[simonh]

Devaluing in-the-mattress savings is a good thing, hence all the many government schemes to incentivise small scale productive investment. Here in the UK that's through tax free consumer savings accounts like ISAs, but also pensions. Savings that are invested do work in the economy fund businesses, promote economic activity and aid job and wealth creation. Stuffed mattresses are a boat anchor on the economy.

Having said that, deflation isn't always the awful spectre of doom it's sometimes made out do be, especially if it's due to technological improvements or increased supply. As the article we're all notionally discussing explains, inflation in a reasonably well managed economy is generally differential and reflects shifts in the structure of the economy.

[nagasadhu]

That's basically saying u can't hold on to ur hard earned money after paying taxes. Give it to the government or some pension firm. And depend on the government and incompetent regulators to take care of you in your old age.

[dinom]

What is "in-the-mattress" savings exactly... besides one person's savings that another wants to spend differently?

Who should be the ultimate judge of how capital is saved and invested? You? The government? What about the person who actually did the saving?

Taken to it's logical conclusion, saying that "devaluing in-the-mattress savings is a good thing" sounds a lot like "let's soak the rich" to me.... and it's a very slippery road to serfdom.

[simonh]

In-the-matress savings are money that is not invested, such as cash stuffed in a matress.

This is the opposite of soaking the rich. The well-off generally have a very large proportion of their wealth invested in productive economic activities, with returns well above inflation.

[dinom]

You haven't convinced me. After all... what about short-term bills? Are they considered savings or investment? What about FX accounts? What about operating capital? In other words... what is "not invested"? An axiomatic definition is imperative... not turtles all the way down.

Savings and investment are largely synonymous so I stand by my initial statement. How can one expect to buy a house if they're precluded from putting savings "in-the-mattress"? I'm not suggesting they'd be better or worse off using leverage... I'm saying it is solely for them to determine since they're the ones who are most familiar with their own circumstances.

If someone enjoys wiping their rear with $100 bills that's up to them.

As I can tell, the best definition for "in-the-mattress savings" is capital that is deemed a bad investment by any/every one except the person who managed to create the savings itself.

Your argument leads to a slippery slope... what would stop me from taking your assets because they don't fit my definition of "investment"?

[simonh]

Short term bills are serving a useful economic function and pay interest, because they are useful to people. When I was saving for a deposit on a house I kept the money in savings accounts and ISAs, again those serve a useful economic function and pay interest.

The basic fact is that money is a financial instrument created and managed by a government for their own purposes. They create it and therefore obviously they control the supply of it. It's value is therefore based on the degree to which people trust that government to manage it effectively, as with a bond or equity or any other financial instrument.

[dinom]

Useful is in the eye of the behold... that's largely the point. No one can judge what or how "useful" something is besides the rightful owner of the asset. That includes cash (under a mattress), bonds, stocks, options, toilet paper, apples, bananas, etc.

If short term bills are serving a "useful economic function" and "in-the-mattress savings" does not... then there must be some asset that serves "the most useful economic function". No? Are you suggesting to know the true intrinsic value of all assets?

So, to assert that "Devaluing in-the-mattress savings is a good thing" one needs to assume that this objective way to measure value exists. Otherwise how can we [de]value things if we can't objectively valuate them?

Unfortunately, since the value theory of labor fails in so many ways where the subjective theory of value does not, it's hard to see your rational as anything but an appeal to authority.

Continuing a mindless appeal to authority just leads to tyranny. And therein lies the slippery slope.

[simonh]

There’s no appeal to authority or need for me to know the ‘intrinsic’ value of things. It’s up to individual people what they will pay for things, or sell them for. That’s what a market is.

Short term paper pays interest because it’s issued by people who need short term money and are willing to pay for it. There’s no central authority setting its value, no objective criteria, no law of physics, just actual people choosing to pay for something they need. Same with equities, same with bonds. Same with money itself.

As I said even central governments don’t set the value of money, only it’s supply, people set its value. That’s why the currencies in Venezuela and Zimbabwe collapsed. The people selling things chose how many ZB$ they wanted to sell things for, and buyers decided how much they would pay, and it turned to be a lot because there was so much around.

Nobody needs you to keep money in a mattress. It doesn’t benefit anyone, so they won’t pay you to do it no matter how useful you think it is to you. An economy with a significantly appreciating currency is set up to incentivise not engaging in economic activity, not investing and not lending isn’t going to work very well because those incentives have to be paid by someone somehow. Why would they do that?

[sokoloff]

That is true but also feels somewhat circular. “The set of people who are prone to make optimal choices with their money is correlated with the set of the people who have more money today.”

It’s not clear the direction of the causal link and it’s almost surely a bit of both. Having more money affords the luxury of making (and time to research or money to outsource) better decisions. Making better decisions leads to having more money.

If the predominant economic paradigm were one that favored in-mattress-saving (such as persistent deflation might be), would the “rich” still be as inclined to invest in today’s productive-given-inflation assets or would they pivot to being heavy in-mattress savers? The ones that didn’t adjust would presumably become relatively less rich over time.

[merpnderp]

The value of a worker 50 years ago is surely far less to me today than it was to his employers back then. Yet if we had deflation his work would be worth more today than back then. Why should I value a road builder’s work today when that road has been tore up 10x over since then?

[dinom]

Lol, here: https://news.ycombinator.com/item?id=31539114

you say "I don’t want to devalue their savings" yet above you say

"Devaluing in-the-mattress savings is a good thing".

Either your thinking has changed or, you're trying to cause confusion or, maybe confused yourself, or are trolling. At this point I suspect I may even be chatting with an ELIZA... so what else is there for me to say? Think whatever you want.

¯\_(ツ)_/¯