| > The point of money is to be spent, not to hold it. Why? Why prioritize spending now rather than later? If I can't defer consumption, I will always need to work, and I can't retire. That would be financial oppression. > You can't have an asset that's both good to hold over the short and long term. I am abnormally curious why this is the case. > That's because the point of an economic system is to trick other people into making food for you I'd rather they make food for me when I'm old, instead of when I'm young and I can make it for myself. How is this an argument against saving? > holding money instead of trading it obviously isn't going to lead to that. While it's true that if everyone saved in the short term, we'd see persistent recessions, it's bound to end, as people start to want to spend their earned money. In "Die with Zero", an argument is made to allocate and spend everything you've made, because this life is all you've got to do so. I agree with this book. Even in extreme deflation, people buy things they need. For example, technology prices have been in exponential free fall for decades, yet today the world's largest companies have a lot to do with selling computers, phones, and/or software. The only reason for government currency inflation is balancing the (wasteful) budget, after the government spends beyond its means. This allows soft-defaults (government paying bond coupons in a diminishing currency) instead of hard-defaults (government failing to pay bond coupons). But both kinds of defaults should be seen as bad, by investors. To get an idea of the scale of the misallocation, compare the tax revenue to GDP with government spending to GDP. The US government pays for 44% of the yearly domestic product, while only taxing 9.9%. This amounts to a LARGE benefit to those printing money and spending it before price inflation hits. - https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS - https://tradingeconomics.com/country-list/government-spendin... |
I should've said spent or invested. You can save by turning money into I bonds or stocks for retirement, and that works because it funds something productive (stocks/corp bonds) or the government would like you to defer consumption due to inflation (I bonds).
But remember money (vaguely) represents stored up labor. In nature you can't retire because you can't save up labor; saving money isn't just like a squirrel storing nuts for later, it's also like if the squirrel could put off gathering them at all.
> I am abnormally curious why this is the case.
https://en.wikipedia.org/wiki/Risk–return_spectrum
Long term investments (stocks) are better for retirement because they're riskier.
> I'd rather they make food for me when I'm old, instead of when I'm young and I can make it for myself. How is this an argument against saving?
By "other people" I meant farmers, so you're probably not doing that work yourself. There will probably be farms because other people are continually buying enough from them to keep them producing, but if nobody buys something for long enough it won't get cheaper, the market will cease to exist because nobody will produce it anymore. Saving money/retiring in this way is kind of parasitic.
An example would be FOGBANK, which the government didn't produce for so long it forgot how to do it: https://en.wikipedia.org/wiki/Fogbank
> Even in extreme deflation, people buy things they need.
There was a Great Depression where people stopped being able to do that, you know. Deflation really upsets people. Deflation in Germany also got the Nazis elected.
It's not good to think about "the government spending beyond its means" as if it was a household. The government's the one that invented the money in the first place. A fixed money supply doesn't make sense on a planet with an increasing population that all want to use your money because of how awesome the US financial empire is.
And not only did the US fail to get inflation despite best efforts from ~1980-2020, other countries are seeing inflation now without extra deficits.