9/30/2007

Should the people save?

Less than 30 years ago, the top prize for the Big Sweep ticket was $400k compares to today's $2 million. Hitting the top prize then was to become a rich man. The money could easily buy 10 semi Ds. But if this guy were to put the money in the bank to earn interest, to save, he is relatively a poor guy today. Even if the amount is doubled or tripled, he could not afford a decent semi D. For less than $20k, one could drive off a brand new Mercedes 200. Today, not even enough to pay for a cheap weekend car. Is saving a good thing? The Americans may be doing one of the smartest thing. Spend the future money now and pay the debt in the future with depreciated currency. In that way they get the full value of the money today. The qualification is that they must be able to pay later. Why the obsession to make the people save when the end result is that the saver gets less than what he gets at the end, the value drops significantly? Who benefits from such a scheme? Not that saving is bad. But it is bad and a poor way to manage your money if inflation and the cost of living is not controlled. This is the dreadful thing. For every 2 or 3 % interest gain, inflation may double or triple and the money, though growing in size, is actually losing its value. Saving is a big farce if other factors are not managed properly to protect the value of money. It is quite wicked actually.

4 comments:

  1. there's why it is not so simple...

    the cash locked up in cpf is channelled for great investments returns,...

    in return, you get peanuts...

    and the best part...

    opting out of this arrangement is not allowed!

    ReplyDelete
  2. > But if this guy were to put the money in the bank to earn interest, to save, he is relatively a poor guy today. <

    This is true and the fact is that we no longer have a HARD MONEY system. We use CURRENCY—fiat currency, which is worthless paper the govt prints out. A picture of a dead president or some other notable is used to convey the idea of being "sound" and "official", so that people trust the currency, which is used as a medium of exchange.

    Inflation, and the resulting LOSS OF PURCHASING POWER is inherent in the nature of paper currency. This is because the govt and the banks can INCREASE the supply of money, and they do it—everyday.

    In fact, the way the money we use today is "created" is by creating loans. If you look up Central Banking, you'll get an idea of how the process works.

    To beat the consequence of INFLATION and the resultant decrease in purchasing power, think 'CASH FLOW' instead of 'SAVING'.

    The reasoning behind this is never told to you by your (govt) teachers: when you have cash flow happening (off some asset), it doesn't really matter so much if the money supply is inflated, because as other prices rise (due to inflation) so do the prices you charge too (provided you still stay competitive and that there is still a "market" for what you offer)

    ReplyDelete
  3. ! Y a w n !

    Some self-righteous self-professed ex-Singaporean and ITS usual loads of poo-poo. Someone help this blog!
    Someone maybe more intelligent, more decent, more human, more genuine, more macho, more honest, more sincere, more credible, more Singaporean, than this freak!!

    * elle *

    ReplyDelete
  4. Is that your best shot?

    How about attacking my economic reasoning? With zest and vigour. Can you?

    Oh, you need brains for that. Sorry, that peremptorily excludes you.

    I will have a slag on you work. I think it is even below sub standard.

    I have never seen one post of yours containing ideas which were YOUR OWN WORK, and which actually contained anything of substance (i.e. "heart"). All you do is cut and paste, and regurgitate tired bromides, who like you, should fuck off and die somewhere, then spontaneously combust so you don't stink up the place ;-)

    Hey, elle, how's the national health in Blighty? You still bludging off the system, and off the missus hiring out her nasties (and boy, are they NASTY!) to East European migrant workers?

    Good on you, you old tosser. You possess neither any HEART nor do you have an iota of FEELING in your being.

    Thus you have no intellect, no heart, no soul, no feeling...as cold as a fish and as lifeless as a corpse... and yet, you are alive.

    I would say, that braindead as you are, you're a fucking lucky sod!

    ReplyDelete