A central bank’s debauchery of the currency serves to raise people’s time preferences and impair their judgment.
For years I’ve repeated the dictum that inflation debauches not only the currency but the citizens’ morality: their sense of individualism and personal responsibility. In other words, inflation causes people to act in ways contrary to their own best interests: like saving for a rainy day.
My [farmer] grandfather was the diligent sort who would use rainy days to do required maintenance on his implements, noting with derision other farmers who spent rainy days at the bar in town. He believed they would surely end up with broken equipment when the sun would reappear, keeping them from making hay.
So the idea of savings is not necessarily the return one receives on the money that’s socked away, but the peace of mind that, when the weather doesn’t cooperate, the saver has a little stash to tide him over.
Instead, the advice from those who should know better is: go ahead and spend the day in the bar. Your money isn’t worth anything, and it isn’t earning anything. So spend it on something memorable. They can’t take that away from you.
French decried the advice from a so-called financial guru—John Strelecky, who has written four books which have been translated into 20 languages—who said it was OK to spend your tax refund on a memorable experience rather than save it for a rainy day. French remembers the responses from those who agreed with Strelecky. Here’s one:
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.
In a microcosm French has illustrated perfectly my point: the Federal Reserve doesn’t just debauch the currency, it debauches morality and good judgment.