[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 is just misinformation, I have worked with investment firms and family offices that regularly buy government securities.

[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.