I can't predict what the future will be. Much will depend on the kind of policies that government enacts. Without knowing how those policies will develop, no one can predict anything.
Saying that government is going to adopt bad monetary policies to keep us all poor is easy and appealing to people looking for an easy target to criticize. The problem is that the reality is more complicated. Some aspects of the situation are simple, but the steps from the simple side of things to the complicated side of things go in all kinds of directions. Every expert and non-expert will have a different opinion about which steps are valid.
On the very simple side, a community of ten farmers each producing one "unit" of food and not being burdened with any kind of overhead or other loss will result in each farmer's "wealth" being that "unit" of food. If one farmer has a unique talent that allows him to produce two "units" of food, then his "wealth" will be twice that of the other nine farmers. That begins the political argument of whether that farmer should be allowed to be twice as wealthy or whether all or some portion of that farmer's extra "unit" of wealth should be distributed among the other nine farmers.
If two farmers decide to combine their abilities and two units of wealth in a way that allows them to produce three units of wealth instead of two, then each of them ends up with a one-and-a-half units of wealth. Again, that raises the question of whether they should each be half a unit wealthier than the other eight or whether there should be some redistribution.
If one farmer gives up half of his unit of wealth to the farmer who can produce two units of wealth every year and that farmer can turn that half unit of wealth into a whole unit of wealth, then they can decide what to with the extra wealth. If the farmer who gave up half a unit of wealth continues to work his fields, he will produce his usual unit of wealth. The question is how much of the extra unit of wealth produced by the doubly-productive farmer should go to the farmer who gave up half a unit of wealth. That's something that the two of them have to agree. Investing is largely about deciding how much of that profit goes to the farmer who gave up half a unit of wealth and how much goes to the farmer who could turn that half unit into an extra whole unit.
A big problem with the whole model is that societies are full of people who aren't producing enough to live or aren't producing anything at all. If we start with the original model of ten farmers each producing only ten units of wealth each year and then suddenly add ten more people who produce nothing but get to share in everything, then each farmer is receiving only half a unit of wealth each year and is at the same place as the ten people who produce nothing. According to socialists, leftists, and many liberals, the farmers should continue producing so that everyone will have half a unit of wealth. In real life, the farmers get home from a long day of working hard and realize that they are getting no reward greater than what the people who aren't producing anything are getting. The farmers come to feel demoralized, and they don't produce as much. Soon, the society that was producing ten units of wealth every year is producing only eight units of wealth and is still distributing those eight units of wealth among twenty people. The ones who produce nothing still feel cheated because they are getting twenty percent less than they previously got. The farmers who have been working hard still feel cheated because they are only getting half of their productivity.
This declining situation leads to conflict because those who contribute nothing are now claiming that their very existence is a contribution of "diversity." The farmers realize that this "diversity" adds nothing to their lives, and the farmers just wish that these non-producers would go somewhere else.
As you noted, much of the problem of inflation comes because the "government" of this little community decides to define the eight units of wealth as ten units of wealth. By this new definition of wealth, everyone is back to having half a unit of wealth, but everyone knows that they really don't have half a unit of wealth. If the government is really arrogant, it defines these eight units of wealth as twenty units of wealth. Then, everyone has one unit of wealth, and the government insists to the farmers that are back to having one unit of wealth each. This gaslighting just makes things worse. The farmers know that they have only four-tenths of the wealth that they used to have, but now the government and the non-producers expect them to pretend that they haven't lost anything.
Obviously, scaling this whole analogy to a society that includes many different kinds of jobs producing many different kinds of products is complicated. People will have different ideas of what each unit of production is really worth. At times, we can't just go back to the simple analogy. In a large society, we must have some kind of government to administer the ownership of property. Otherwise, property is owned only by those strong enough to take it from someone weaker. As the Declaration of Independence says, we all have inalienable rights and governments are instituted among men to defend these rights. I once knew a very foolish woman who thought that Jefferson was contradicting himself when he said that we all had inalienable rights but then advocated for the creation of government to protect those rights.
We don't know how things are going to change in the future. We don't know whether we will see a greater load or non-productive people on those who are productive or whether we will see a reduction in this burden of non-productive people. We don't know if or how much government will try to declare that what was a unit of wealth yesterday will now be considered two units of wealth today.
My big problem with the hard-core gold people is that gold doesn't do anything. Gold has long been considered a stable unit of wealth, but the gold itself doesn't do anything. When the farmer who has a handle invests his handle with the farmer who has a blade, the plow that they make together can allow each of them to produce much more than either of them could produce with just a handle or just a blade. In that sense, the investment of resources that each owns produces more wealth in the form of crops. Gold doesn't produce anything. The farmer who has one lump of gold can't combine that lump of gold with another farmer's lump of gold to produce more crops.
I have some gold investments because they are a hedge against inflation. As a matter of practical investing, I see the value of gold. I also see the potential for a huge crash someday.
Gold as a metal in a technological age has some value, but the value of gold is not set by its utilitarian value. Gold's primary value is simply in how much people like to look at gold. If we put one guy on an island with a strip of iron, he can shape that iron into very effective tools that will allow him to do things needed for survival. If we put another guy on an island with a strip of gold, he's going to have a much harder time turning that gold into effective tools that will allow him to survive. Investing in gold in many ways is investing on the belief that a metal that people just enjoy seeing will hold more value than the labor of people who are actually making something. If people continue to become more abundant and less valuable, maybe that's a good investment. If we have the kind of crash that makes human labor more valuable than a metal that just sits there, gold could finally see a huge crash.
The other point that I would make about investing is that not all profit has to come from selling one's stock. Some companies return some amount of profit every year as dividends. I like dividend stocks. I like that they are producing cash that I could use if necessary while the principal (and appreciation) of my investment stays where it is. Real wealth accumulation depends on living on less than one produces, investing the difference between earning and spending, and not spending one's investment gains for regular living. Not spending one's gains means re-investing the interest, but if a person must live off investments for some time, living off interest is better than living off principal.
Nice example of capitalism vs socialism with a touch of monetary policy. {smile}
Yes, some people are completely against government because at this point our experience is with a government which causes more harm than good. Few of us can imagine back to Jefferson's time and understand the role of government *should* be to protect the rights of the individual. We don't need massive taxes to fund that!
Good points about gold. I've mentioned several times that gold does not create wealth, gold is for preserving wealth.
Retirement is an interesting challenge as we shift from living off our labor, to living off our "investments / savings". In our modern society, we hope to accumulate enough wealth that is invested well such that we can live primarily off the "interest".
Dividend stocks are fairly "new" to me, but I'm buying more and more of them. They tend to be more steady and stable. But this is where it is critical to understand the loss of value of the dollar (aka inflation). If a dividend stock isn't paying better than 5.7% then it really isn't doing you any good. I've got a few that are paying 15% to 20% but it is dubious that they will do that consistently forever.
Most dividend stocks are also in industries / schemes that I don't want to fund. That makes it hard for me to justify buying them.
I can't predict what the future will be. Much will depend on the kind of policies that government enacts. Without knowing how those policies will develop, no one can predict anything.
Saying that government is going to adopt bad monetary policies to keep us all poor is easy and appealing to people looking for an easy target to criticize. The problem is that the reality is more complicated. Some aspects of the situation are simple, but the steps from the simple side of things to the complicated side of things go in all kinds of directions. Every expert and non-expert will have a different opinion about which steps are valid.
On the very simple side, a community of ten farmers each producing one "unit" of food and not being burdened with any kind of overhead or other loss will result in each farmer's "wealth" being that "unit" of food. If one farmer has a unique talent that allows him to produce two "units" of food, then his "wealth" will be twice that of the other nine farmers. That begins the political argument of whether that farmer should be allowed to be twice as wealthy or whether all or some portion of that farmer's extra "unit" of wealth should be distributed among the other nine farmers.
If two farmers decide to combine their abilities and two units of wealth in a way that allows them to produce three units of wealth instead of two, then each of them ends up with a one-and-a-half units of wealth. Again, that raises the question of whether they should each be half a unit wealthier than the other eight or whether there should be some redistribution.
If one farmer gives up half of his unit of wealth to the farmer who can produce two units of wealth every year and that farmer can turn that half unit of wealth into a whole unit of wealth, then they can decide what to with the extra wealth. If the farmer who gave up half a unit of wealth continues to work his fields, he will produce his usual unit of wealth. The question is how much of the extra unit of wealth produced by the doubly-productive farmer should go to the farmer who gave up half a unit of wealth. That's something that the two of them have to agree. Investing is largely about deciding how much of that profit goes to the farmer who gave up half a unit of wealth and how much goes to the farmer who could turn that half unit into an extra whole unit.
A big problem with the whole model is that societies are full of people who aren't producing enough to live or aren't producing anything at all. If we start with the original model of ten farmers each producing only ten units of wealth each year and then suddenly add ten more people who produce nothing but get to share in everything, then each farmer is receiving only half a unit of wealth each year and is at the same place as the ten people who produce nothing. According to socialists, leftists, and many liberals, the farmers should continue producing so that everyone will have half a unit of wealth. In real life, the farmers get home from a long day of working hard and realize that they are getting no reward greater than what the people who aren't producing anything are getting. The farmers come to feel demoralized, and they don't produce as much. Soon, the society that was producing ten units of wealth every year is producing only eight units of wealth and is still distributing those eight units of wealth among twenty people. The ones who produce nothing still feel cheated because they are getting twenty percent less than they previously got. The farmers who have been working hard still feel cheated because they are only getting half of their productivity.
This declining situation leads to conflict because those who contribute nothing are now claiming that their very existence is a contribution of "diversity." The farmers realize that this "diversity" adds nothing to their lives, and the farmers just wish that these non-producers would go somewhere else.
As you noted, much of the problem of inflation comes because the "government" of this little community decides to define the eight units of wealth as ten units of wealth. By this new definition of wealth, everyone is back to having half a unit of wealth, but everyone knows that they really don't have half a unit of wealth. If the government is really arrogant, it defines these eight units of wealth as twenty units of wealth. Then, everyone has one unit of wealth, and the government insists to the farmers that are back to having one unit of wealth each. This gaslighting just makes things worse. The farmers know that they have only four-tenths of the wealth that they used to have, but now the government and the non-producers expect them to pretend that they haven't lost anything.
Obviously, scaling this whole analogy to a society that includes many different kinds of jobs producing many different kinds of products is complicated. People will have different ideas of what each unit of production is really worth. At times, we can't just go back to the simple analogy. In a large society, we must have some kind of government to administer the ownership of property. Otherwise, property is owned only by those strong enough to take it from someone weaker. As the Declaration of Independence says, we all have inalienable rights and governments are instituted among men to defend these rights. I once knew a very foolish woman who thought that Jefferson was contradicting himself when he said that we all had inalienable rights but then advocated for the creation of government to protect those rights.
We don't know how things are going to change in the future. We don't know whether we will see a greater load or non-productive people on those who are productive or whether we will see a reduction in this burden of non-productive people. We don't know if or how much government will try to declare that what was a unit of wealth yesterday will now be considered two units of wealth today.
My big problem with the hard-core gold people is that gold doesn't do anything. Gold has long been considered a stable unit of wealth, but the gold itself doesn't do anything. When the farmer who has a handle invests his handle with the farmer who has a blade, the plow that they make together can allow each of them to produce much more than either of them could produce with just a handle or just a blade. In that sense, the investment of resources that each owns produces more wealth in the form of crops. Gold doesn't produce anything. The farmer who has one lump of gold can't combine that lump of gold with another farmer's lump of gold to produce more crops.
I have some gold investments because they are a hedge against inflation. As a matter of practical investing, I see the value of gold. I also see the potential for a huge crash someday.
Gold as a metal in a technological age has some value, but the value of gold is not set by its utilitarian value. Gold's primary value is simply in how much people like to look at gold. If we put one guy on an island with a strip of iron, he can shape that iron into very effective tools that will allow him to do things needed for survival. If we put another guy on an island with a strip of gold, he's going to have a much harder time turning that gold into effective tools that will allow him to survive. Investing in gold in many ways is investing on the belief that a metal that people just enjoy seeing will hold more value than the labor of people who are actually making something. If people continue to become more abundant and less valuable, maybe that's a good investment. If we have the kind of crash that makes human labor more valuable than a metal that just sits there, gold could finally see a huge crash.
The other point that I would make about investing is that not all profit has to come from selling one's stock. Some companies return some amount of profit every year as dividends. I like dividend stocks. I like that they are producing cash that I could use if necessary while the principal (and appreciation) of my investment stays where it is. Real wealth accumulation depends on living on less than one produces, investing the difference between earning and spending, and not spending one's investment gains for regular living. Not spending one's gains means re-investing the interest, but if a person must live off investments for some time, living off interest is better than living off principal.
Nice example of capitalism vs socialism with a touch of monetary policy. {smile}
Yes, some people are completely against government because at this point our experience is with a government which causes more harm than good. Few of us can imagine back to Jefferson's time and understand the role of government *should* be to protect the rights of the individual. We don't need massive taxes to fund that!
Good points about gold. I've mentioned several times that gold does not create wealth, gold is for preserving wealth.
Retirement is an interesting challenge as we shift from living off our labor, to living off our "investments / savings". In our modern society, we hope to accumulate enough wealth that is invested well such that we can live primarily off the "interest".
Dividend stocks are fairly "new" to me, but I'm buying more and more of them. They tend to be more steady and stable. But this is where it is critical to understand the loss of value of the dollar (aka inflation). If a dividend stock isn't paying better than 5.7% then it really isn't doing you any good. I've got a few that are paying 15% to 20% but it is dubious that they will do that consistently forever.
Most dividend stocks are also in industries / schemes that I don't want to fund. That makes it hard for me to justify buying them.