5 ms·

With current interest rates and inflation, I believe that GBP stored in savings accounts actually decreases in value over time in real terms... There doesn't se

by makomk 9y ago

With current interest rates and inflation, I believe that GBP stored in savings accounts actually decreases in value over time in real terms... There doesn't seem to be many great places to store money in general, which arguably has resulted in bubbles in absolutely everything.

wils1245 9y ago
GBP inflation is currently less than 2%, and there are many very low risk options to account for it. The fact that money sitting in a checking account depreciates due to inflation is a terrible argument for cryptocurrency. No one actually does that with any significant amount of capital.
- dharma1 9y ago
  GBP inflation is around 3%. However, due to the way inflation is measured with CPI, I think the actual figure is higher https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/october2017#main-points https://www.ons.gov.uk/economy/inflationandpriceindices/bull...
  - wils1245 9y ago
    Ok, fair enough, I was lazy in my Googling. But the point stands. Money yielding 0% and wasting away due to inflation is a straw man.
    - cloakandswagger 9y ago
      A straw man for what? Once your net worth reaches a certain level, it would be silly to let it sit in any one asset, whether that's a specific currency or commodity or whatever. Diversifying with a deflationary asset like Bitcoin is a wise strategy, one that is likely responsible for its $160B market cap.
    - dharma1 9y ago
      People who have surplus wealth usually have a mix of assets - stocks, bonds, commodoties, cash, property, and sometimes more exotic assets like art, collectible cars, cryptocurrencies, whatever. Everyone has their own preferences and risk appetite and as such a different mix of assets. Cash (at least major currencies) is one asset class that is relatively safe but tends to depreciate due to inflation, especially due to recent monetary expansion by central banks. Cash can also be easily seized, and this is a cause of concern for some. Contrasted with other asset classes that have yield, having all your net worth in cash would not be something you want to do.
- priitmaxx 9y ago
  Agreed
mikekchar 9y ago
Inflation is a feature, not a bug. It encourages you to spend your money which, in turn, allows others to use it to produce "growth". The reason we need money, from a societal sense, is that there is a time gap between when we decide to build something and when that thing is finished. You need access to raw materials, or labour before the thing you are building is completed. The premise is that the thing you are building is more valuable than the raw material and labour that went into it. Money is basically a lubricant that allows you to pay people before you start and then balance the books after you finish. If money increased in value over time, we would have a problem. Let's say that the thing you are building will return an extra 5% on the investment. If holding on to money and doing nothing returned 10% in the same time period, you would be stupid to build the thing. You will make more money by doing nothing. In a deflationary system, people will tend not want to risk the money they have by spending it to build something. This means less demand for goods and services and causes people to be idle. Access to capital is harder because why would I lend you money when I can just make a return by doing nothing? If I'm going to lend it to you, you had better lock in a really good rate -- which means you need to have a spectacular return on investment in your enterprise. Essentially, rich people are rewarded and poor people are screwed. Society has no incentive to build things and poor people can't bootstrap themselves out of poverty without incredible risk. I think the easiest way to verify this for yourself is to look at BTC. If you own BTC, what value does it have on society sitting in your wallet? Now consider using those BTC to buy something and employ people. Would you do it? Or would you rather park the BTC in your wallet and hope for a 2-300% return through deflation? Imagine I wanted to start a game company and I would like to borrow your BTC so that I can hire artists, musicians and programmers? Would you lend me your money? What kind of promises would it take to entice you to lend me your money? Now imagine a currency where the value decreases over time. So you have a million units and over the period of your lifetime, the value will decrease to almost nothing. How does that change your view of whether or not it's a good idea to lend me your money? How does that ultimately affect society?
- zik 9y ago
  The people who told you "Inflation is a feature, not a bug" are the same people who benefit from you believing that. People have used assets like gold as money for thousands of years without long term inflation and it worked very well. It's only in the last hundred years or so that we've been sold the idea that our money should be worth less tomorrow than it is today. Put that way it sounds like a bad thing and that's because it is a bad thing. One way of looking at inflation is that it's a motivator to encourage us to give our money to other more powerful people before it loses its value. Those more powerful people are the people who told us that inflation is a good thing. Cryptocurrency takes monetary control away from the rich and democratises it.

by makomk 9y ago

wils1245 9y ago

GBP inflation is currently less than 2%, and there are many very low risk options to account for it. The fact that money sitting in a checking account depreciates due to inflation is a terrible argument for cryptocurrency. No one actually does that with any significant amount of capital.

dharma1 9y ago
GBP inflation is around 3%. However, due to the way inflation is measured with CPI, I think the actual figure is higher https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/october2017#main-points https://www.ons.gov.uk/economy/inflationandpriceindices/bull...
- wils1245 9y ago
  Ok, fair enough, I was lazy in my Googling. But the point stands. Money yielding 0% and wasting away due to inflation is a straw man.
  - cloakandswagger 9y ago
    A straw man for what? Once your net worth reaches a certain level, it would be silly to let it sit in any one asset, whether that's a specific currency or commodity or whatever. Diversifying with a deflationary asset like Bitcoin is a wise strategy, one that is likely responsible for its $160B market cap.
  - dharma1 9y ago
    People who have surplus wealth usually have a mix of assets - stocks, bonds, commodoties, cash, property, and sometimes more exotic assets like art, collectible cars, cryptocurrencies, whatever. Everyone has their own preferences and risk appetite and as such a different mix of assets. Cash (at least major currencies) is one asset class that is relatively safe but tends to depreciate due to inflation, especially due to recent monetary expansion by central banks. Cash can also be easily seized, and this is a cause of concern for some. Contrasted with other asset classes that have yield, having all your net worth in cash would not be something you want to do.
priitmaxx 9y ago
Agreed

mikekchar 9y ago

Inflation is a feature, not a bug. It encourages you to spend your money which, in turn, allows others to use it to produce "growth". The reason we need money, from a societal sense, is that there is a time gap between when we decide to build something and when that thing is finished. You need access to raw materials, or labour before the thing you are building is completed. The premise is that the thing you are building is more valuable than the raw material and labour that went into it. Money is basically a lubricant that allows you to pay people before you start and then balance the books after you finish. If money increased in value over time, we would have a problem. Let's say that the thing you are building will return an extra 5% on the investment. If holding on to money and doing nothing returned 10% in the same time period, you would be stupid to build the thing. You will make more money by doing nothing. In a deflationary system, people will tend not want to risk the money they have by spending it to build something. This means less demand for goods and services and causes people to be idle. Access to capital is harder because why would I lend you money when I can just make a return by doing nothing? If I'm going to lend it to you, you had better lock in a really good rate -- which means you need to have a spectacular return on investment in your enterprise. Essentially, rich people are rewarded and poor people are screwed. Society has no incentive to build things and poor people can't bootstrap themselves out of poverty without incredible risk. I think the easiest way to verify this for yourself is to look at BTC. If you own BTC, what value does it have on society sitting in your wallet? Now consider using those BTC to buy something and employ people. Would you do it? Or would you rather park the BTC in your wallet and hope for a 2-300% return through deflation? Imagine I wanted to start a game company and I would like to borrow your BTC so that I can hire artists, musicians and programmers? Would you lend me your money? What kind of promises would it take to entice you to lend me your money? Now imagine a currency where the value decreases over time. So you have a million units and over the period of your lifetime, the value will decrease to almost nothing. How does that change your view of whether or not it's a good idea to lend me your money? How does that ultimately affect society?

zik 9y ago
The people who told you "Inflation is a feature, not a bug" are the same people who benefit from you believing that. People have used assets like gold as money for thousands of years without long term inflation and it worked very well. It's only in the last hundred years or so that we've been sold the idea that our money should be worth less tomorrow than it is today. Put that way it sounds like a bad thing and that's because it is a bad thing. One way of looking at inflation is that it's a motivator to encourage us to give our money to other more powerful people before it loses its value. Those more powerful people are the people who told us that inflation is a good thing. Cryptocurrency takes monetary control away from the rich and democratises it.