Today I received my statement for my 401(K) account from my last job. The top right corner of the statement lists my personal rate of return:
This period (January 1, 2011-March 31, 2011): 2.22%
For the last 12 months (March 31, 2010-March 31, 2011): 9.27%
Since your account inception (June 1, 1997-March 31, 2011): 1.56%
Almost 14 years of saving has netted me a 1.56% rate of return in my 401(K). I don't have the courage to look at how much my rate of return would have been had I purchased gold instead. But given that I was a liberal much of my life and a conservative until summer 2008, it's not like I knew better. I did believe in saving my money and building wealth. But a 1.56% makes me think "Why bother?"
Indeed Doug French at the Mises Institute has encountered this attitude before. Such an attitude is a direct result of inflationary monetary policy that destroys incentives to save. He writes:
Unfortunately, a central bank's debauchery of the currency serves to raise people's time preferences and impair their judgment. In a blog post recently, I highlighted the advice of life coach and author John P. Strelecky, who advises people to spend their tax refunds on an experience they will remember forever, rather than saving the few hundred or thousand dollars that the IRS may be giving back.
Live your life for today, says the life coach — a couple thousand bucks isn't going to matter anyway. I posted to the Mises Blog to point out how ludicrous this advice is. But most who commented sided with Strelecky:
I think his advice is spot-on, at least given the constraints of the times in which we live. What's the point in saving if inflation will ravage whatever you manage to accumulate?
You play by the rules of the game. Your savings growth will be puny due to pathetic interest rates, erased by inflation, and confiscated by a rapacious state. So go ahead, enjoy the "money" now, while it still has some value.
Most people don't really have a better place to put the money than into a pleasurable experience, which is all you will want in the end.
Gotta agree with the comments. Maybe not trips or other "experiences." But I feel safer with stuff than I do with Federal Reserve notes going forward.
Many days I find myself agreeing with these commenters. Why bother saving for the future at all? Why not just eat, drink, and be merry? What's the point of working hard and savings when your savings will be destroyed by inflation? And if you do acquire gold, it's still not safe from the U.S. Federal Government. FDR already set that precendent. So why not just travel all over the globe to have some memorable experiences before the SHTF?
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