100th Anniversary of the Instruments of Our Oppression

[Famspear]

I guess that my overall point was the money has two uses; a short-term (fruits of my labor in my pocket) and a long term (capital investments) store of value.

True, if money was not a short-term store of value, no one would accept it as payment for labor. But, if I accept cash and put it under my bed, it DOES lose its value, so I still think money (meaning cash or equivalents) is not a good store of value. In order to protect the value I have received, I must invest it in some non-cash asset, such as a house or stock.

I'm not an economist by training, but I don't think that I'm that far off the mark, here.

Yes, and when others talk about the massive inflation (loss of the value of money relative to the value of non-monetary assets) from, say, the 1920s to the present day, one has to agree with what I take as your point -- that a prudent person would not normally hold a large amount of money for the purpose of a long-term investment.

[LPC]

30 years ago my mother was a bartender making 150 bucks a day.

Using changes in the CPI from 1984 to 2014, $150 would translate into about $341 in today's dollars. Working 5 days a week for 50 weeks a year would be a gross income of $85,250.

So a bartender earning $150 a day 30 years ago doesn't sound likely.

According to the May 2013 National Occupational Employment and Wage Estimates from the Bureau of Labor Statistics, the median hourly wage (including tips) of bartenders was $9.09, while the mean hourly wage is $10.48, both of which are slightly higher than food and beverage servers as a group. The median annual wage was $18,920 and the mean annual wage was $21,770.

If you go into the more detailed spreadsheet, you'll see that percentile figures are also available, and the annual income for the 90th percentile was $32,780. There are no figures for 95th percentile or 99th percentile, but a bartender earning $85,250 (260% of the 90th percentile) would probably be in the 99th percentile, if not higher.

Not impossible but, as I said, not likely.

Meanwhile, a bartender earning $150 a night and working 5 days a week for 50 weeks would gross $37,500, also putting him or her in the 90th percentile, but probably not the 99th percentile.

[KickahaOta]

I think there's a pretty strong argument to be made that money -- as in cash and electronic equivalents of cash -- isn't intended to be a long-term store of wealth, and that that's not a bug, that's a feature.

The main reason why money isn't a good long-term store of wealth is inflation. And inflation is a very interesting thing. If it's too high, so that nobody is willing to hold onto it at all and nobody is willing to borrow, the economy suffers. But if it's zero (or worse, negative), so that money does become a great long-term store of wealth, then the economy also suffers. People, especially the wealthy, stash their money away. The economy slows. People put off purchases as long as they can, because there's no incentive to buy anything earlier. The economy enters a Japan-style stagnation.

Inflation acts as an invisible, unavoidable tax on holding pure wealth -- on simply having money without doing something with it. And if it's in the right range, it's a positive force -- it gets people to invest rather than simply hide cash under the mattress, and it encourages a level of purchasing that stimulates the economy without overheating it.

[Pottapaug1938]

During my time in the financial services industry, I have seen more than one panicky investor cash out their investments (and, often, their retirement investments) so that they could keep cash in a safe deposit box, or else switch all of their holdings into money market accounts. In both cases, the stated goal was "so that I don't lose any more money".

My job did not permit me to overtly give investment advice; but from time to time, among other things, I did point out that neither money market accounts nor cash holdings protected them from "inflation risk" and a consequent diminution of the value of their holdings. This usually produced a plaintive response of "well, where can I put my money so that it's safe and won't lose value?" They were unable to truly grasp the fact that such investments do not exist.

The people who did the worst were the ones who said "I'm going to sell everything and buy gold. That NEVER loses its value!" Well, those people bought when the price of gold was $1,600 an ounce and up; and this morning, it was under $1,200. Oops....

[Gregg]

I think there's a pretty strong argument to be made that money -- as in cash and electronic equivalents of cash -- isn't intended to be a long-term store of wealth, and that that's not a bug, that's a feature.

The main reason why money isn't a good long-term store of wealth is inflation. And inflation is a very interesting thing. If it's too high, so that nobody is willing to hold onto it at all and nobody is willing to borrow, the economy suffers. But if it's zero (or worse, negative), so that money does become a great long-term store of wealth, then the economy also suffers. People, especially the wealthy, stash their money away. The economy slows. People put off purchases as long as they can, because there's no incentive to buy anything earlier. The economy enters a Japan-style stagnation.

Inflation acts as an invisible, unavoidable tax on holding pure wealth -- on simply having money without doing something with it. And if it's in the right range, it's a positive force -- it gets people to invest rather than simply hide cash under the mattress, and it encourages a level of purchasing that stimulates the economy without overheating it.

That's a really good post. What most populists screamers don't realize or admit is that inflation acts in favor of people with low or negative net worth, and especially in favor of people who have high debt loads. If you have a $1200 mortgage payment and inflation runs a pretty healthy 1.5% over the 30 years (do yourself a favor and only get a 15 or better yet 10 year mortgage but most people don't) about halfway through you start to notice that the monthly nut is a lot more manageable, provided you haven't doubled down with a HELOC and you've gotten pay raises that kept up with inflation.

[Patriotdiscussions]

During my time in the financial services industry, I have seen more than one panicky investor cash out their investments (and, often, their retirement investments) so that they could keep cash in a safe deposit box, or else switch all of their holdings into money market accounts. In both cases, the stated goal was "so that I don't lose any more money".

My job did not permit me to overtly give investment advice; but from time to time, among other things, I did point out that neither money market accounts nor cash holdings protected them from "inflation risk" and a consequent diminution of the value of their holdings. This usually produced a plaintive response of "well, where can I put my money so that it's safe and won't lose value?" They were unable to truly grasp the fact that such investments do not exist.

The people who did the worst were the ones who said "I'm going to sell everything and buy gold. That NEVER loses its value!" Well, those people bought when the price of gold was $1,600 an ounce and up; and this morning, it was under $1,200. Oops....

Ah no investments like that you say? I beg to differ, in fact one of my peeps has made a killing on arms and ammo. He "invested" his money into sks's years ago when they were 100 bucks each, they now go for 3-4 hundred each, better return then the market gave him and NO risk of his investment losing value(thanks fiat currency based inflation).

[Patriotdiscussions]

Of course most intelligent people realize gold and silver prices are low due to manipulation, sort of like gold fiat if you will, unless of course you believe they really have all that gold that they sell and hold for you..... Lol.



Two weeks ago when news broke about the first confirmed instance of gold price manipulation (because despite all the "skeptics" claims to the contrary, namely that every other asset class may be routinely manipulated but not gold, never gold, it turned out that - yes - gold too was rigged) we said that this is merely the first of many comparable (as well as vastly different) instances of gold manipulation presented to the public. Today, via the FT, we get just a hint of what is coming down the pipeline with "Trading to influence gold price fix was ‘routine’." We approve of the editorial oversight to pick the word "influence" over "manipulate" - it sound so much more... clinical.

What the FT found:

When the UK’s financial regulator slapped a £26m fine on Barclays for lax controls related to the gold fix, the UK financial regulator offered more ammunition to critics of the near-century-old benchmark. But it also gave precious metal traders in the City of London plenty to think about.

While the Financial Conduct Authority says the case appears to be a one off – the work of a single trader – some market professionals have a different view. They claim the practice of nudging a tradeable benchmark in order to protect a “digital” derivatives contract – as a Barclays employee did – was routine in the industry.

[Pottapaug1938]

Once again -- and typically -- PD has completely missed my point.

Anyone who has spent much of time in the financial services industry, whether as an individual investor or as a professional, can tell of investments which paid off as lucratively as that of PD's friend, if not more so. However, they can also tell of investments which lost much or all of their value. PD's friend caught a lucky break with his investment in SKS rifles; but PD's assertion that his friend ran "NO risk of his investment losing value only betrays his financial ignorance. To give but a few examples: there is the political risk from the possibility of governments banning possession of the rifles or prohibiting their importation or exportation; there is the risk that the value of SKS rifles could be diminished through overproduction or by the gun-buying public preferring another firearm; there is the risk that an as yet unknown flaw in the design of the SKS may appear and make the rifles valueless because no one wants them; and there are other risks as well.

Gold is another example. Like all commodities, its price fluctuates according to the laws of supply and demand; and many different things influence its price, such as political instability, the discovery of a new gold field or the superior performance of investments in the stock market. Investing in gold carries its own set of risks (loss due to theft is an obvious one; and it pays no dividends when held. Indeed, some years ago, someone did a study in which they found that at no point in our country's history, including the Great Depression, has gold outperformed the stock market during any 10-year period. Gold can certainly be a part of an investment portfolio, due to its easy liquidity; but no prudent investor would make it -- or any other individual investment -- the sole component of an investment portfolio.

[Patriotdiscussions]

Ok I must be wrong. Please name the firearm that costs less then it did 10 years ago. Thanks.

[Pottapaug1938]

Ok I must be wrong. Please name the firearm that costs less then it did 10 years ago. Thanks.

You ARE wrong. I NEVER said that a given firearm costs less than it did 10 years ago; I only said that it COULD, thus resulting in a loss, on Day 365 of Year 10, for someone who bought it on Day 1 of Year 1.

Now, let's get back to the topic of this thread.