Saving money I mean. With the banks paying near nothing in the form of interest, and getting the money they lend from the Federal Reserve, is it really a good thing to save money? It seems to me (since I have no outstanding loans) it would be better for me to sped money on stuff I need for my small hobby farm than trying to save money. When I mean spend it...I am really talking about investing it in durable goods such as fencing, animals, etc. It seems like the price of everything is going up faster than my wages.
Well if you save a $20 dollar bill today, it might be worth $10 in a decade or so... (Assuming that things don't get better SOON).
Theoretically it should get worse. Printing money out of thin air devalues the dollar even faster than time. To make saving work one has to have some vehicle for staying ahead of inflation. That certainly isn't easy or automatic and is getting harder as the government taxes us all by printing money.
Printing is the slow way. Banks can loan money into existance each time they make a loan, how much depends on their reserve requirements (between 3% and 10%). The major banks have $1T of Fed money in reserves - thus, can loan between $9T and S32T into existance unless the Fed figures out how to recall it.
Its also important to note that the reason they have such high excess reserves (if you look at graphs of historical excess reserves, it is flat, and the sharply increased during this recession) is because the Federal Reserve created the money and gave it to them. So not only does the fractional reserve banking system create money and cause inflation, but the Federal Reserve system on top of it makes the inflationary effect even worse. The attitude you are displaying (to the OP) is that attitude that often precedes more inflation. People fear that in the future prices will rise, so they start to spend more. Hence the demand for money falls (for they don't want to save as much money) and that results in higher prices of goods priced in money. I fear the day those excess reserves are let out. You can make money investing in the bubble and getting out before the crash, but that would be very risky. Not to mention China is hoarding 1.5 trillion USD. If it decides to send that money back to the US, you will get the same inflationary effects. The economy is not in good shape. It wont take much to blow it up again. The bomb is just waiting to go off.
We also have a bunch of dollars being used as the worlds reserve currency. That money comes flooding into the market if / when we are no longer the reserve currency (that will probably add insult to the injury the banks or China caused by releasing their money. My concern with the banks is that they can lend $10 to $30(+) for every $1 they hold in reserve, with over $1T in reserve.....
If I had money to save, first I'd buy a year plus of non-perishable food (the Mormons are on to something). If the economy collapses, you can't eat gold.
Saving money is certainly worth it if it is invested in things that keep pace with inflation. Just putting it in a bank savings account is pretty silly, though. It will only lose value there. I remember when Brazil had wild inflation. Brazilians would buy something immediately with their pay checks or they would send the funds immediately to another country with another currency. Holding cruzeiros in Brazil at the time was devastating.
Look at I savings bonds for up to10 grand a year per person in family. Buy some food, ammo, guns, and silver and gold. May consider buying in stock market for a very short time in the near future as well. It has tanked, fed will print more money at some point in the next month or two, but would sell not too long after. Timing is tough, I wouldn't be holding many stocks for too long unless they pay a decent dividend and don't plan on selling them in the next five years or so.
You get nothing from your savings but you are not losing much these days because inflation is very low. If you think inflation is coming, borrow as much as you can at the lowest interest rate you can wrangle for as long a term as you can get. Then buy some bonds that pay a higher interest rate than your borrowing costs. That is what the big guys do. But consider this, they are all buying US Treasuries at extremely low interest rates. That means they think that their money will be worth about the same tomorrow as today. In other words, they are betting on a fairly stable currency. There are a number of good reasons for that. For one thing, the EU is in trouble and that will effect China more than the US. The US economy is still the largest in the world and is far less dependent on its trading partners than they are on it. For another, the Fed has a few $Trillion is assets it can sell immediately to remove excess money from the economy if monetary inflation ever rears its ugly head. Inflation is the debtor's best friend. Deflation is the savers best friend. Many of the inflation mongers around here make no distinction among different kinds of inflation and seek to put the blame for all price inflation on the monetary side. Sometimes prices rise because there is too few goods and no one can do anything about it, no matter how much money they do or do not print.
What I am doing is using the money I earn and investing it in livestock and fencing. I sold a pig and I was going to buy field fence thinking it was about the same price as a few months ago 139.00 for 330 ft. It is now 189.00 for 330 ft. That is an increase of 50.00 in just a few months. Just for one roll. But I did catch fence post on sale and went with barbed wire. I don't see the price of anything going down in the near future and fencing will last me the rest of my life and reduce the price of feed. Oh...and cattle were going for 112.00 per hundred weight and is now at 120.00 per hundred weight. Calves were going for 119.00 and are now 159.00 pigs were .87 a pound and are now about .97 So why try to save cash?
