20 ms·

The money I saved as a child would buy one picogram of gold today

331 points by diego 4y ago

rkuester 4y ago
"May the sign of the exponential be ever in your favor." -- @dbasch, a great tweet concluding that thread
teddyh 4y ago
Ah, the magic of interest: http://www.threepanelsoul.com/comic/at-the-bank http://www.threepanelsoul.com/comic/at-the-bank
- imtringued 4y ago
  Why exactly do we want to reward already rich people at the expense of poorer people? Somehow, people convinced themselves that giving money to those who don't need it is efficient.
  - randyrand 4y ago
    It’s not that we want to. Its not our choice. It’s decided by the people, or the foreign countries, that have the money to lend. It’s the rate they are willing to lend at. Most don’t lend it for free.
  - dlivingston 4y ago
    Do you understand why the system is set up the way it is? By which I mean the actual financial mechanisms.
  - FabHK 4y ago
    If everyone puts their money in the bank and gets 5% (say), then the proportion of wealth will remain unchanged. (FWIW, a similar argument against Proof of Stake (that it will inevitably lead to greater and greater inequality) is similarly flawed. (This doesn't mean that PoS is a good idea.))
  - lottin 4y ago
    You don't have to reward anyone. Just don't borrow. But if you want to borrow the lender will expect a reward. Simples.
    - MisterSandman 4y ago
      It's a lot easier for the rich to "just not borrow" that it is for the poor. Capitalism was designed so people HAVE to borrow money to do things, so saying that you can just avoid things by not borrowing is elitist at best. University, Medical Bills, Housing - all are things that many people (in NA at least) need to borrow money for. Borrowing money is an integral part to move up the social and economic ladder for most people alive today.
  - infamouscow 4y ago
    Because economists without even an undergraduate understanding of mathematics say the right things to those in power.
  - teddyh 4y ago
    I assure you that the bank is making good money out of using that capital. Are you suggesting that it’s better that the bank keep all the profits rather than some of it going to the person lending the bank that money?
t43562 4y ago
I remember my dad encouraging me to save my dollars and not spend them on choc-99 double ice-creams ($2.13). These were soft whip ice-creams with 2 cadbury's flake chocolates stuck in the side and they seemed like the closest thing to heaven on earth to me. What my dad said seemed logical though and I saved. When I was 16 I had a holiday job that earned me many ice-cream-worths but I kept it - didn't buy a bicycle or anything. "Save your money." These were Zimbabwe dollars, however, and in the late 1990s it all inflated away to nothing. So much for conscientious saving.
- supersync 4y ago
  Thanks for sharing. A book “The Psychology of Money” talks about this. How people handle money (successful or not) is very different depending on whether or not they experienced inflation as a child.
- Bolkan 4y ago
- xiphias2 4y ago
  I did the same thing for many years, until in 2013 the Cyprus bailouts woke me up...at that point I went all in on Bitcoin out of anger of the banking system, and haven't changed anything since.
  - shadowgovt 4y ago
    I hope this works out for you in the long term; BTC isn't the most stable platform, but it could certainly be more stable than some national currencies.
    - WanderPanda 4y ago
      In fact it is „more stable than some national currencies“
    - xiphias2 4y ago
      If you don't look at the price, it's the most stable and predictable service and protocol in the existence of the internet (maybe after the internet / IPv4). It's uptime is 99.987%, last time it was down in 2013, and the cool thing is that even if it gets down, it has self healing property in the case of network separation / sybil attack. https://www.buybitcoinworldwide.com/bitcoin-uptime/ https://www.buybitcoinworldwide.com/bitcoin-uptime/ I dare you to find another internet service (or even banking service) with the same stability. Also the same software that I downloaded in 2013 still works (although I'm not using it, I have the option to not upgrade). There was a bail in last month in my country (Hungary) as well: all people who stored their money in Russian banks lost their money over $100000, just like in Cyprus in 2013. They did't even know that their bank was Russian owned. I'm not playing the game of russian roulette with my money anymore.
gus_massa 4y ago
For comparison, from https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_Argentina https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A... the monthly minimum salary in September 1976 was AR$11200 ~= US$45.34. So the AR$1228 of the author were like US$4.97 in 1976, that are like US$25.11 today https://www.in2013dollars.com/us/inflation/1976?amount=4.97 https://www.in2013dollars.com/us/inflation/1976?amount=4.97 . Also, the price of gold was like $120/oz https://sdbullion.com/gold-prices-1976 https://sdbullion.com/gold-prices-1976 so it was like 1.2 grams
innagadadavida 4y ago
Are there any kids book that explain these money concepts to elementary school kids? I feel one the big failings of the school system is that these are not taught early on and instead a lot of time is spent teaching things that kids will never use in their lives.
- sdk16420 4y ago
  I was hoping most people would be familiar with the exponential chessboard story, of which this is pretty much the inverse. https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem
- unlog 4y ago
  Reminds me of this excellent video https://youtu.be/HLIJkmy3vy8 https://youtu.be/HLIJkmy3vy8 it's in Spanish, he tells the story of explaining a financial system crash to his daughter. Probably has subtitles in English, I recommend it
- orangepurple 4y ago
  Easily illustrated for children: https://www.youtube.com/watch?v=H4XL8s1BEdk https://www.youtube.com/watch?v=H4XL8s1BEdk
- MrFoof 4y ago
  A book I read well over 30 years ago, and is still apparently updated today, is "The Kids' Money Book" by Neale S. Godfrey, which you can certainly find secondhand for cheap. There are updated versions authored by Jamie Kyle McGillian, and so long as they are in the original vein they are probably excellent. However it's not something I would throw at a 6-year old. A sharp 8-year old should be able to grok all of it though.
- maximus-decimus 4y ago
  You need to understand exponentials to really get it. Where I live, they only teach it in advanced math classes in 11th grade, so elementary school seems ambitious.
slg 4y ago
Argentina has experienced multiple rounds of hyperinflation due to failed monetary policy. Saying this story is a "lesson about the power of inflation" is like saying "the sun is hot". Yes, it certainly is, but it is so far beyond normal definitions of "hot" that people will have a hard time understanding it. This is more a story about the failures of Argentina's governments over the last 50 years than a story about inflation.
- treeman79 4y ago
  There are a lot of people that think we can print spend endless amounts of money without consequences. Heck an alarming amount of people don’t understand that bonds need to be paid back.
  - UncleMeat 4y ago
    That's true, but there aren't a lot of these people in positions of great policy power.
    - sitkack 4y ago
      /s naaap!
  - slg 4y ago
    I made that comment because I know people are going to use the linked example of what happened in Argentina as the predicted fate of what will happen in the US. That seems to be what you are implying here by drawing parallels between the two. But I simply want to make it clear that the US is at 8% inflation for the last year while Argentina spent decades with the average annual inflation rate measured in the hundreds. The two aren't close to the same.
    - koolba 4y ago
      > But I simply want to make it clear that the US is at 8% inflation for the last year while Argentina spent decades with the average annual inflation rate measured in the hundreds. The two aren't close to the same. “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”
clamprecht 4y ago
I'm from the US but I lived in Argentina for about 5 years (2013-2018). It was a great lesson, and I'm seeing things in the US now that I used to see in Argentina. At the bank recently, they had a sign about the national shortage of coins. That was common in Argentina. Sizes of products getting smaller in order to keep the price the same - "inflacion escondido" (hidden inflation).
- gpgn 4y ago
  "inflacion escondidA"
  - clamprecht 4y ago
    Gracias.. mejor comentario hasta ahora ;)
  - robocat 4y ago
    la inflación escondida. “Shrinkflation”.
- ghaff 4y ago
  The ostensible reason for the coin shortage was COVID-related supply chains. Stores were also trying to minimize handling of cash especially early-on in the pandemic. This is overlaid with the fact that, in the US: 1. A lot of people (though certainly not everyone) don't use a lot of cash these days 2. Coin denominations have basically been unchanged since I was born--which was... not recently. So you have lower denomination coins that cost more to make than they're worth.
  - MerelyMortal 4y ago
    On reddit, I'm seeing people hoard coins because they believe the metal it is made of is more valueable than the currency it represents.
    - ghaff 4y ago
      In some cases, that may be technically true but I suspect that the costs of turning bags of pennies into cash that is > than the face value of the pennies is iffy at best.
Capira 4y ago
bitcoin fixes this
- UncleMeat 4y ago
  That would be true if the only way to create a failed currency was to print it to death. But we've observed cryptocurrencies with mining caps collapse to $0 in the same way as a fiat currency.
  - datadata 4y ago
    Fair to say bitcoin fixes this particular large and important class of currency failure, by taking away the power to print it to death?
    - UncleMeat 4y ago
      Yes, while introducing a host of other very serious problems.
    - albntomat0 4y ago
      That it does, but I understand that Bitcoin's deflationary by default nature has also been criticized. Bitcoin also adds new failure cases such as irreparably losing money through address typos and lost/failed hard drives, not to mention the numerous & exciting failures in DeFi.
- deleted 4y ago
  [deleted]
- narrator 4y ago
  A friend of mine lives in Argentina. He pays his living expenses in Bitcoin to other Argentinians. They are very happy to take it, even without legal tender laws because it doesn't rapidly regularly devalue like the Argentinian currency.
renewiltord 4y ago
Zeihan in tears. I really enjoy his description of geopolitics, but the man definitely overestimates Argentina repeatedly for no bloody reason. When I was a child, I saved a little of my allowance to start with, but then rapidly realized that every year I was blowing away (in earnings) my savings from the previous year. Soon my porn and bootleg music high-school business was beating all the savings of the previous year. Then my ad fraud "business" plus my fake reviews "business" was beating that. I dropped all of that stuff, went to uni for other things and then eventually started engineering later in life than most people and the pattern repeated in earnings. Through sheer luck I happened to make choices that aimed at growth rather than savings. Pure savings are over-rated. You should hold nearly everything in inflation-protected assets. And loads of these are crazy liquid. Plus, I have friends with whom I have a de-facto liquidity pool. It's sort of a liquidity insurance mechanism: we'll just help each other over temporary liquidity humps. One of my friends had to leave the US temporarily because of a green card processing delay due to COVID and he knew that I'd cover his mortgage if he needed me to. Helps you sail closer to the wind knowing that only broad-based economic failure can hurt.
- nanomonkey 4y ago
  What are some examples of these crazy liquid assets? In the past I've spent extra money on tools, a house and some gold and silver (as I have a goldsmithing hobby). The house is difficult to unload, at least mentally, pretty good market. The tools have kept their value, but finding a buyer is difficult. The gold and silver are a similar story, but tend to fluctuate in value rapidly.
  - reducesuffering 4y ago
    Global stock and precious metals ETF's are inflation-resistant and quite liquid. You'll pay only 0.02% spread to liquidate them and have the cash in your bank account within a few days. As opposed to a house which is generally 6% spreads and a couple months to liquidate. Only in exceptional liquidity crises (August 2008 - March 2009, and March 2020) are you at risk of cashing out for 30-50% losses. 80% of the time it's at value or higher. So you just need a small percentage of assets that are deflation-resistant (cash & bonds) for the small periods of time deflation happens, to pay your expenses.
dredmorbius 4y ago
https://threadreaderapp.com/thread/1515737443395383299.html https://threadreaderapp.com/thread/1515737443395383299.html
thenoblesunfish 4y ago
So how much was it worth back in the 70s?
- deleted 4y ago
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me_me_mu_mu 4y ago
Thinking about money and its hypothetical worth in X years is a waste of mind resources, at least for me. Instead, I'm going to just save 20-25% and spend the rest on being happy. If things go south, so what? I've got an expiry date and one day these things won't be a problem.
- cko 4y ago
  That's a pretty decent savings rate. When you say save, though, do you mean putting it in the bank or a diversified portfolio of factor tilted global index funds?
  - me_me_mu_mu 4y ago
    Index fund
zacherates 4y ago
1228 pesos in 1976 was worth about $4.50 in 1976 USD [1]. ... and if he'd bought into the S&P 500 (Vanguard launched the First Index Investment Trust now the Vanguard 500 Index Fund in 1976 [2]), it would be worth about about $190 in today's USD. Which you could sell to buy about 2.99g of gold today (3 trillion times as much as reported). While obvious you'd have to be extremely prescient to put your money in a completely different type of fund that had launched only just that year and at the time they would not have touched such small dollar investments. ... but today we now know that Bogle's idea was actually pretty good and you really can make such small dollar investments (eg. Fidelity's no-fee, large cap fund has no minimum to invest (FNILX), or you could buy a fractional share of a variety of large cap ETFs: SPY (SPDR), IVV (iShares), or VOO (Vanguard) from a variety of brokerages). Of course, a minor wouldn't be able to own shared directly... so, get your kids a UTMA account [4]. [1] https://en.wikipedia.org/wiki/Historical_exchange_rates_of_Argentine_currency https://en.wikipedia.org/wiki/Historical_exchange_rates_of_A... [2] https://en.wikipedia.org/wiki/The_Vanguard_Group#Growth_of_company https://en.wikipedia.org/wiki/The_Vanguard_Group#Growth_of_c... [3] https://fundresearch.fidelity.com/mutual-funds/summary/315911628 https://fundresearch.fidelity.com/mutual-funds/summary/31591... [4] https://www.investopedia.com/terms/u/utma.asp https://www.investopedia.com/terms/u/utma.asp
- mattm 4y ago
  For comparison if he bought gold directly - $4.50 would have bought about 1.13g of gold [1] https://sdbullion.com/gold-prices-1976 https://sdbullion.com/gold-prices-1976
  - manarth 4y ago
    Which today would get you around US$72
- ZoomZoomZoom 4y ago
  And how could he have done it, being in Argentina in 1976? Not even asking about Vanguard. Just accessing s&p500 or NASDAQ is not easy even today, don't think it was much easier then.
mensetmanusman 4y ago
That’s still 3 billion atoms: https://www.wolframalpha.com/input?i=one+picogram+of+gold+in+atoms https://www.wolframalpha.com/input?i=one+picogram+of+gold+in...
cat_plus_plus 4y ago
Cash should be seen as medium of exchange rather than store of value. If you saved for a bike, the bike was probably worth much more to you than a picogram of gold. Even if you ended up forgetting about your penny jar and finding it in the attic as an adult, the act of saving itself gave your valuable lessons about planning and delayed gratification. On the other hand, if you made even a conservative investment like a thin silver chain or a popular book with author autograph, I bet you will get more than your money's worth for that today. If you bought a share of Apple stock - woah, but I guess we couldn't have all known back then. As adults, yeah we should know better than to keep our wealth essentially in the pockets of politicians. Invest in something that will be useful to your or someone else even many years later, or profit-generating businesses. But there is nothing wrong with children play-learning a simplified version of life rather than immediately having to know the difference between mutual funds and ETFs.
MarkusWandel 4y ago
The point missed in most save/invest vs. spend arguments is this: If you've been raised to be a saver, you are well trained at living cheaper/less frivolously. Note that this presupposes that you make enough money to live reasonably and save; I'm not talking about the extreme poverty cases where immediately spending the rare windfall actually makes sense. By cheaper, I mean one car instead of two, simpler vacations, less eating out, less fancy house, "using up" quality consumer goods instead of constantly replacing them with the latest fashionable stuff (e.g. second complete kitchen makeover in 15 years). Suppose person A makes X and spends X and saves nothing. Person B makes the same, but spends 0.5X and saves 0.5X. Now suppose an economic disaster where all those savings are wiped out and A and B additionally end up taking a 50% pay cut. Who will continue to live in comfort, albeit with misgivings about not being able to save up again?
- ip26 4y ago
  It's protective against downside, but can constrain your upside. I was raised a saver, and it's been very hard to hire out simple tasks & let go of trifles, which in turn constrains how much time & energy you have to focus on increasing your earnings. As a low earner, it's better to focus on efficiency & DIY, but as a high earner it's irrational to spend an hour getting bent out of shape over a few dollars.
  - MarkusWandel 4y ago
    Absolutely agree, which is why, for example, I don't do my own car repairs any more. But you can still have a less fancy car and keep it longer. And I don't want to focus on increasing my earnings. I'd much rather be fixing something around the house.
    - vl 4y ago
      The problem with car and house repairs is that even if you have money to pay for it, managing them still takes tremendous amount of time. In fact so, that for trivial repairs it's easier to order supplies and tools and do them myself. So one way or another car and house consume time. Next level is to hire people to manage it for you, but this is completely different level of income.
dukeofdoom 4y ago
Saving and buying collector edition video games might be a good purchase for a kid that might pay off later. A corvette might be a good investment too, if they stop making gasoline cars in the near future.
- quantumcrypt 4y ago
  Corvettes are mass produced. German ICE import like Porsche is far more likely to hold value.
  - oblio 4y ago
    Porsches are mass produced, too.
marcodiego 4y ago
Brazil had its own share of problems with hyperinflation during the 80's and early 90's. I remember the behavior it conditioned people. Once people got their paychecks, they would rush to the supermarket to buy as much as they could, by the end of the month they wouldn't be able to buy that much with the same amount of money. People ran ahead supermarket staff which updated prices so they could buy the same product at a previous price. Gas stations had long queues during the night when there were news about about gas prices rising. My father developed and interesting habit: whatever he bought, he would write in the box how much it cost in gasoline liters. That way we could have a good idea of how much each thing really cost. It was somewhat funny many years later finding old boxes written "Custou dez litros de gasolina".
- xtracto 4y ago
  >It was somewhat funny many years later finding old boxes written "Custou dez litros de gasolina" That's genius. I'm going to start using it here for Mexico
tehlike 4y ago
As a grateful person with sufficient income, we are contributing IRS gift limit of 15-16k per parent to kids account. Eventually when the time is right we will get her practice investing also with the hope that she will see how much her account has grown by the virtue of compounding. Before then we are planning to get her do chores for neighbors and learn to earn money and get her save.
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paganel 4y ago
When Ceausescu's regime fell in late 1989 a piece of bread was costing 3.75 lei. About 10 years later, late '90s-early 2000s, a piece of bread was costing 3,000 lei. Hight inflation is a bitch.
- bombcar 4y ago
  An, but it wasn’t the same piece of bread. :) I’ve always wondered what happened to mortgages and loans during those periods. Did borrowers effectively get free houses? Did borrowers not exist?
  - oblio 4y ago
    1. Scams. Romania had a lot of banks defaulting. 2. Yes, the number of loans and mortgages was minuscule. 3. Do you think anyone gave out fixed interest loans? :-)))
  - ronyfadel 4y ago
    That has happened in many countries, like Argentina and Lebanon. Borrow before crash, and your house would practically cost you as much as a car.
  - razius 4y ago
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01100011 4y ago
We're seeing more and more economic focused posts making it to the front page lately. We're all thinking about it due to high inflation and few options to protect our cash savings. That said, the quality of HN comments regarding economics tend to be, in my experience, quite low. I'd suggest anyone interested go seek out more qualified analysis beyond a weekend HN thread full of people like me regurgitating half understood economics theories we've absorbed over the last two years.
- CamelCaseName 4y ago
  Where would you suggest? I recently purchased a subscription to The Economist and have been listening to the top stories on a daily basis. That said, it seems to be more politics than economics.
  - hnbad 4y ago
    That paper's misnomer aside, you probably don't want to listen to economists to learn how economies work. The soft sciences tend to get a bad rep but economists tend to be the ones most resembling ideological fan fiction.
    - routerl 4y ago
      This is playing out currently, quite openly, as the FTC investigates whether companies have raised prices more than costs have risen from inflation. It's becoming increasingly clear that the academic economic consensus is, simply, disconnected from how markets actually operate. For instance, while each day has brought a new study of consolidated companies engaging in pandemic price gouging, academic establishment luminaries like Larry Summers continue to argue that antitrust is unrelated to inflation. We're in a true "Emperor's new clothes" moment.
      - seizethecheese 4y ago
        Larry Summers was 100% right about impending inflation. He’s been totally vindicated. I’m suspicious of where you are getting your information and suspect it’s politically motivated.
dools 4y ago
This has nothing to do with gold. He is comparing the exchange rate of the Argentine peso and the USD. That exchange rate is appalling over time because Argentina relies heavily on USD denominated imports and issues debt denominated in USD to obtain them.
nabla9 4y ago
The work one did decades ago would not be worth of the same today due to increased total factor productivity. When people think the money they earned in past should be worth same today assume that value of money should grow.
arcticbull 4y ago
Repeat after me: we do not save currency we use currency to buy savings instruments like a portfolio of stocks and bonds.
jmyeet 4y ago
So there is something to be said for keeping your savings in a stable currency or asset but that doesn't necessary protect you from negative government action. Some examples: 1. Many Russians held funds in currencies other than rubles. Faced with sanctions, Putin instituted forced conversion to rubles. So far the ruble hasn't been decimated but this could still go south; 2. Venezuela essentially prevents conversion of currencies. I mean it's complicated. There's a government rate and a black market rate and the country is under completely unjustifiable sanctions; and 3. Argentina is also currently restricting access to foreign currencies; 4. Years ago, Argentinians held funds in foreign currencies. Local banks held foreign currencies against those deposits. When things went south the banks basically packed up all their money, put it on a plane, flew it out and then declared bankruptcy or just threw up their hands; and 5. Some will even point to FDR's sovereign devaluation of the US dollar as another bad example. In the 1930s, the government forced purchase gold for $20/oz (the peg at the time) and then revalued the US dollar at $35/oz. This last one is a constant point of consternation for gold bugs turned Crypto Andys. And no crypto isn't the answer here. My point here is that you cannot overstate the importance of multigenerational wealth creation in the developed world. The dark truth here is that the US has often had a hand in the above events that have essentiaally stolen accumulated wealth from ordinary citizens.
- MathYouF 4y ago
  > So far the ruble hasn't been decimated but this could still go south The ruble was worth 0.14 dollars before the war and now is worth 0.12, which is just below a 0.014 reduction in its value, so it has quite literally and almost exactly been decimated, as it was done in roman tradition.
  - eggsome 4y ago
    On one hand I really appreciate the original meaning, it always seemed 'neat' to me. However the reality is that it's modern meaning has changed. See here: https://www.merriam-webster.com/dictionary/decimated https://www.merriam-webster.com/dictionary/decimated
TedShiller 4y ago
Inflation is simply the final bill for all the “free” stuff that wasn’t actually free.
nikolay 4y ago
Same happened with my savings as a child in Bulgaria - my grandparents were putting into that savings account significant amount of money evety month, and when I tried to withdraw them later, all that savings were worth nothing! This should be a lesson to all of us - at least it was for me!
sytelus 4y ago
Fun fact: You will likely lose more money in divorce (about 50% probability in Western world) than all the money you had saved throughout all of the married combined by choosing cheaper vacations, forgoing hobbies, finding discounts, buying inexpensive cloths and cars.
sytelus 4y ago
OP describes investment strategy that is destined to fail (i.e. keep money in savings account). This is in fact great way to teach the children by inducing failure so they understand why they need to learn investing instead of saving. My mom always converted cash to gold instinctively because she did not trust government printed paper. In US, people tend to keep money in S&P 500 with rather poor return but still well protected against inflation. The problem is still that money earned over time increases at least linearly for most people. This means that whatever amount you saved up as kid isn’t going to amount much even if it was inflation protected. For instance, all the money I saved up as kid for 10 years and put in S&P 500 for inflation protection will still come bit short to match my one month income.

331 points by diego 4y ago

"May the sign of the exponential be ever in your favor." -- @dbasch, a great tweet concluding that thread

Ah, the magic of interest: http://www.threepanelsoul.com/comic/at-the-bank http://www.threepanelsoul.com/comic/at-the-bank

imtringued 4y ago
Why exactly do we want to reward already rich people at the expense of poorer people? Somehow, people convinced themselves that giving money to those who don't need it is efficient.
- randyrand 4y ago
  It’s not that we want to. Its not our choice. It’s decided by the people, or the foreign countries, that have the money to lend. It’s the rate they are willing to lend at. Most don’t lend it for free.
- dlivingston 4y ago
  Do you understand why the system is set up the way it is? By which I mean the actual financial mechanisms.
- FabHK 4y ago
  If everyone puts their money in the bank and gets 5% (say), then the proportion of wealth will remain unchanged. (FWIW, a similar argument against Proof of Stake (that it will inevitably lead to greater and greater inequality) is similarly flawed. (This doesn't mean that PoS is a good idea.))
- lottin 4y ago
  You don't have to reward anyone. Just don't borrow. But if you want to borrow the lender will expect a reward. Simples.
  - MisterSandman 4y ago
    It's a lot easier for the rich to "just not borrow" that it is for the poor. Capitalism was designed so people HAVE to borrow money to do things, so saying that you can just avoid things by not borrowing is elitist at best. University, Medical Bills, Housing - all are things that many people (in NA at least) need to borrow money for. Borrowing money is an integral part to move up the social and economic ladder for most people alive today.
- infamouscow 4y ago
  Because economists without even an undergraduate understanding of mathematics say the right things to those in power.
- teddyh 4y ago
  I assure you that the bank is making good money out of using that capital. Are you suggesting that it’s better that the bank keep all the profits rather than some of it going to the person lending the bank that money?

t43562 4y ago

I remember my dad encouraging me to save my dollars and not spend them on choc-99 double ice-creams ($2.13). These were soft whip ice-creams with 2 cadbury's flake chocolates stuck in the side and they seemed like the closest thing to heaven on earth to me. What my dad said seemed logical though and I saved. When I was 16 I had a holiday job that earned me many ice-cream-worths but I kept it - didn't buy a bicycle or anything. "Save your money." These were Zimbabwe dollars, however, and in the late 1990s it all inflated away to nothing. So much for conscientious saving.

supersync 4y ago
Thanks for sharing. A book “The Psychology of Money” talks about this. How people handle money (successful or not) is very different depending on whether or not they experienced inflation as a child.
Bolkan 4y ago
xiphias2 4y ago
I did the same thing for many years, until in 2013 the Cyprus bailouts woke me up...at that point I went all in on Bitcoin out of anger of the banking system, and haven't changed anything since.
- shadowgovt 4y ago
  I hope this works out for you in the long term; BTC isn't the most stable platform, but it could certainly be more stable than some national currencies.
  - WanderPanda 4y ago
    In fact it is „more stable than some national currencies“
  - xiphias2 4y ago
    If you don't look at the price, it's the most stable and predictable service and protocol in the existence of the internet (maybe after the internet / IPv4). It's uptime is 99.987%, last time it was down in 2013, and the cool thing is that even if it gets down, it has self healing property in the case of network separation / sybil attack. https://www.buybitcoinworldwide.com/bitcoin-uptime/ https://www.buybitcoinworldwide.com/bitcoin-uptime/ I dare you to find another internet service (or even banking service) with the same stability. Also the same software that I downloaded in 2013 still works (although I'm not using it, I have the option to not upgrade). There was a bail in last month in my country (Hungary) as well: all people who stored their money in Russian banks lost their money over $100000, just like in Cyprus in 2013. They did't even know that their bank was Russian owned. I'm not playing the game of russian roulette with my money anymore.

gus_massa 4y ago

For comparison, from https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_Argentina https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A... the monthly minimum salary in September 1976 was AR$11200 ~= US$45.34. So the AR$1228 of the author were like US$4.97 in 1976, that are like US$25.11 today https://www.in2013dollars.com/us/inflation/1976?amount=4.97 https://www.in2013dollars.com/us/inflation/1976?amount=4.97 . Also, the price of gold was like $120/oz https://sdbullion.com/gold-prices-1976 https://sdbullion.com/gold-prices-1976 so it was like 1.2 grams

innagadadavida 4y ago

Are there any kids book that explain these money concepts to elementary school kids? I feel one the big failings of the school system is that these are not taught early on and instead a lot of time is spent teaching things that kids will never use in their lives.

sdk16420 4y ago
I was hoping most people would be familiar with the exponential chessboard story, of which this is pretty much the inverse. https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem
unlog 4y ago
Reminds me of this excellent video https://youtu.be/HLIJkmy3vy8 https://youtu.be/HLIJkmy3vy8 it's in Spanish, he tells the story of explaining a financial system crash to his daughter. Probably has subtitles in English, I recommend it
orangepurple 4y ago
Easily illustrated for children: https://www.youtube.com/watch?v=H4XL8s1BEdk https://www.youtube.com/watch?v=H4XL8s1BEdk
MrFoof 4y ago
A book I read well over 30 years ago, and is still apparently updated today, is "The Kids' Money Book" by Neale S. Godfrey, which you can certainly find secondhand for cheap. There are updated versions authored by Jamie Kyle McGillian, and so long as they are in the original vein they are probably excellent. However it's not something I would throw at a 6-year old. A sharp 8-year old should be able to grok all of it though.
maximus-decimus 4y ago
You need to understand exponentials to really get it. Where I live, they only teach it in advanced math classes in 11th grade, so elementary school seems ambitious.

slg 4y ago

Argentina has experienced multiple rounds of hyperinflation due to failed monetary policy. Saying this story is a "lesson about the power of inflation" is like saying "the sun is hot". Yes, it certainly is, but it is so far beyond normal definitions of "hot" that people will have a hard time understanding it. This is more a story about the failures of Argentina's governments over the last 50 years than a story about inflation.

treeman79 4y ago
There are a lot of people that think we can print spend endless amounts of money without consequences. Heck an alarming amount of people don’t understand that bonds need to be paid back.
- UncleMeat 4y ago
  That's true, but there aren't a lot of these people in positions of great policy power.
  - sitkack 4y ago
    /s naaap!
- slg 4y ago
  I made that comment because I know people are going to use the linked example of what happened in Argentina as the predicted fate of what will happen in the US. That seems to be what you are implying here by drawing parallels between the two. But I simply want to make it clear that the US is at 8% inflation for the last year while Argentina spent decades with the average annual inflation rate measured in the hundreds. The two aren't close to the same.
  - koolba 4y ago
    > But I simply want to make it clear that the US is at 8% inflation for the last year while Argentina spent decades with the average annual inflation rate measured in the hundreds. The two aren't close to the same. “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”

clamprecht 4y ago

I'm from the US but I lived in Argentina for about 5 years (2013-2018). It was a great lesson, and I'm seeing things in the US now that I used to see in Argentina. At the bank recently, they had a sign about the national shortage of coins. That was common in Argentina. Sizes of products getting smaller in order to keep the price the same - "inflacion escondido" (hidden inflation).

gpgn 4y ago
"inflacion escondidA"
- clamprecht 4y ago
  Gracias.. mejor comentario hasta ahora ;)
- robocat 4y ago
  la inflación escondida. “Shrinkflation”.
ghaff 4y ago
The ostensible reason for the coin shortage was COVID-related supply chains. Stores were also trying to minimize handling of cash especially early-on in the pandemic. This is overlaid with the fact that, in the US: 1. A lot of people (though certainly not everyone) don't use a lot of cash these days 2. Coin denominations have basically been unchanged since I was born--which was... not recently. So you have lower denomination coins that cost more to make than they're worth.
- MerelyMortal 4y ago
  On reddit, I'm seeing people hoard coins because they believe the metal it is made of is more valueable than the currency it represents.
  - ghaff 4y ago
    In some cases, that may be technically true but I suspect that the costs of turning bags of pennies into cash that is > than the face value of the pennies is iffy at best.

Capira 4y ago

bitcoin fixes this

UncleMeat 4y ago
That would be true if the only way to create a failed currency was to print it to death. But we've observed cryptocurrencies with mining caps collapse to $0 in the same way as a fiat currency.
- datadata 4y ago
  Fair to say bitcoin fixes this particular large and important class of currency failure, by taking away the power to print it to death?
  - UncleMeat 4y ago
    Yes, while introducing a host of other very serious problems.
  - albntomat0 4y ago
    That it does, but I understand that Bitcoin's deflationary by default nature has also been criticized. Bitcoin also adds new failure cases such as irreparably losing money through address typos and lost/failed hard drives, not to mention the numerous & exciting failures in DeFi.
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narrator 4y ago
A friend of mine lives in Argentina. He pays his living expenses in Bitcoin to other Argentinians. They are very happy to take it, even without legal tender laws because it doesn't rapidly regularly devalue like the Argentinian currency.

renewiltord 4y ago

Zeihan in tears. I really enjoy his description of geopolitics, but the man definitely overestimates Argentina repeatedly for no bloody reason. When I was a child, I saved a little of my allowance to start with, but then rapidly realized that every year I was blowing away (in earnings) my savings from the previous year. Soon my porn and bootleg music high-school business was beating all the savings of the previous year. Then my ad fraud "business" plus my fake reviews "business" was beating that. I dropped all of that stuff, went to uni for other things and then eventually started engineering later in life than most people and the pattern repeated in earnings. Through sheer luck I happened to make choices that aimed at growth rather than savings. Pure savings are over-rated. You should hold nearly everything in inflation-protected assets. And loads of these are crazy liquid. Plus, I have friends with whom I have a de-facto liquidity pool. It's sort of a liquidity insurance mechanism: we'll just help each other over temporary liquidity humps. One of my friends had to leave the US temporarily because of a green card processing delay due to COVID and he knew that I'd cover his mortgage if he needed me to. Helps you sail closer to the wind knowing that only broad-based economic failure can hurt.

nanomonkey 4y ago
What are some examples of these crazy liquid assets? In the past I've spent extra money on tools, a house and some gold and silver (as I have a goldsmithing hobby). The house is difficult to unload, at least mentally, pretty good market. The tools have kept their value, but finding a buyer is difficult. The gold and silver are a similar story, but tend to fluctuate in value rapidly.
- reducesuffering 4y ago
  Global stock and precious metals ETF's are inflation-resistant and quite liquid. You'll pay only 0.02% spread to liquidate them and have the cash in your bank account within a few days. As opposed to a house which is generally 6% spreads and a couple months to liquidate. Only in exceptional liquidity crises (August 2008 - March 2009, and March 2020) are you at risk of cashing out for 30-50% losses. 80% of the time it's at value or higher. So you just need a small percentage of assets that are deflation-resistant (cash & bonds) for the small periods of time deflation happens, to pay your expenses.

dredmorbius 4y ago

https://threadreaderapp.com/thread/1515737443395383299.html https://threadreaderapp.com/thread/1515737443395383299.html

thenoblesunfish 4y ago

So how much was it worth back in the 70s?

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me_me_mu_mu 4y ago

Thinking about money and its hypothetical worth in X years is a waste of mind resources, at least for me. Instead, I'm going to just save 20-25% and spend the rest on being happy. If things go south, so what? I've got an expiry date and one day these things won't be a problem.

cko 4y ago
That's a pretty decent savings rate. When you say save, though, do you mean putting it in the bank or a diversified portfolio of factor tilted global index funds?
- me_me_mu_mu 4y ago
  Index fund

zacherates 4y ago

1228 pesos in 1976 was worth about $4.50 in 1976 USD [1]. ... and if he'd bought into the S&P 500 (Vanguard launched the First Index Investment Trust now the Vanguard 500 Index Fund in 1976 [2]), it would be worth about about $190 in today's USD. Which you could sell to buy about 2.99g of gold today (3 trillion times as much as reported). While obvious you'd have to be extremely prescient to put your money in a completely different type of fund that had launched only just that year and at the time they would not have touched such small dollar investments. ... but today we now know that Bogle's idea was actually pretty good and you really can make such small dollar investments (eg. Fidelity's no-fee, large cap fund has no minimum to invest (FNILX), or you could buy a fractional share of a variety of large cap ETFs: SPY (SPDR), IVV (iShares), or VOO (Vanguard) from a variety of brokerages). Of course, a minor wouldn't be able to own shared directly... so, get your kids a UTMA account [4]. [1] https://en.wikipedia.org/wiki/Historical_exchange_rates_of_Argentine_currency https://en.wikipedia.org/wiki/Historical_exchange_rates_of_A... [2] https://en.wikipedia.org/wiki/The_Vanguard_Group#Growth_of_company https://en.wikipedia.org/wiki/The_Vanguard_Group#Growth_of_c... [3] https://fundresearch.fidelity.com/mutual-funds/summary/315911628 https://fundresearch.fidelity.com/mutual-funds/summary/31591... [4] https://www.investopedia.com/terms/u/utma.asp https://www.investopedia.com/terms/u/utma.asp

mattm 4y ago
For comparison if he bought gold directly - $4.50 would have bought about 1.13g of gold [1] https://sdbullion.com/gold-prices-1976 https://sdbullion.com/gold-prices-1976
- manarth 4y ago
  Which today would get you around US$72
ZoomZoomZoom 4y ago
And how could he have done it, being in Argentina in 1976? Not even asking about Vanguard. Just accessing s&p500 or NASDAQ is not easy even today, don't think it was much easier then.

mensetmanusman 4y ago

That’s still 3 billion atoms: https://www.wolframalpha.com/input?i=one+picogram+of+gold+in+atoms https://www.wolframalpha.com/input?i=one+picogram+of+gold+in...

cat_plus_plus 4y ago

Cash should be seen as medium of exchange rather than store of value. If you saved for a bike, the bike was probably worth much more to you than a picogram of gold. Even if you ended up forgetting about your penny jar and finding it in the attic as an adult, the act of saving itself gave your valuable lessons about planning and delayed gratification. On the other hand, if you made even a conservative investment like a thin silver chain or a popular book with author autograph, I bet you will get more than your money's worth for that today. If you bought a share of Apple stock - woah, but I guess we couldn't have all known back then. As adults, yeah we should know better than to keep our wealth essentially in the pockets of politicians. Invest in something that will be useful to your or someone else even many years later, or profit-generating businesses. But there is nothing wrong with children play-learning a simplified version of life rather than immediately having to know the difference between mutual funds and ETFs.

MarkusWandel 4y ago

The point missed in most save/invest vs. spend arguments is this: If you've been raised to be a saver, you are well trained at living cheaper/less frivolously. Note that this presupposes that you make enough money to live reasonably and save; I'm not talking about the extreme poverty cases where immediately spending the rare windfall actually makes sense. By cheaper, I mean one car instead of two, simpler vacations, less eating out, less fancy house, "using up" quality consumer goods instead of constantly replacing them with the latest fashionable stuff (e.g. second complete kitchen makeover in 15 years). Suppose person A makes X and spends X and saves nothing. Person B makes the same, but spends 0.5X and saves 0.5X. Now suppose an economic disaster where all those savings are wiped out and A and B additionally end up taking a 50% pay cut. Who will continue to live in comfort, albeit with misgivings about not being able to save up again?

ip26 4y ago
It's protective against downside, but can constrain your upside. I was raised a saver, and it's been very hard to hire out simple tasks & let go of trifles, which in turn constrains how much time & energy you have to focus on increasing your earnings. As a low earner, it's better to focus on efficiency & DIY, but as a high earner it's irrational to spend an hour getting bent out of shape over a few dollars.
- MarkusWandel 4y ago
  Absolutely agree, which is why, for example, I don't do my own car repairs any more. But you can still have a less fancy car and keep it longer. And I don't want to focus on increasing my earnings. I'd much rather be fixing something around the house.
  - vl 4y ago
    The problem with car and house repairs is that even if you have money to pay for it, managing them still takes tremendous amount of time. In fact so, that for trivial repairs it's easier to order supplies and tools and do them myself. So one way or another car and house consume time. Next level is to hire people to manage it for you, but this is completely different level of income.

dukeofdoom 4y ago

Saving and buying collector edition video games might be a good purchase for a kid that might pay off later. A corvette might be a good investment too, if they stop making gasoline cars in the near future.

quantumcrypt 4y ago
Corvettes are mass produced. German ICE import like Porsche is far more likely to hold value.
- oblio 4y ago
  Porsches are mass produced, too.

marcodiego 4y ago

Brazil had its own share of problems with hyperinflation during the 80's and early 90's. I remember the behavior it conditioned people. Once people got their paychecks, they would rush to the supermarket to buy as much as they could, by the end of the month they wouldn't be able to buy that much with the same amount of money. People ran ahead supermarket staff which updated prices so they could buy the same product at a previous price. Gas stations had long queues during the night when there were news about about gas prices rising. My father developed and interesting habit: whatever he bought, he would write in the box how much it cost in gasoline liters. That way we could have a good idea of how much each thing really cost. It was somewhat funny many years later finding old boxes written "Custou dez litros de gasolina".

xtracto 4y ago
>It was somewhat funny many years later finding old boxes written "Custou dez litros de gasolina" That's genius. I'm going to start using it here for Mexico

tehlike 4y ago

As a grateful person with sufficient income, we are contributing IRS gift limit of 15-16k per parent to kids account. Eventually when the time is right we will get her practice investing also with the hope that she will see how much her account has grown by the virtue of compounding. Before then we are planning to get her do chores for neighbors and learn to earn money and get her save.

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paganel 4y ago

When Ceausescu's regime fell in late 1989 a piece of bread was costing 3.75 lei. About 10 years later, late '90s-early 2000s, a piece of bread was costing 3,000 lei. Hight inflation is a bitch.

bombcar 4y ago
An, but it wasn’t the same piece of bread. :) I’ve always wondered what happened to mortgages and loans during those periods. Did borrowers effectively get free houses? Did borrowers not exist?
- oblio 4y ago
  1. Scams. Romania had a lot of banks defaulting. 2. Yes, the number of loans and mortgages was minuscule. 3. Do you think anyone gave out fixed interest loans? :-)))
- ronyfadel 4y ago
  That has happened in many countries, like Argentina and Lebanon. Borrow before crash, and your house would practically cost you as much as a car.
- razius 4y ago

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01100011 4y ago

We're seeing more and more economic focused posts making it to the front page lately. We're all thinking about it due to high inflation and few options to protect our cash savings. That said, the quality of HN comments regarding economics tend to be, in my experience, quite low. I'd suggest anyone interested go seek out more qualified analysis beyond a weekend HN thread full of people like me regurgitating half understood economics theories we've absorbed over the last two years.

CamelCaseName 4y ago
Where would you suggest? I recently purchased a subscription to The Economist and have been listening to the top stories on a daily basis. That said, it seems to be more politics than economics.
- hnbad 4y ago
  That paper's misnomer aside, you probably don't want to listen to economists to learn how economies work. The soft sciences tend to get a bad rep but economists tend to be the ones most resembling ideological fan fiction.
  - routerl 4y ago
    This is playing out currently, quite openly, as the FTC investigates whether companies have raised prices more than costs have risen from inflation. It's becoming increasingly clear that the academic economic consensus is, simply, disconnected from how markets actually operate. For instance, while each day has brought a new study of consolidated companies engaging in pandemic price gouging, academic establishment luminaries like Larry Summers continue to argue that antitrust is unrelated to inflation. We're in a true "Emperor's new clothes" moment.
    - seizethecheese 4y ago
      Larry Summers was 100% right about impending inflation. He’s been totally vindicated. I’m suspicious of where you are getting your information and suspect it’s politically motivated.

dools 4y ago

This has nothing to do with gold. He is comparing the exchange rate of the Argentine peso and the USD. That exchange rate is appalling over time because Argentina relies heavily on USD denominated imports and issues debt denominated in USD to obtain them.

nabla9 4y ago

The work one did decades ago would not be worth of the same today due to increased total factor productivity. When people think the money they earned in past should be worth same today assume that value of money should grow.

arcticbull 4y ago

Repeat after me: we do not save currency we use currency to buy savings instruments like a portfolio of stocks and bonds.

jmyeet 4y ago

So there is something to be said for keeping your savings in a stable currency or asset but that doesn't necessary protect you from negative government action. Some examples: 1. Many Russians held funds in currencies other than rubles. Faced with sanctions, Putin instituted forced conversion to rubles. So far the ruble hasn't been decimated but this could still go south; 2. Venezuela essentially prevents conversion of currencies. I mean it's complicated. There's a government rate and a black market rate and the country is under completely unjustifiable sanctions; and 3. Argentina is also currently restricting access to foreign currencies; 4. Years ago, Argentinians held funds in foreign currencies. Local banks held foreign currencies against those deposits. When things went south the banks basically packed up all their money, put it on a plane, flew it out and then declared bankruptcy or just threw up their hands; and 5. Some will even point to FDR's sovereign devaluation of the US dollar as another bad example. In the 1930s, the government forced purchase gold for $20/oz (the peg at the time) and then revalued the US dollar at $35/oz. This last one is a constant point of consternation for gold bugs turned Crypto Andys. And no crypto isn't the answer here. My point here is that you cannot overstate the importance of multigenerational wealth creation in the developed world. The dark truth here is that the US has often had a hand in the above events that have essentiaally stolen accumulated wealth from ordinary citizens.

MathYouF 4y ago
> So far the ruble hasn't been decimated but this could still go south The ruble was worth 0.14 dollars before the war and now is worth 0.12, which is just below a 0.014 reduction in its value, so it has quite literally and almost exactly been decimated, as it was done in roman tradition.
- eggsome 4y ago
  On one hand I really appreciate the original meaning, it always seemed 'neat' to me. However the reality is that it's modern meaning has changed. See here: https://www.merriam-webster.com/dictionary/decimated https://www.merriam-webster.com/dictionary/decimated

TedShiller 4y ago

Inflation is simply the final bill for all the “free” stuff that wasn’t actually free.

nikolay 4y ago

Same happened with my savings as a child in Bulgaria - my grandparents were putting into that savings account significant amount of money evety month, and when I tried to withdraw them later, all that savings were worth nothing! This should be a lesson to all of us - at least it was for me!

sytelus 4y ago

Fun fact: You will likely lose more money in divorce (about 50% probability in Western world) than all the money you had saved throughout all of the married combined by choosing cheaper vacations, forgoing hobbies, finding discounts, buying inexpensive cloths and cars.

sytelus 4y ago

OP describes investment strategy that is destined to fail (i.e. keep money in savings account). This is in fact great way to teach the children by inducing failure so they understand why they need to learn investing instead of saving. My mom always converted cash to gold instinctively because she did not trust government printed paper. In US, people tend to keep money in S&P 500 with rather poor return but still well protected against inflation. The problem is still that money earned over time increases at least linearly for most people. This means that whatever amount you saved up as kid isn’t going to amount much even if it was inflation protected. For instance, all the money I saved up as kid for 10 years and put in S&P 500 for inflation protection will still come bit short to match my one month income.