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Comment by cmiles8 | Hacker News Reader

Interest rates on things like CDs and low-risk bonds have been decent for a while now. It’s not been painful to sit on cash reserves provided you were smart about where the cash was parked.

It’s not an either/or, it’s just a question of who was participating in the boom while preparing for storms ahead vs those all in on the boom.

What implodes in the period ahead are things that are massively over leveraged and can’t absorb a hit without doubling down again with more funding/loans and such. These are the folks and companies that get wiped out.

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Interest rates on things like CDs and low-risk bonds have been decent for a while now. It’s not been painful to sit on cash reserves provided you were smart about where the cash was parked.

Just make sure you can unpark it, else you're SVB.

You're not wrong it's always good to have cash but certain allocations could have done 50%-100% return on investment while a CD brought ~5.5% for a while. Look at S&P since 2021. Knowing when to transition from cash, liquidity, other instruments is what kills/allows people to survive. We can't all do the same thing, it's almost as if it's economic ecological evolution, random death.

It's decent only if you believe inflation = CPI

In actuality, the CPI is lower than inflation because technological advancement, automation, and economies of scale (due to globalization etc) are driving consumer prices low. In other words, if factories are still producing things like they were 20 years ago, the CPI would have been much higher, and that higher number is closer to what should have been the inflation number.

> if factories are still producing things like they were 20 years ago, the CPI would have been much higher, and that higher number is closer to what should have been the inflation number

This is an impossible counterfactual to test. In reality, tracking value across time requires adjusting for immeasurable preferences. This is why inflation is really only a useful measure for personal purposes across periods of years. It’s only macro economically interesting across a generation and close to meaningless longer than a human lifespan.

I think it's so obvious that no testing is needed, but generally I don't disagree with your take.

The thing is one really needs to understand what "real yields" mean when investing in bonds, i.e. it means your purchasing power with respect to cheap commodities tracked by the CPI is preserved, but it doesn't necessarily mean "value" (whatever that means in the abstract) is retained.

> it means your purchasing power with respect to cheap commodities tracked by the CPI is preserved

CPI isn't a measure of commodities. And "CPI" is a bit of shorthand, given there are pretty much as many measures of consumer and producer prices as there are economists.

> it doesn't necessarily mean "value" (whatever that means in the abstract) is retained

This is what any measure of inflation ultimately seeks to measure. Purchasing power is intrinsically tied to the basket of goods and services its measuring. That basket varies across people and time as preferences vary.

A better measure is what % of the total money supply you have.

I.e. you started out with 2e-20 % of the total money, and after 5 years you now have 1e-20 % of the total money, then whatever happened to CPI, you've been diluted and you would probably have been better off investing in something else other than cash.

That makes sense in theory, but in reality what "total money supply" is is a complete can of worms and basically impossible to measure

Decent is fine if you're about to retire and want to avoid risk but I wouldn't recommend parking your wealth in CDs/bonds if your retirement is still 15+ years out, personally. The government has to print money to bail itself out which means things are going to inflate quite a bit, just look at what gold has done in anticipation of this.

Banks bailed out the hedge funds in '98, then the taxpayer bailed out the banks in '08, then the government bailed out the taxpayer in '20... now monetary policy from the fed has to prevent the government from defaulting.

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