The TLDR cut out the more full explanation that is not actually the bank itself that is benefiting from the theft-via-dilution. Who benefits is a fiendishly difficult question:
Well, to be more accurate, it is the government stealing your money, not the banks. Actually, to be more accurate, it is impossible to pin down who exactly is stealing your money, because banks should be seen as arms of the state, and the state is the arm of an ecosystem of elites and elite clients, and the entire thing has grown fiendishly complex because it is in everyones interest to allow it to be complex. In fact, the real bandit may be your neighbor who bought a million dollar home with a 30-year, 2% interest rate loan. Or maybe the thief is your friend who cashed out on Apple stock after Apple funded a stock buyback with a loan at 1% interest. (Don’t go screaming at your friend – hate the game not the player).
Moreover, the assumption that, because my savings are worth less because of inflation, that therefore someone has "stolen" money from me does not work.
Dilution is theft. If the board of a company secretly prints new shares and gives it to their friends that is theft.
If I choose to save it, then I have many options, but they are of two general categories: a) High risk / high return; and b) low risk / low return.
Our put is that option b) is actually low risk negative return and that this is a big problem.
Interest rates are determined by the market. Monetary policy doesn’t effect real interest rates in the long run
Nonsense.
fiscal policy has been extremely expansionary
True, this matters too.
and that increases real interest rates
Expansionary fiscal policy causes CPI inflation which lowers CPI-adjusted interest rates.
Cash can be fine in times and places where government has handled currency dilution and interest rates responsibly. The United States since 2002 has not been such a place, which is the point of the post.
Dilution is a form of theft. If, Musk, without his shareholders knowledge or consent, printed entirely new shares of Tesla and gave them to himself or his cronies, this would be theft, even if the price of shares actually rose during that period due to other factors. Tesla shares rising or falling is not theft.
"We shouldn't put more regulations on cryptocurrency or banks because consumers don't have a risk-free way to preserve their purchasing power over some time horizon"
Some amount of well-thought out regulation is fine. My point is that demand for scams and get-rich-quick schemes will exceed state capacity to police them as long as people must find an alternative to simple savings deposits in order to simply preserve purchasing power for retirement.
Are you a Scott Sumner fan? This reminds me of his arguments, and which I always found to be just plain wrong. But in order to actually have a productive conversation about it we need to go in full "rectification of names" mode.
Firstly, the target of this article is simply wrong. Main street banks aren't stealing your money because they're not the ones causing inflation. The same loss of purchasing power would occur if you took your money and stuffed it under your mattress. It's the federal government's decision to target a positive nonzero inflation rate that's causing the issue, and that decision is no more of a "theft" of your money than simple taxation is.
The TLDR in my post cut out a more full explanation of this:
Well, to be more accurate, it is the government stealing your money, not the banks. Actually, to be more accurate, it is impossible to pin down who exactly is stealing your money, because banks should be seen as arms of the state, and the state is the arm of an ecosystem of elites and elite clients, and the entire thing has grown fiendishly complex because it is in everyones interest to allow it to be complex. In fact, the real bandit may be your neighbor who bought a million dollar home with a 30-year, 2% interest rate loan. Or maybe the thief is your friend who cashed out on Apple stock after Apple funded a stock buyback with a loan at 1% interest. (Don’t go screaming at your friend – hate the game not the player).
and that decision is no more of a "theft" of your money than simple taxation is. Some people might think the implicit tax of inflation is sneaky and therefore illegitimate, but there's nothing really secret about it.
Diluting the currency in the modern system is far, far, far less transparent in terms of how much dilution is occuring and who is getting it. It is far less transparent than taxation, and far less transparent than when a company board publicly votes new shares to be created to reward employees with bonuses.
The effects of inflation are known, and it's not hard to prevent erosion of purchasing power with minimal risk if that's your main goal.
"It's not a fraud because everyone knows it is a fraud and so avoids it." For a normie steel-worker retiring in 2013 it was not at all obvious that they needed to invest in the stock market simply to preserve purchasing power. The standard Vanguard retiree fund has lost out compared to inflation: https://investor.vanguard.com/investment-products/mutual-funds/profile/vasix#price
But actually it is really difficult to preserve purchasing power, because it requires buying extremely volatile assets and it is difficult to know if said assets are in a bubble or not. Consider the historically high P/E ratios we are experiencing -- are stocks still in a bubble or is this the new normal?
The fed doesn’t control real rates.
We despise the term "real" rate is as in plain English the "real" rate is the rate a person sees at the bank, the number that economists call the "real rate" is the rate adjusted by the price of a basket of goods in en enormously complex calculation filled with arbitrary and subjective decisions. But going with your term "real rate", this is a function of the nominal rate and the CPI, so no the fed does not control the CPI, although their actions do influence it as cheap money can in circumstances , nobody sets the CPI exactly, but the Fed does set the nominal rate, and when they set the nominal rate below the rate of monetary dilution, that is really bad for ordinary savers.
Why do you think savers deserve risks free high return investment products or that any “government” agency is stealing from people.
Savers deserve simply to keep their money and not have it diluted away. We don't demand that they be able to keep up with the stock market, but they shouldn't be losing ground relative to everything. Did you click through and see the image that was linked? This one: https://www.theprotocols.net/attachments/post-3---6-y9m_NavZtJ5NLIGpnLv8HfGVg/Purchasing-power-lost.png
Maybe this is just the initial offering meant to be as inoffensive as possible?
This.
Is there actually some significant subset of people that stores large percentages of their high net worth in banks?
Fewer and fewer because people have caught on that their money will be diluted away if left in banks. Thus, they pursue much more volatile assets like homes, stock portfolios and long-term bonds. This is a problem because when everyone is piling into these assets simply to escape dilution it becomes very hard to tell what is a bubble and what is not. Stocks have been at historically high P/E ratios. So are they in a bubble? Or is it the new normal.
Also, retirees close to retirement generally move to a more bond heavy portfolio, or at least this was the traditional advice. But if you put your money in Vanguard's retiree fund -- https://investor.vanguard.com/investment-products/mutual-funds/profile/vasix#price -- you would have lost considerably to inflation or to alternative stores of value in the last 10 years of artificially low interest rates and high inflation.
We are going to have more spicy posts in the future on all the hot button issues -- race, sex, etc -- of the kind that might attract doxxing and cancellation mobs. The name "protocol" comes from the original definition: "Protocol" -- "1. The first leaf glued to the rolls of papyrus and the notarial documents, on which the date was written 2. The original copy of any writing, as of a deed, treaty, dispatch, or other instrument." So we had the idea of a very sparse web site with a simple dispatch and a date in the upper corner (a million satoshis to anyone who can figure out what system the date is using). But "protocol" also has the association with modern tech stuff. And yes, there is the hint of edginess due to the association with a forged document from a long time ago, though we don't plan on writing much or anything about that kind of topic.
Bitcoin does not cost anything to store, though you do have to spend some time learning how to self-custody securely. It's a lot easier than it was ten years ago, very low risk of losing your keys or having them stolen if you do it well.
Storage costs of gold are overblown. You can fit a million dollars of gold in a standard $70 a year safe deposit box. GoldMoney.com or BullionVault.com will store it for you with high security for 0.1% a year -- so that is a 2% loss over 20 years. That is far less than the numbers cited in the article for the monetary dilution losses from holding cash in a bank.
See our explanation of the domain name here: https://www.themotte.org/post/221/culture-war-roundup-for-the-week/39692?context=8#context
See our explanation here: https://www.themotte.org/post/221/culture-war-roundup-for-the-week/39692?context=8#context
Your comment makes it seem like you have an expectation that you ought to be able to put money in a bank account and thereby be able to exchange it for certain particular goods at particular rates at some future time that are similar to the rates when you put it in.
We would have the expectation that we should be able to save and be able to preserve our claim on a share of the economy. If output genuinely falls, if there was a grain famine, then we would not expect our purchasing power of grain to hold steady. But if output increases greatly, then we should benefit from that too.
Unless someone knows that in your brain is the key to $100,000 of untraceable, irrecoverable currency, in which case a 9mm held to your knee is sort of a universal key.
Do not tell anyone who much crypto you have. For a wrench attack, the thief would have to know how much you have, otherwise you just open up a side wallet and only give them a small portion of your funds. Also, you can use multisig or split up your seed so that you literally could not give an attacker your keys on the spot even if you wanted to.
But yeah, given a high enough rate of crime, nothing is safe, kidnapping loved ones is always a risk, no matter what form of wealth you hold.
You have me on the safe deposit box, but I'm not sure I'd really trust a storage company with a significant fraction of my net worth.
Safe deposit boxes aren't perfect as bank customer service has declined. There are horror stories about banks shutting down a branch and not properly notifying customers and the deposit boxes ending up in limbo somewhere.
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Long time motteizen, new pseudonym for extra privacy.
Some friends and I are launching a new anonymous group blog: https://www.theprotocols.net/ Many of us have interesting culture-war related takes that we post on forums like these, or on our group chats, but we felt like we needed a place to more permanently publish things that deserved a wider audience. Subscribe via ye olde email or RSS to see posts as they come out.
Our first post is "Regulated Banks Are Just Stealing Your Money Slowly". Here is the TLDR:
Myself (and the author of the post through this account) will be happy to answer any questions or respond to comments about this post.
Also, we are open to publishing guest blog posts if you have something you need to get off your chest and want to publish anonymously to the web. You can DM me here or email the contact address on the web site. Cheers!
EDIT: Looks like I did a really poor job of making a TLDR for the original post. I've added a bit more context, but I advise clicking through and reading the whole thing before leaving a comment.
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