[recuter]

If I was alive in 1923 and stashed away $8 million in ̶c̶a̶s̶h̶ (Edit: 100y bonds) would only be worth about $140 million today.

Had I put it into some fancy ETF (Recall Vanguard dates back only to 1975, but whatever) I'd be a billionaire.

That's it, that is the entire difference of less than an order of magnitude. Don't reckon the nickels and the dimes matter much to centenarians.

Most people don't even have $8000 to invest so they plow it all into crypto and beanie babies and we scoff at them trying to x10. Food for thought. Memento Mori.

Edit for clarity: I obviously didn't mean stash cash under the mattress. Sorry for the confusion.

[onlyrealcuzzo]

> If I was alive in 1923 and stashed away $8 million in cash it would only be worth about $140 million today.

Stashed it away as cash where? If you had $8M in 1923 and kept it under a mattress, it would still be $8M today - the difference is due to inflation - in 1923 you would've been the equivalent of a Billionaire today - and today... you'd have $8M.

I think things like this matter a lot.

If you invested in treasuries or only had a savings account with interest - you're going to get eaten alive by inflation, and over a long period of time - your wealth will decrease enormously - maybe as much as 50%+ (with a savings account).

If you instead had invested in the S&P - and it did what it did over the last 100 years - you'd have 2-3x what you started with in real terms.

Although, past performance != future performance. No one knows what the future will hold. Maybe the US won't even be around. Maybe we'll move to socialism. Maybe private companies get overrun with crooks and everyone loses most of their money because the whole S&P goes Enron/Wirecard. Who knows!

But my guess is I'll be better off with equities than cash medium & long term. And fortunately, I'm not too concerned about short-term.

[ikiris]

If you only had a savings account with interest, you'd be lucky to have anything considering the great number of bank failures and lack of FDIC for a portion of that timeframe.

[ceejayoz]

> If you had $8M in 1923 and kept it under a mattress, it would still be $8M today

Saving account interest rates haven't been 0% for the whole last 100 years.

It's not a great investment, but you'd have substantially more than $8M.

[karatinversion]

The parent specifically refers to holding it as cash (“under the mattress”), though. And of course, if you do put it in the bank 1923, there’s no deposit insurance for the first ten years, any possible bank might just go under in the first ten years…

[edgyquant]

How many of them did though?

[karatinversion]

The numbers I find are that some 11,000 out of 25,000 U.S. banks failed between 1929 and 1933 - the key words to search for are “bank failure” and “Great Depression”

[Dylan16807]

How much more would you have with a savings account?

Apparently the $140M number was bonds. Edit: Or, theoretical bonds that match inflation and don't actually exist?

[onlyrealcuzzo]

In a non-funny-money-world, government bonds would yield more than expected inflation.

No one would ever give the government money expecting to lose money.

Only in a world where you can always count on the government to lower interest rates ad-infinitum to keep itself solvent which pushes up the value of your bonds to someone who's willing to pay more money to lose the same amount of money later (a greater fool - although, are you a fool if you've been able to count on this like clockwork for the last 30 years?).

[kgwgk]

> In a non-funny-money-world, government bonds would yield more than expected inflation. > No one would ever give the government money expecting to lose money.

What would they do? Is there a dominating (stochastically) alternative?

[Dylan16807]

I don't follow your argument here.

How about a hypothetical?

Let's say government bonds pay 3%, they have done so for decades, and we're confident they will keep doing so for decades.

So right off the bat, no lowering of interest rates ad-infinitum.

Let's also say inflation is 4%.

Everyone wants to beat inflation. But you need to find an investment opportunity for that. And the higher an investment yields, the riskier it is.

If you can't find a good investment, what's plan B? Surely it's not putting your money in a vault and losing 4% a year. Isn't plan B buying the government bonds and losing only 1% a year?

[onlyrealcuzzo]

AAA corporate bond yield has always been about ~1% above the treasury yield [1].

Almost nobody has bought government bonds for a long time besides pension funds (due to obligations), banks (due to regulations), foreign governments (due to ForEx necessity), the Fed, and a pretty small amount (~8%) held in 401ks (overwhelmingly by older folks) [2].

Rich people certainly aren't buying Treasuries to protect their wealth - unless it's someone like DoubleLine betting on interest rates only going down and the forced greater fool (pension funds).

401k people are only buying treasuries because of the "age old wisdom" - not because it makes sense unless you think like DoubleLine that treasury yields - long term - are only going down.

[1] https://fred.stlouisfed.org/series/AAA10Y

[2] https://www.thebalancemoney.com/who-owns-the-u-s-national-de...

[roflyear]

This isn't true.

If you had a bunch of gold, for example, you'd have to pay for security to... secure it.

People are willing to "pay a premium" to store money somewhere risk-free.

[ilikehurdles]

If you had $8million in 1923 cash stashed away, you’d have $8million in 2023 cash today. Ie you’d have lost about 94% of your buying power.

[pixl97]

And if you had 8 million in a bank in 1923 there's a good chance it would have all been gone when the bank collapsed and there wasn't FDIC insurance.

[astrange]

1923 dollars are worth more than face value to collectors, but that's marginal value so you'd have to sell them pretty slowly.

Anyway, that's what you get for not contributing to money velocity. It's not designed as a savings product, so don't save with it.

[int_19h]

If we're being pedantic, it depends on what kind of cash. A silver 1923 dollar coin goes for $20-30 today.

[tarboreus]

Through most of that history, interest rates in savings accounts exceeded inflation, often significantly so. So I find this unconvincing. Obviously not a great investment comparatively, but the number in the account is going to be significantly higher.

[roflyear]

Really? I can't easily find a chart going past 1980 for "savings rates" nevermind that these accounts often have a $ cap, and nevermind going back to 1920.

[jldugger]

10x matters quite a bit in generational wealth terms. If every generation doubles the number of plausible claimants to the wealth, thats about what is needed to balance out.

On the other hand:

> If I was alive in 1922 and stashed away $8 million in cash it would only be worth about $140 million today.

Why would it not be worth $8 million?

[recuter]

From peasants shoes to peasants shoes all in three generations, signore Medici.

> Why would it not be worth $8 million?

https://www.in2013dollars.com/us/inflation/1923

[lkbm]

You've got it backwards. In 1923, your 8 million 1923-dollars was worth what $138 million 2023-dollars is today. You started with $138 million 2023-dollars, but denominated in 1923-dollars that's $8 million.

If you just hold on to it your 1923-dollars have become 2023-dollars, but there's still exactly $8 million of them. You've lost nearly 95% of the value.

[ByersReason]

however, given that your 1923 dollars were likely silver dollars which currently trade for $32 (for junk grade) and up ... I made that 8m * 32 = 256m :) - and better if you were sensible and stored un-circulated dollars

[kgwgk]

>> If I was alive in 1923 and stashed away $8 million

> your 1923 dollars were likely silver dollars

It's unlikely that you had 200 metric tons of silver coins stashed away.

[tristor]

> It's unlikely that you had 200 metric tons of silver coins stashed away.

I think the grandparent was imagining they were silver certificate dollars[1], not actual silver dollar coins. That said, silver certificate dollars needed to be converted at some point in the past, in 2023 they can't be converted and only have collector value, and $8 million worth would dilute their collector value substantially.

[1]:https://www.investopedia.com/articles/markets-economy/090116...

[roflyear]

Well, you'd have to have a safe place to literally store that cash. If that save place was a bank, then you'd not have silver dollars, unless you paid for storage.

Also banks weren't really safe that entire time!

[quickthrowman]

It should read “If I was alive in 1923 and invested $8M in 100y bonds that return the exact rate of inflation, I’d have $140M today”

Plugging it into a USD inflation calculator checks out.

[jldugger]

Unfortunately we don't have such a thing. Especially in 1922, we didn't even have TIPS, or 100 year bonds. The best case scenario you're looking at something like 10 year treasuries at 4.3 percent[1] in 1922. Shorter durations will help match dramatic inflation moves things get weird in the great depression -- a bout of 10 percent deflation happened in 1933.

    [1]: https://www.multpl.com/10-year-treasury-rate/table/by-year

[bobleeswagger]

$8 million in cash will always be $8 million in cash. "Stashed it away" is pretty vague but cash is cash.

[tarboreus]

Only if you literally mean physical cash. Banks offered pretty significant interest rates historically.

[kgwgk]

Why say “stash away” if not to suggest the literal “hiding the money somewhere” meaning rather than “opening a savings account”?

[jldugger]

With the slight caveat that the FDIC wouldnt exist until a decade after you put your money in and in no case would it protect all 8 million dollars.

[knodi123]

> Why would it not be worth $8 million?

mice ate some.

[psychlops]

Meaning trust fund children.

[verteu]

The article provides a counterpoint: If you invested in "the market" in 1851, you'd still be underwater (in real terms) in 1932.

See page 44.

[kgwgk]

A counterpoint to what?

What's your definition of "underwater (in real terms)"? That investment would have been paying dividends for decades. What happens with those cash flows?

[verteu]

It was a counterpoint to the common wisdom that "stock returns beat inflation over long-term periods." But I didn't realize the author discarded dividends -- that makes the entire analysis suspect.

[b33j0r]

Not fair. That Princess Diana beanie baby is a hold. Take a long position, you're going to be looking at it until you die!

I wish I still had my pogs! (Almost not kidding that it's due for a re-commercialization or embedded marketing for some comic book franchise)

[roflyear]

What return are you assuming for cash?