Why we don’t need Kahunas or compulsory saving—or the c***s who promote them
Here’s a thought for those of you contemplating the self-serving proposals peddled by suits wanting more welfare for suits. (Come in Gareth Bloody Morgan and Sam “I’m Just Another Self-Serving Suit” Stubbs.)
You’ll have noticed by now that prices have been rising every year since the Reserve Bank of New Zealand was born. (This compared to a half-century of prosperity and gently falling prices in the period before modern central banking was born.) You’ll have noticed too that they’ve been rising even in the period that “inflation” is supposed to have been tamed, rising this year at least five percent on last year’s prices, and about four percent the year before that.
If you think about it however not so much as prices rising, but as the value of money falling, you’d actually be more accurate—more accurate, since that is what is a actually happening. Every dollar the Reserve Bank prints (or allows to be created out of thin air by the banking system) dilutes every existing dollar in your pocket or your savings account. That, in short, is the reason both for rising prices and for your dollar buying less and less every year.
Your dollar buys less every decade than it did before. According to the CPI (which famously understates inflation) since the beginning of 2002, every dollar has lost over 20% of its purchasing power, a precipitous decline in less than 10 years—and if your savings were invested at less than the CPI rate (or less than the real rate of money dilution), you’d have lost the value of your savings each and every year.
The loss is significant. Especially when you consider that the value of your dollar is around ninety-five times less than it was just ten decades ago, when the First World War blew apart the period of peace and prosperity backed by the gold standard.
You want to know why people don’t save as much as they used to? Because they noticed that their goddamn money after they’d finished saving wasn’t worth as much as it was when they started! They noticed that the grey ones were stealing from them by inflation! People aren’t stupid. Not as stupid as the pollies and the central bankers think they are. You keep diluting their money, and they’ll keep trying to get rid of it while it’s still worth something. And you keep interest rates below the rate at which their cost of living is rising, and they’ll borrow like hell—and know they’ll still come out on top.
Inflation is a killer, even at the so-called tepid rate of five percent that it’s at now. (But note that in 1971 five-percent inflation was enough to get Richard Nixon so worried his “brains trust” called for wage and price controls.)
So, instead of fatuous schemes by fatheads who lose you money (like the rum old Captain Morgan), or compulsory saving called for by the recipients of that compulsion (like the suit called Sam Stubbs), or shop talk about letting inflation fix things from Prime Ministers more interested in smiling and waving than effecting real repairs, why not just leave people’s money alone; why not stop the inflation altogether; why not stop diluting the currency, full stop, so that people’s savings actually start to mean something again.
They might even thank you for it.