When I first started working as a wage slave software engineer in 1999, I was very attracted to the ideas of "The Retire Early Homepage". If I save and invest wisely in the stock market, then eventually I'd have enough savings that I could live off my investment gains.
It's very similar to the idea of a slave buying his own freedom. I didn't see it that way. I interpreted it as the reward for saving and working.
I recently realized that the stock market doesn't outperform true inflation. Instead of growing exponentially, my savings are actually shrinking exponentially! After 10 years of working, I came to a horrible realization. My current savings are stolen via the State faster than I can earn new savings!
My savings are being stolen, via a declining stock market and inflation. Not only has the nominal value of my stock investments declined, but I've also lost ground to true inflation.
Here's an example. Suppose I can save $10k per year (inflation-adjusted $10k). Suppose the real return on my investments is negative 10%, including inflation. Then, my savings will never be greater than $100k! (inflation-adjusted $100k) I say "inflation-adjusted $10k" to avoid making an awkward comparison; assume that inflation is directly deducted from my savings, rather than being a nominal increase in prices.
Instead of increasing exponentially, my savings increase asymptotically to $100k! State theft of my savings limits how much savings I can acquire!
I always thought that "be diversified" was stupid investment advice. If it's more than 30 years until I retire, I should invest in the asset class with the highest expected return. Bonds are a guaranteed inflation ripoff. At the time, I thought "I should stick with stocks. Over 30 years, volatility should average out."
I was shocked to realize that stocks also don't outperform true inflation! If gold/silver outperform stocks, then that should be my primary investment. Right now, my new investments are directed to GLD and SLV. I'll switch to physical metal in another few years.
I'm keeping my stock investments, which probably is a mistake. All future investments will be SLV or GLD or physical metal. The main problem with physical bullion is that my parents forbid me to invest in physical metal while I'm living with them. There's also the "safe place to store it" problem.
That was a shocking discovery. State bureaucrats stealing my savings almost as fast as I can acquire new savings! My savings were stolen by a combination of inflation and a declining stock market. After 10+ years of investing, my savings have reached my State-allotted asymptotic maximum. The correct investment strategy is to invest in physical metal, or in building your own business.
Thursday, July 1, 2010
The State Stole My Savings!
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13 comments:
Savings are inherently risky, even in a free market. There is nothing that is guaranteed to have more value in the future than it has today. Yes, somethings are often better than others, but these are never guarantees. This has nothing to do with the state (not that the state can't make things worse), but it is simply the nature of not being able to predict the future.
I think it helps to think in terms of resources instead of money. Yes, money (gold included) is supposed to represent resources in an abstract way, but that can deceive you sometimes. If there were no common currencies, what would you want to be paid in? Perhaps you would choose a combination of food and useful resources such as wood and metal. One way or another you are choosing something that you would think will be valuable to you. The hard part, of course, is predicting the proportions of the things that you want since your needs and desires are constantly changing. This is hard, even if you were paid daily, but imagine if you were paid once a month, or once a year! You would have to predict what you would need for a much longer period of time and you would likely make many bad choices.
Eventually, you would decide that you will choose to be paid mostly in things that you do not actually need, but that you think others are very likely to need during the period of uncertain times, so that you can easily trade what you have for what you will need.
These things that you choose to be paid in to use as trading resources will have some risk associated with them too. Some of them will be worth more and some will be worse less when you choose to actually trade them for the things you need. If you could predict the future, you would be paid with the resources which will be the most valuable in the future (and that will not get destroyed or perish between now and then). But since we cannot predict the future, this is really hard.
Good or bad choices aside, one would expect things on average to be worth less in the future than they are today, one bird in your hand (that you can use today) is better than two in the bushes that you might be able to use tomorrow. This holds true for most things unless you have a zero sum or diminishing resource game. If every time you used a resource it could never be replaced, then the things others choose to use today will make the things you save for tomorrow more valuable. But, this is rarely the case in nature. As long as the earth is getting more energy from the sun as it gives off to space, total resources accumulation is increasing on earth.
So, in a resourceful economy, one which innovates and multiplies the full accumulation of resources over time (via innovation and flexibility), most things will naturally be worth less in the future than they are today. It is therefor very hard in this situation to save something and have it be worth more in the future than it is worth today. The only chance you have of this is: the possibility of others valuing your savings in the meantime more than you value it. They have to value it so much so that they increase overall resources (of the correct things) through proper innovation and direction of resources. If they do, you may be able to profit from this gain. This is the hope of the stock market and loans, gold alone can never do this! This last point is very important, without this, future value of your resources are never likely to be worth more (unless you miraculously chose to save the minority of things that are worth more).
...continued below (you should consider bumping your character limit up a bit)
Savings are inherently risky, even in a free market. There is nothing that is guaranteed to have more value in the future than it has today. Yes, somethings are often better than others, but these are never guarantees. This has nothing to do with the state (not that the state can't make things worse), but it is simply the nature of not being able to predict the future.
I think it helps to think in terms of resources instead of money. Yes, money (gold included) is supposed to represent resources in an abstract way, but that can deceive you sometimes. If there were no common currencies, what would you want to be paid in? Perhaps you would choose a combination of food and useful resources such as wood and metal. One way or another you are choosing something that you would think will be valuable to you. The hard part, of course, is predicting the proportions of the things that you want since your needs and desires are constantly changing. This is hard, even if you were paid daily, but imagine if you were paid once a month, or once a year! You would have to predict what you would need for a much longer period of time and you would likely make many bad choices.
Eventually, you would decide that you will choose to be paid mostly in things that you do not actually need, but that you think others are very likely to need during the period of uncertain times, so that you can easily trade what you have for what you will need.
These things that you choose to be paid in to use as trading resources will have some risk associated with them too. Some of them will be worth more and some will be worse less when you choose to actually trade them for the things you need. If you could predict the future, you would be paid with the resources which will be the most valuable in the future (and that will not get destroyed or perish between now and then). But since we cannot predict the future, this is really hard.
Good or bad choices aside, one would expect things on average to be worth less in the future than they are today, one bird in your hand (that you can use today) is better than two in the bushes that you might be able to use tomorrow. This holds true for most things unless you have a zero sum or diminishing resource game. If every time you used a resource it could never be replaced, then the things others choose to use today will make the things you save for tomorrow more valuable. But, this is rarely the case in nature. As long as the earth is getting more energy from the sun as it gives off to space, total resources accumulation is increasing on earth.
...continued below (you should consider bumping your character limit up a bit)
Savings are inherently risky, even in a free market. There is nothing that is guaranteed to have more value in the future than it has today. Yes, somethings are often better than others, but these are never guarantees. This has nothing to do with the state (not that the state can't make things worse), but it is simply the nature of not being able to predict the future.
I think it helps to think in terms of resources instead of money. Yes, money (gold included) is supposed to represent resources in an abstract way, but that can deceive you sometimes. If there were no common currencies, what would you want to be paid in? Perhaps you would choose a combination of food and useful resources such as wood and metal. One way or another you are choosing something that you would think will be valuable to you. The hard part, of course, is predicting the proportions of the things that you want since your needs and desires are constantly changing. This is hard, even if you were paid daily, but imagine if you were paid once a month, or once a year! You would have to predict what you would need for a much longer period of time and you would likely make many bad choices.
Eventually, you would decide that you will choose to be paid mostly in things that you do not actually need, but that you think others are very likely to need during the period of uncertain times, so that you can easily trade what you have for what you will need.
These things that you choose to be paid in to use as trading resources will have some risk associated with them too. Some of them will be worth more and some will be worse less when you choose to actually trade them for the things you need. If you could predict the future, you would be paid with the resources which will be the most valuable in the future (and that will not get destroyed or perish between now and then). But since we cannot predict the future, this is really hard.
Good or bad choices aside, one would expect things on average to be worth less in the future than they are today, one bird in your hand (that you can use today) is better than two in the bushes that you might be able to use tomorrow. This holds true for most things unless you have a zero sum or diminishing resource game. If every time you used a resource it could never be replaced, then the things others choose to use today will make the things you save for tomorrow more valuable. But, this is rarely the case in nature. As long as the earth is getting more energy from the sun as it gives off to space, total resources accumulation is increasing on earth.
So, in a resourceful economy, one which innovates and multiplies the full accumulation of resources over time (via innovation and flexibility), most things will naturally be worth less in the future than they are today. It is therefor very hard in this situation to save something and have it be worth more in the future than it is worth today. The only chance you have of this is: the possibility of others valuing your savings in the meantime more than you value it. They have to value it so much so that they increase overall resources (of the correct things) through proper innovation and direction of resources. If they do, you may be able to profit from this gain. This is the hope of the stock market and loans, gold alone can never do this! This last point is very important, without this, future value of your resources are never likely to be worth more (unless you miraculously chose to save the minority of things that are worth more).
...continued below (you should consider bumping your character limit up a bit)
Savings are inherently risky, even in a free market. There is nothing that is guaranteed to have more value in the future than it has today. Yes, somethings are often better than others, but these are never guarantees. This has nothing to do with the state (not that the state can't make things worse), but it is simply the nature of not being able to predict the future.
I think it helps to think in terms of resources instead of money. Yes, money (gold included) is supposed to represent resources in an abstract way, but that can deceive you sometimes. If there were no common currencies, what would you want to be paid in? Perhaps you would choose a combination of food and useful resources such as wood and metal. One way or another you are choosing something that you would think will be valuable to you. The hard part, of course, is predicting the proportions of the things that you want since your needs and desires are constantly changing. This is hard, even if you were paid daily, but imagine if you were paid once a month, or once a year! You would have to predict what you would need for a much longer period of time and you would likely make many bad choices.
Eventually, you would decide that you will choose to be paid mostly in things that you do not actually need, but that you think others are very likely to need during the period of uncertain times, so that you can easily trade what you have for what you will need.
These things that you choose to be paid in to use as trading resources will have some risk associated with them too. Some of them will be worth more and some will be worse less when you choose to actually trade them for the things you need. If you could predict the future, you would be paid with the resources which will be the most valuable in the future (and that will not get destroyed or perish between now and then). But since we cannot predict the future, this is really hard.
Good or bad choices aside, one would expect things on average to be worth less in the future than they are today, one bird in your hand (that you can use today) is better than two in the bushes that you might be able to use tomorrow. This holds true for most things unless you have a zero sum or diminishing resource game. If every time you used a resource it could never be replaced, then the things others choose to use today will make the things you save for tomorrow more valuable. But, this is rarely the case in nature. As long as the earth is getting more energy from the sun as it gives off to space, total resources accumulation is increasing on earth.
So, in a resourceful economy, one which innovates and multiplies the full accumulation of resources over time (via innovation and flexibility), most things will naturally be worth less in the future than they are today. It is therefor very hard in this situation to save something and have it be worth more in the future than it is worth today. The only chance you have of this is: the possibility of others valuing your savings in the meantime more than you value it. They have to value it so much so that they increase overall resources (of the correct things) through proper innovation and direction of resources. If they do, you may be able to profit from this gain. This is the hope of the stock market and loans, gold alone can never do this! This last point is very important, without this, future value of your resources are never likely to be worth more (unless you miraculously chose to save the minority of things that are worth more).
This is all without any common currency. The addition of currencies to the market place, even such as gold does not change this overall picture. The currency cannot change the nature of things, it is simply a mechanism (an abstraction) to facilitate storing and trading, but it cannot change the nature of those things (gold included).
This is disappointing, yes. And when the common currency can be devalued by the state, it is way worse. But don't be fooled into thinking that this does not happen in a free market. Either way, you have excess today; that is why you save! Not because of the socialist idea that somehow you can insure your future wealth. You plan for the future but you cannot predict it. Your excess today may be worth to others less than it is worth today, but the funny thing about value, is that it is personal. So you excess today is still worth more to you in the future than it is worth to you today! It is still worth saving. Just hope that you can save something that retains value better than surplus grain rotting in a silo somewhere. :(
...continued from above (you should consider bumping your character limit up a bit)
Good or bad choices aside, one would expect things on average to be worth less in the future than they are today, one bird in your hand (that you can use today) is better than two in the bushes that you might be able to use tomorrow. This holds true for most things unless you have a zero sum or diminishing resource game. If every time you used a resource it could never be replaced, then the things others choose to use today will make the things you save for tomorrow more valuable. But, this is rarely the case in nature. As long as the earth is getting more energy from the sun as it gives off to space, total resources accumulation is increasing on earth.
So, in a resourceful economy, one which innovates and multiplies the full accumulation of resources over time (via innovation and flexibility), most things will naturally be worth less in the future than they are today. It is therefor very hard in this situation to save something and have it be worth more in the future than it is worth today. The only chance you have of this is: the possibility of others valuing your savings in the meantime more than you value it. They have to value it so much so that they increase overall resources (of the correct things) through proper innovation and direction of resources. If they do, you may be able to profit from this gain. This is the hope of the stock market and loans, gold alone can never do this! This last point is very important, without this, future value of your resources are never likely to be worth more (unless you miraculously chose to save the minority of things that are worth more).
...continued from above again...
This is all without any common currency. The addition of currencies to the market place, even such as gold does not change this overall picture. The currency cannot change the nature of things, it is simply a mechanism (an abstraction) to facilitate storing and trading, but it cannot change the nature of those things (gold included).
This is disappointing, yes. And when the common currency can be devalued by the state, it is way worse. But don't be fooled into thinking that this does not happen in a free market. Either way, you have excess today; that is why you save! Not because of the socialist idea that somehow you can insure your future wealth. You plan for the future but you cannot predict it. Your excess today may be worth to others less than it is worth today, but the funny thing about value, is that it is personal. So you excess today is still worth more to you in the future than it is worth to you today! It is still worth saving. Just hope that you can save something that retains value better than surplus grain rotting in a silo somewhere. :(
This is Blogger, so I don't control the engine. "Move to self-hosted WordPress" is on my list of things to do.
Sigh, I figured so much. Sorry if it came off as a criticism, it was meant as a suggestion. Sorry for all the double posts too, the engine kept saying they were rejected (got lot's of 404s). Feel free to delete them if you can.
At the moment I'm trying to save some money for the future.
I'm investing mainly in stocks.
I'm going for sectors that are always needed and for which the general opinion is that will be needed even more in the future.
So far my score is that the value of my stocks is staying constant i.e. they are going down at the level of inflation.
I think I picked my stocks reasonably well in that the recent stock market depressions are just knocking back the value of my stocks to the value at which I purchased at.
I'm still losing at the rate of inflation though.
I hear Goldman Sucks has high-frequency computer trading algorithms and that against all probability every day is a winning day for them at the stock market.
Remember that "true inflation" equals "price of gold" (by FSK standards).
Goldman Sachs makes money with high-frequency trading because:
- They co-locate servers with the exchange.
- They get a free peek at incoming customer orders.
Actually, most banks are making money via simpler methods. They're borrowing at the Fed Funds Rate (currently 0.25%) and lending to the Federal government via Treasury debt (currently 2%-4%).
That's a pretty sweet deal. Borrow from the government (Federal Reserve) and then lend that money right back to the government. That's one reason State comedians say "The national debt is sacred!"
So has the money FSK has lost on the stock market, gone into the pockets of ass clowns with their funny computer programs?
Is every little stock market investor and pension fund the loser and the ass clowns in banks the winners?
The State, banks and property owners make it very hard to anyone to save money.
If you don't have enough money to buy a house outright (which is all the "little" people) you will have to pay off the banksters. The banksters can get money at low interest rates, but you being a little person has to pay at least 7%.
If you have to rent and live in a city like London, then quite easily a third to half of your pay packet goes in rent.
The government clowns take 30% of your wage in income tax and national insurance. If you are a normal, semi-skilled or skilled worker and if you get sick you will find the National Health Service will turn its back on you and you will have to live off your savings while you recover. Disability payments and sick leave are only for the privileged class or dishonest. When I was genuinely sick due to a workplace accident I found I got nothing. Now I read in the newspapers anyone in the UK can get a sick note over the Internet for 10 pounds!!!!! I read in the Daily Mail local council employees use the 10 pounds sick note Internet scam to get 6 months off work. Sick notes from the Internet are used for ass clown insiders privileged enough to get State jobs. The working man is not allowed to get sick leave, even if he is injured at work.
When you go to the shops and buy something (maybe even biscuits) you get taxed 17.5%.
Then there is fuel tax, tax when you sell your house, capital gains tax....
The effective tax rate is over half your income.
Rent will take almost the other half if you live in an expensive city.
THE GOVERNMENT SHOULD PUT RENT CONTROLS ON PROPERTY.
But they won't because property speculators are in our government.
These ass clowns can't make money by creating something themselves. They can't create real creative businesses doing real research or producing food.
These ass clowns can only make money by buying property on their MP's expenses and selling at a profit.
How many property developers are in government or have been?
In doing so the ass clowns push up the price of property and make it unaffordable to the regular guy.
These ass clowns are not working for the people. They are pigs in the trough.
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