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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: benwood who wrote (23753)	10/22/2009 8:48:32 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 71407

So the net income is 72% of 5%, or 3.6%. But that's a loss in real terms of 1.4% per year (the taxed amount). during the 20th century, cash rates averaged 4.1% while inflation was 3.7%, leaving a real yield of 0.4%. so the nominal yield typically exceeds the rate of inflation (in fact it must in the long term, or the currency goes defunct), but not by enough to exceed the tax hit. the net result was, cash compounding at the cash rate for the century was a 57-bagger, a fact either unknown to or unmentioned among goldbugs. (NB. the above data also from memory, but i'm pretty sure it's accurate. source: Triumph of the Optimists, a truly amazing compendium of statistics on 20th century financial returns. i can't wait to read their followup book at the end of the current century. working title: Triumph of the Pessimists -g-) but in your example of a family in 1909 with $1mil, presumably they will not keep all their assets in cash for an entire century. basically nobody would recommend this. Wow, 34 million dollars now, but you've lost 75% of your buying power! In real life, it's actually been worse as the dollar has lost about 94-95% of it's purchasing power since 1913. well, the dollar which lost 95% of its purchasing power since 1913 is a dollar which was stuck in a mattress the whole time; not your dollar compounding at 3.6%, which becomes $34. This also explains why, in an old Dickens novel, if somebody had an income of 1000 Pounds per year, they could live like a king. from what i can tell, in the time Dickens was writing a pound sterling was equivalent to 7.3g of gold, or a little less than a quarter of a troy oz. so 1000 pounds income would be like 234 oz, or about US $250K. nowadays 250K isn't living like a king in the US, but imagine the same income in a country where avg income is equivalent to $500 in 2009 dollars. you can afford a lot of servants.