic output adjusted for inflation or deflation. If inflation is 20%, and you're earning 3% interest, your losing purchasing power. If inflation is 1% and you're earning 3%, you're gaining. Real, not nominal, returns are what people care about.
- rifung 10y ago
  > If inflation is 20%, and you're earning 3% interest, your losing purchasing power. Yes but I think the point the person you're replying to is trying to make is that it doesn't matter because the inflation rate is not dependent on where you put your money. Shouldn't the comparison be to the interest rates and risk with comparable places to put/invest your money? I suppose if inflation were extremely high or low compared to interest rates then it would affect your appetite for risk vs interest rate, but I don't think that's the case here.
- foota 10y ago
  You need to consider real returns only if the inflation rate varies between things you're looking at, i.e., across countries or time.

pikzen 10y ago

When you're storing small sums of money (less than 10k €/$), the amount you lose from inflation from stuffing money in a mattress over a year is negligible.

verbify 10y ago

But investing in 'the economy' generally means investing in the stock market. Which introduces risk, which isn't great for an emergency fund - and you'll no longer be covered by FSCS.