There are people out there that are fabulously rich. Usually it’s through sports entertainment or invention. But most people get rich the old fashioned way by saving. They don’t get real rich, but nobody ever has enough money no matter how much they make.
There is a conundrum here that the politicians don’t quite understand. Once you get to the “rich” level, you don’t really spend any more than a poor person. The extra goes into savings. This is where the economy is dragging. The massive infusion of Fed funds into the economy has really gone nowhere. A lot of the funds have made it into retirement fund real estate investing or the stock market. Neither of these creates very many new jobs. Real estate investing in good years returned about 21% on the investment, and in today’s market, 10 percent is a very optimistic expectation. Stocks are doing a lot better than cash in the bank, but there is the question of “Why?” The economy is not in great shape.
Then there is the time element. Given 40 years, $100 a week for 20 years at 8% and then sitting on it for another 20 resulted in a million dollars. That was the expected in the 1960’s. In today’s world a million dollars might buy two tear down homes in Los Angeles. Notice one thing, the people that started saving 40 years ago, don’t have the buying power with their savings from 40 years ago. And it is too late for them to save more now.
We are also at a point with nonexistent interest rates, why even save? There is no added value for surrendering your immediate gratification for later consumption. Buy it now!
So basically we have a bunch of new savers looking down the road to retirement 40 years away, and reality hits them. The money in the bank is going nowhere. Whereas the old people that have saved for 40 years notice that inflation has reduced their buying power of their savings by a great amount. If your 20 years old, this concept is way over your head and makes no sense. Aggravatingly so, if you are over 65 nobody cares when you complain about inflation, you are invisible, you are an “Old Fart,”---- and what do they know.
The thing that really cracks me up lately, is all the ads for medications for the senior citizens. For the drug companies, it is a given, that old people are the target for buying these new pills that they want to sell. Take Preparation H, Cialis, and Viagra. I can’t figure out how the medications know where to go, you certainly don’t want erect hemorrhoids or a member with no sensation. But I digress.
Where to from here? We have a problem, the money not being spent by savers is squirreled away for retirement and is being eaten alive by government printing (inflation). Congress knows the syndrome, too old to complain—nothing to worry about they will die soon, so blow them off. Inflation is only a game; through time you will understand it’s consequences but until then, it will be too late to do anything about it. So grab a deck chair, and move it to another spot on the deck, give yourself that slight feeling that you are still in control.