"during the 20th century, cash rates averaged 4.1% while inflation was 3.7%, leaving a real yield of 0.4%. ..."
Wyatt -- you forgot that you get taxed on earnings. If the 28% tax rate is used (an understatement I believe esp. when considering that the vast majority of deposits are held by the wealthy) then the net rate using your numbers would be 2.95%, meaning your real yield is -0.75%.
Taxes, every year -- it's the key. Until that concept is understood then the stealth tax created by monetary inflation will not be understood. Lawmakers are thrilled that so few understand.
Another point is that, wherever you got your 3.7% inflation number, it likely was not Shadowstats.com -- even though the fudge factor for suppressing official inflation has accelerated in recent years, it's likely that your number is still too low by at least one or two tenths of a percent, perhaps more.
This is all simplified of course -- there's the entire world of gov't bonds, some with taxes deferred etc.
The basic premise however cannot be overstated -- the stealth tax created through monetary inflation will, one way or another, erode your purchasing power. The situation the Federal gov't is setting up now *requires* a high rate of return in order to stay ahead. Sure, the inflation hasn't showed up in force yet (in many areas). But... it will.
U of Wash tuition: 30% up in two years. Preview of the sorts of things we'll be witnessing in the next decade, in my opinion. |
