[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?

[dinom]

> That’s what a market is.

To win me you need to consider the difference between a free market vs. a coerced or highly regulated one; the dynamics likely change.

> even central governments don’t set the value of money

And the difference between real and nominal rates? I'd say your statement is largely true but that doesn't mean a central bank doesn't try to manipulate real rates. That's actually their charter... price stability.

However, there is a strong argument to be made that they're not very good at it and can make things worse. The last year of exceptionally high inflation is a rather obvious real-world example.

> Nobody needs you to keep money in a mattress

Maybe true, but the question isn't what do others need... it's who gets to allocate my capital? I contend it should be me, you seem to think otherwise. Why should the government actively try to de-value people's savings? Is it a good thing to squeeze elderly retirees back into the work-force?

This is what you're implying when you say "Devaluing in-the-mattress savings is a good thing". It could be a bad thing; again esp. for pensioners and people who don't have better investment opportunities.

It's not just a question of "does the theory hold water" but also one of morality. This is why I think the phrase "in-the-mattress savings" is loaded and full of hooey. It just sounds like you're telling me I'm an idiot and can't be trusted to spend my own money wisely? It's not convincing and quite insulting to boot! Lol

I believe savings is always a good thing and it's up to the individual to determine their own preference in terms of allocation; some under a mattress and maybe some in a shoebox or some short General Dynamics puts.

The point is it's up to the individual. Why should someone else have a say when they haven't been entrusted? That is the very gist. Why should someone else have a say when they haven't been entrusted?

Freedom and liberty vs. tyranny. That's it... you're going to have a hard time convincing me that financial repression is the moral high ground.

[simonh]

> Why should the government actively try to de-value people's savings? Is it a good thing to squeeze elderly retirees back into the work-force?

I don’t want to devalue their savings. I’m in my 50s and looking forward to retiring myself. I want them to have productive savings that grow and provide them with a retirement income. Savings accounts, ISAs, pension funds, stocks and bonds, even property are all productive savings that grow and can provide income in retirement. They help the economy and help savers.

> who gets to allocate my capital? I contend it should be me, you seem to think otherwise

Not at all, it should absolutely be you, we just talking about incentives. The question we’re debating is what should happen to the value of cash you keep in your pocket. Literal cash. Should it appreciate in value or depreciate? Is there a benefit to society either way?

If money itself appreciates in value that’s because someone is paying a cost for that to happen. I don’t think that’s a reasonable expectation. Beyond that, it benefits society if savings are put to economically useful purposes, such as savings accounts and investments. A small amount of inflation incentivises this.

I’m not telling anyone what to do. But on the flip side you can’t tell people what to do either. You can’t tell them what they will or won’t pay you to do, and they’re not going to pay you to keep your money in your pocket, mattress, whatever by inflating the value of cash.

Cash is a financial instrument. You own the notes, but can’t set its value. We all do that collectively, so other people have a say in it. That’s just the nature of it.

[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.