4 ms·

I'd rephrase the parent comment to say "inflationary currency steals from savers". Imagine someone like me, without debt but trying to save money for something

I'd rephrase the parent comment to say "inflationary currency steals from savers". Imagine someone like me, without debt but trying to save money for something (larger deposit so I don't have to take 30 years mortgage for example). I am not rich by any stretch but I am not poor either. Probably I would fall into middle class (if middle class still exists as it's been disappearing). Inflation is really harming me and people like me. Basically what inflationary currency does is it forces frugal people who would otherwise not go into debt to take loans anyways as they realize that saving is a lose lose idea right now. Better to take a mortgage or two and let inflation slowly erase value of your debt.

Nursie 9y ago
Saving's a poor idea at the moment because the interest rates on offer are so tiny. Looking at the last 25(ish) years of UK data the base rates have tended to be above inflation, until the 2008 crisis. But yes, inflation will slowly devalue your debt if the debt is a static amount, borrowing can be a good driver of growth, when managed well. And sitting on piles of currency is not good either - the currency is a medium of exchange, not a store of value, it's better to encourage the economy by encouraging investment over hoarding. Further, deflationary currency values work yesterday over work today, helping people lock in value and higher wealth purely by being older entrants into the market.
- richardknop 9y ago
  The thing is I really entered economy (got a university degree and started working full time and getting paid) around 2011. So in my life I have never experienced a time period which was good for savers. Just seems to me that as a saver I never get a break in this economic system. I feel pressure to go into debt and take some crazy loans just not to be left behind. I think my work experience is quite short though, just 6 years or so. Over longer period of time, since economy moves in cycles, there will be a cycle with higher interest rates (like 5-10 percent) which will again be good for savers. Waiting for this cycle to arrive :)
  - phaemon 9y ago
    The advice today is pretty much the same as it was 5 years ago: buy into a low cost fund. Since you're in the UK, through a Stocks & Shares ISA. I recall the same complaints about low interest rates back in 2012, but the returns from, for example, the Vanguard LifeStrategy 80% Equity over the last 5 years were 16.07%, 9.16%, 8.00%, 10.84%, 17.04%. A bit better than a savings account. Of course, when there's another market crash the value will drop, but there you go.
- dnautics 9y ago
  Inflationary currency values work done tomorrow over work done yesterday. If there's a major catastrophe, like, say a giant hurricane that devastates a coastal state with a healthy economy, then the returns on work done tomorrow have a effect that can cascade through the economy magnified by the money multiplier. On the other hand, if you valued work done yesterday, and a bunch of value is destroyed by a major disaster, it is a sunk cost, not an unfunded liability that affects the person who depends on the payment of that liability, and the person who depends on that person, and so forth.
pjc50 9y ago
Which country do you live in and what inflation rate (and what metric) are you suffering under? Versus what rate of return on basic index fund? Plenty of countries have lived through double-digit inflation. The real issue there is not so much savings as wages: inflation means needing to renegotiate wages more often. This caused a lot of the UK's labour unrest in the 70s, for example, or the problems of Brazil leading to the "Real". Also people keep thinking inflation is purely due to money supply and forgetting that eventually you have to exchange money for goods and services at some kind of price level.
- richardknop 9y ago
  I live in London, UK. I agree inflation is very low right now (has been for a decade in EU really). However this is still really bad for savers like me as there is no safe place for me to store my money with any sensible interest rate (most banks here will give you something ridiculous like 0.25% interest rate on savings now...). Feels like savers never get a break in the current economic system. But I was making an argument about why inflationary currency might not be great for everybody. It's definitely not a win win. Inflationary currency helps some people but also harms other people, deflationary currency would just switch groups that are being advantaged/disadvantaged.
  - Nursie 9y ago
    I don't believe it would, it would slow the economy a lot in many different ways. The post you replied to asked about the returns on a tracker fund as compared to inflation, as that's generally the way to make relatively safe, modest interest on money at the moment. Investing, rather than saving.
int_19h 9y ago
Unless you're saving it in forms of wads of cash under the bed, you should be getting some interest from it, even if it's just parked in a bank account. And even larger interest if you actively look around for opportunities to invest. And such investment is beneficial to other economic actors, who are on the receiving end of it.

Nursie 9y ago

Saving's a poor idea at the moment because the interest rates on offer are so tiny. Looking at the last 25(ish) years of UK data the base rates have tended to be above inflation, until the 2008 crisis. But yes, inflation will slowly devalue your debt if the debt is a static amount, borrowing can be a good driver of growth, when managed well. And sitting on piles of currency is not good either - the currency is a medium of exchange, not a store of value, it's better to encourage the economy by encouraging investment over hoarding. Further, deflationary currency values work yesterday over work today, helping people lock in value and higher wealth purely by being older entrants into the market.

richardknop 9y ago
The thing is I really entered economy (got a university degree and started working full time and getting paid) around 2011. So in my life I have never experienced a time period which was good for savers. Just seems to me that as a saver I never get a break in this economic system. I feel pressure to go into debt and take some crazy loans just not to be left behind. I think my work experience is quite short though, just 6 years or so. Over longer period of time, since economy moves in cycles, there will be a cycle with higher interest rates (like 5-10 percent) which will again be good for savers. Waiting for this cycle to arrive :)
- phaemon 9y ago
  The advice today is pretty much the same as it was 5 years ago: buy into a low cost fund. Since you're in the UK, through a Stocks & Shares ISA. I recall the same complaints about low interest rates back in 2012, but the returns from, for example, the Vanguard LifeStrategy 80% Equity over the last 5 years were 16.07%, 9.16%, 8.00%, 10.84%, 17.04%. A bit better than a savings account. Of course, when there's another market crash the value will drop, but there you go.
dnautics 9y ago
Inflationary currency values work done tomorrow over work done yesterday. If there's a major catastrophe, like, say a giant hurricane that devastates a coastal state with a healthy economy, then the returns on work done tomorrow have a effect that can cascade through the economy magnified by the money multiplier. On the other hand, if you valued work done yesterday, and a bunch of value is destroyed by a major disaster, it is a sunk cost, not an unfunded liability that affects the person who depends on the payment of that liability, and the person who depends on that person, and so forth.

pjc50 9y ago

Which country do you live in and what inflation rate (and what metric) are you suffering under? Versus what rate of return on basic index fund? Plenty of countries have lived through double-digit inflation. The real issue there is not so much savings as wages: inflation means needing to renegotiate wages more often. This caused a lot of the UK's labour unrest in the 70s, for example, or the problems of Brazil leading to the "Real". Also people keep thinking inflation is purely due to money supply and forgetting that eventually you have to exchange money for goods and services at some kind of price level.

richardknop 9y ago
I live in London, UK. I agree inflation is very low right now (has been for a decade in EU really). However this is still really bad for savers like me as there is no safe place for me to store my money with any sensible interest rate (most banks here will give you something ridiculous like 0.25% interest rate on savings now...). Feels like savers never get a break in the current economic system. But I was making an argument about why inflationary currency might not be great for everybody. It's definitely not a win win. Inflationary currency helps some people but also harms other people, deflationary currency would just switch groups that are being advantaged/disadvantaged.
- Nursie 9y ago
  I don't believe it would, it would slow the economy a lot in many different ways. The post you replied to asked about the returns on a tracker fund as compared to inflation, as that's generally the way to make relatively safe, modest interest on money at the moment. Investing, rather than saving.

int_19h 9y ago

Unless you're saving it in forms of wads of cash under the bed, you should be getting some interest from it, even if it's just parked in a bank account. And even larger interest if you actively look around for opportunities to invest. And such investment is beneficial to other economic actors, who are on the receiving end of it.