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Comment by mush_room | Hacker News Reader

I've been thinking about this lately, and to put it bluntly, my conclusion is with the "sound money" people, that monetary intervention at the whims of bureaucrats has progressively poisoned the economy as the information system it is. Basically all irrationality observed both at the macro and micro level (down to individual insanity) is due to something being wrong with how money is made and allocated. This creates irrational behavior at top level, and that trickles down from there.

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Low interest rates disincentivize saving and incentivize reckless speculation. In a world where savings accounts yield 0.25% and bonds yield negative, even ordinary people are forced to consider investments like crypto, SPACs, and high growth tech stocks just to maintain their wealth. Monetary policy has made us all into gamblers.

I'm not saying there's nothing wrong with our monetary policy that leads to wild speculation, but isn't "just to maintain their wealth" overstating it? I guess it remains to be seen what happens from here, but ignoring this year the S&P has been a good solution to maintaining wealth, has it not?

Yes, anyone can easily track inflation by buying and holding a cheap broad market index fund like VOO or VTI. In fact, it has never been easier for people to ensure they keep up with inflation. As you get close to retirement, you can transition to cheap bond index funds like VCSH.

There are even cheap target date funds where all you need to know is what year you want to retire.

The people who feel the need to gamble on the things listed below are those who are not earning enough, not saving enough, or want to gamble:

> even ordinary people are forced to consider investments like crypto, SPACs, and high growth tech stocks just to maintain their wealth. Monetary policy has made us all into gamblers.

Money is not wealth. Money is an IOU for future wealth at an unclear price.

You should spend your money on wealth, or give it to someone who will.

If you save your money and don't spend it, that creates inflation because it isn't stimulating production of wealth.

But isn't keeping your money providing information to the economy? And conversely, forcing it to be spent as investment generating malinvestment, investment in frivolous activity? I'm just thinking out loud...

I've never heard of this before.

A substantial net worth is known as wealthy. Net worth is defined as the current value of one's assets less liabilities.

Having a billion dollars in one's bank account and zero liabilities is wealthy, unless you are defining wealthy some other way.

Are you talking about wealth as a a nation, as opposed to individual wealth?

Please explain.

Savings don't cause inflation at all. Imagine adding $100K to every one's bank account in the US, and make sure that these accounts are frozen for 30 years; this doesn't increase aggregate demand at all.

Fractional reserve banking allows a bank to take deposits and create loans up to some ratio, thus increasing money supply in the economy.

Loans create deposits, this whole fractional reserve banking is nonsense taught in many schools.

Is this a complicated way of saying “it’s because markets are regulated”?

I guess, I just have this sense that things could've been much better if we intervened less, and that's in general. I think bias for action does harm in many instances.

Bias for action makes sense for present or near term.

Unfortunately, terrible for the long term.

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