Why You Should NOT Save Money

     Every time I hear a news story about the personal savings rate in the United States being low I put hand to forehead.

(Saving Rate)

















       
     Trying to explain why money is NOT something to be saved but to be used to create wealth is not an easy task, and may seem counter intuitive.  Notice the distinction between money and wealth, they are NOT the same thing.  Money may have been a store of wealth in the past, and it could be again in the future, but it is not today.

     To start, take a dollar out of your wallet or purse and take a long look at what you are holding.  For most of us, we look at the dollar and say this is money.  We notice it's paper with ink on it, yet it doesn't look like it used to, the pictures are bigger, colors other than green, and a ton of security features.  Now flip it front side up and read the words printed at the top.  Do you read "FEDERAL RESERVE NOTE"?  Note?  Note? Note?

bank note

 

noun

a promissory note, payable on demand, issued by an authorized bank and intended to circulate as money.

promissory note

 

noun

a written promise to pay a specified sum of money to a designated person or to his or her order, or to the bearer of the note, at a fixed time or on demand.

     Generally speaking what we refer to as money is actually debt.  Let me rephrase that:

 "All Federal Reserve Notes are Debt"

     Money is not a store of value.  The word money refers only to a medium of exchange....that's it, pure and simple.  In the good old days, money was gold and silver.  Gold and silver obviously are a store of wealth and so they serve both functions when they circulate as money.  To demonstrate the distinction I ask the reader to name the price of a soda and a candy bar.

Today's price at the convenience store, $2.24:

Soda = $1.25

Candy bar = $.99

Price in 1949 (pick this because of my mother's stories), $.10

Soda = $.05

Candy bar = $.05

The point of interest here???

1 silver dime roughly = $2.50

The point is that the soda and candy bar did not change in value, they are the exact same price today as they were 50 years ago.
(though it would appear that the soda had a better return than the candy bar, that's the price of 20oz vs the old 12oz bottles)

    "The Federal Reserve guarantees you to loose wealth if you choose to hold money" 

Think about that.  What is the target inflation rate of the Fed? Supposedly it's been 2%, however Ben just threw that out the window with QE infinite.  So, if you are a saver at best you can expect to have 98% purchasing power after 12 months and 90.5% after only 5 years. This is guaranteed by the Fed, at this point we could open a discussion of why this is the case, but for now it's best to just understand this point.

"The Federal Reserve openly states they will steal 2% of your purchasing power, your WEALTH every year that you hold money"

     Don't believe it...visit the link below to see it in their own statement. 

http://www.federalreserve.gov/newsevents/press/monetary/20120125c.htm

Quote from article above:

"The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate."

     This information leads to the conclusion:  Currently savers are losers, and debtors are winners.