Saving money is not allowed

[Beej]

The fish & chip shop near my parents' house opened in 1985. I remember that quite well as it was a big deal at the time, there being no other shops of any kind in the area.

Minimum order for chips was 50 cents then and that got you a big parcel wrapped up in white paper (not a small bag). Then it went up to 60c within a month or two. Last time I went into that shop was a few years ago and the minimum order was $2 and you didn't get as many chips as you used to for minimum order.

That's pretty basic in terms of the effects of inflation. Potatoes, cooking oil, old fashioned white butcher's paper, salt, power to run the deep fryer and some profit for the shop owner. In the order of 350% or so inflation over the past 23 years.

So that's an average of about 5.5% pa compounded over that time, Sounds about right given the late 80s saw inflation generally running at the 10% level, before we moved into those low inflation times in the 90s.

Beej

 

[numbercruncher]

The fish & chip shop near my parents' house opened in 1985. I remember that quite well as it was a big deal at the time, there being no other shops of any kind in the area.

Minimum order for chips was 50 cents then and that got you a big parcel wrapped up in white paper (not a small bag). Then it went up to 60c within a month or two. Last time I went into that shop was a few years ago and the minimum order was $2 and you didn't get as many chips as you used to for minimum order.

That's pretty basic in terms of the effects of inflation. Potatoes, cooking oil, old fashioned white butcher's paper, salt, power to run the deep fryer and some profit for the shop owner. In the order of 350% or so inflation over the past 23 years.

I remember when video recorders were first released when I was a very young tacker, my old man paid over 2k for one, now I can get a dvd player for fifty bucks .....

 

[BradK]

It would be interesting to know how much of the purchase price is retained by the finance company on that.

Dont know... but post was firmly tongue in cheek

 

[ROE]

I thought that this is worth a new thread, as it seems to come up a lot in other topics.

With IR reaching towards lows again, after inflation and taxes, the return on a savings account is actually negative.

How are people supposed to avoid this? This isnt even debt deflation, as in my case, i have no debt. What should a young person do? Spend every cent as soon as they get it and live for payday to payday? At least then i would have a heap of nice stuff and would be able to lose value on TVs etc rather than lose value on money/nothing in a bank account.

Or is the stockmarket an option? No cause thats still falling.

It seems that there is no option, not even saving, which will make money or even break even at the moment

hmm every heard of a dollar save is a dollar earned
got 2K, save and get $2100 next year or spend on an LCD and get nothing
next year ...if some unfortunate events happen to you that $2100 may make or break you where the LCD wont, so forget about technical stuff like inflation that erose value of your money etc...

Save save save, people dont go broke saving but people who spend do

 

[lioness]

I have debt and now it is even easier to service and pay off quicker.

Many thanks Rudd, keep those rates dropping and I will be debt free much sooner. Thanks.

 

[It's Snake Pliskin]

I have debt and now it is even easier to service and pay off quicker.

Many thanks Rudd, keep those rates dropping and I will be debt free much sooner. Thanks.

Why are you thanking Rudd for something out of his control?

 

[Temjin]

It's funny how everyone in a bank's "trading room" was cheering when the RBA announced a 1% cut. Am I the only one who think it's ridiculous? What the !@#$ is there to cheer about? Does it punish people who save wisely and live within their means? Ohhhh..it's socially unacceptable and "unAustralian" because you supposed to simulate the economcy by spending more and getting into debt and buy as many properties as you can.

Enough ranting.

Now what do I do with my spare cash?

Obviously saving up to build up more capital required for more "professional" trading.

I would invest some of it in gold/silver agriculture commodites and other under-valued selective shares. The rest in cash.

Nothing we can do to stop interest rate from falling to 0% as Steve Keen is predicting. So I guess it's up to us to hoard everything and hope for the best.

 

[Julia]

Well (as I know you are aware) in the stockmarket at the moment there are opportunities to buy a $1 for 90c or much less in some circumstances.

Some of the stocks that are trading below cash backing and well below NTA, while producing good incomes must be worth a look in.

All very well, Cuttlefish, but as we see almost every day these "great buys" can still fall further. Also as company profits fall there is an increased risk of dividends being cut (this has happened in several companies already), so if someone is buying a so called good company for its better than bank rate yield, they could well be disappointed on the basis of lower or no yield in addition to loss of capital. Just not worth the risk imo at this stage.

Seriously your crackin me up prawn !


Soooooo hard done by, is it a Gen-Y thing ?

No, NC, it is most definitely not a Gen-Y thing. It is the 'thing' of anyone in any generation who has elected not to run their lives on credit and instead has savings which will soon be generating a negative return. Get that??
Negative return, i.e. we will be paying the banks to look after our money.
And you think there isn't an issue, fergawdsake???

While I agree there is currently no reward for saving money from our government and tax system, to me worrying about inflationary effects on your savings is a bit silly imo, it is something most of us have no control over.

IMO the only people that should be looking to do something about it is people with large amounts of money saved up that don't need it in the short term and really want to make the money work for them.
For people with little to no savings, the first goal should be to get a decent amount saved so they can look at ways of investing that money to try and beat inflation.

Spending your savings because it is going "backwards" sitting in a bank account is just plain silly imo, you may end up with nice clothes, cars and big TVs etc but in 20 years the peolpe who have saved hard and then invested that money wisely to create passive income streams or wealth of some sort will be the ones who are really laughing.

While most investments are copping a hiding now in 12,18,24 months there are going to be plenty of very good investment opportunities around and the people with cash on hand, while currently "losing" money to inflation will be the ones to benefit if they invest that money wisely and make the most of those opportunities.

I'm currently setting myself up to try and take advantage of the current situation once things settle down a bit and that means saving hard and leaving my cash in a bank account with the highest interest rate I can get, and until I find a better investment with a risk profile that suits me that is where my money will stay. I personally am not going to waste time worrying about the effect inflation is having on my savings in the current climate because frankly I don't see any better options around atm without taking some huge risks that I'm not comfortable with atm.

Great post Nomore4s. Improved my own sense of perspective.

Spend it all on stereos and home theatre. Too cheap not to.

Oh, right. Great advice. Buy all sorts of stuff that you neither need nor want.

Spending all my cash doesnt help me get ahead, hence why i havnt and am still saving, despite in being a negative return.

I dont need an incentive to save, but our country, and the whole western economy does, and that incentive is not being provided.

This is really the whole point, and supersedes all our individual perspectives.
We are in this utter mess because of excessive use of credit (plus of course some shonky practices), and what are we being encouraged to do? Well, just go out and get into more big spending because credit is so cheap.

It seems to be all about the quick fix, the ultra short term view. Make the figures for the next quarter look OK by encouraging people to buy lots of stuff they don't need, so that the politicians can say "Hey folks, we're not in recession here - it takes two quarters of negative growth and we haven't even had one quarter yet".

And the government has now acknowledged it will almost certainly go into deficit with all this flinging about of much money. And will that deficit be deemed acceptable when we are facing up to the next election? Of course not! It will have to be paid for somehow. Can't all the people who are celebrating these rate cuts see there must be more taxes and charges in the future to save the political skin of the Labor Party whose history of running deficits will very quickly be jumped on by the Opposition.

So, despite all the G20 meetings, summits, serious vows by politicians to "make real changes", nothing has changed, nor can we expect that it will.
Just so depressing to have such short sighted leadership.

 

[prawn_86]

Just so depressing to have such short sighted leadership.

And even more depressing that there is nothing that can be done about it as all politicians are essentially the same

 

[Happy]

So, despite all the G20 meetings, summits, serious vows by politicians to "make real changes", nothing has changed, nor can we expect that it will.
Just so depressing to have such short sighted leadership.

Many voices mentioned that the whole world economy is locked into growth model, which eventually will create so called hockey stick growth, exponential = not sustainable.

Current stimulus packages don’t address the underlining problem, they just try to keep the model alive pushing accelerator to the floor on a journey toward concrete wall.

When all future money are spent, with interest rates at or below zero, second shock will happen where the only solution will be:

reduced production
reduced consumption
reduced population.

 

[noirua]

Before you buy check if it is Australian. If it's foreign try to do without it. Buying foreign wine is sacrilege.

Time to vote for Australia. Or you could vote for ASF at the following link: http://www.thebull.com.au/the_stockies/forums.html
Only 3 days left

 

[numbercruncher]

Many voices mentioned that the whole world economy is locked into growth model, which eventually will create so called hockey stick growth, exponential = not sustainable.

Current stimulus packages don’t address the underlining problem, they just try to keep the model alive pushing accelerator to the floor on a journey toward concrete wall.

When all future money are spent, with interest rates at or below zero, second shock will happen where the only solution will be:

reduced production
reduced consumption
reduced population.

Exactly !

 

[gfresh]

It's funny how everyone in a bank's "trading room" was cheering when the RBA announced a 1% cut. Am I the only one who think it's ridiculous? What the !@#$ is there to cheer about? Does it punish people who save wisely and live within their means? Ohhhh..it's socially unacceptable and "unAustralian" because you supposed to simulate the economcy by spending more and getting into debt and buy as many properties as you can.

I agree, it's disgusting in fact.. That the only way an economy such as ours can exist is that we spend the pants off and go into further and further debt. If we don't then our economy literally falls over.

Soon as there is even an inkling that the wheels for that sort of approach are falling off, the RBA goes and props it up again by slashing rates ridiculously low.. before anybody has time to be truly punished for their folly, and from that learn to live a different lifestyle. So the debtors are saved, the greedy are practically rewarded for their actions in taking out as much debt as possible to build wealth, and it builds into an even bigger crisis later on. The attitude will be who cares about going into debt in future? the RBA will bail us out as they did last time in the financial crisis of 08/09, and things were supposedly dire then.. let's take on more next time.

While this approach may work this time around, to save us by the skin of our teeth, we're leading to the sort of society where everything is throw away, buy something better later, who gives a damn, you can always buy it again on credit, possibly cheaper later.

Yet at the same time we're using more and more water, more and more energy to produce these items (maybe not us here in Australia, but in China, etc where these cheap goods are produced), more energy to dispose of the waste afterwards, and the world is slowly tipping into an environmental pit that (eventually) will be very hard to dig our way out of.

It's just doesn't seem sustainable long-term this sort of consumer existence. I'm only in my 30's, but even I can remember parents/grandparents bought a dining table, furniture, practically to last decades. Now it's pretty much "don't like the colour of this any more, time to throw it out and buy a new one" every few years. Nothing necessarily wrong with that on the surface, but when you think of all the timber, metalwork, cotton, fertiliser, fuel, etc to produce each of these items, and consumers are burning through it like never before, there is a problem.

 

[Ashsaege]

Great news about the interest rate cut today.

I WAS going to use the money to buy a new plasma - but Harvey Norman are giving me 48 months interest free!!

Think I might GET the plasma over 48 months - and book a holiday with the extra money!

Awesome!!!! Oh, and I might take a kick back to interest only on my mortgage after the scare of the past two years....

Brad

Be careful about the free interest deals... it's just a honey moon period, and when that's over you will pay through your knee caps with high interest rates. Make sure you pay it off before 48 months.... though i thought they brought it back down to like 15months now?

Make sure you pay off the plasma within 48months.

 

[trinity]

And the government has now acknowledged it will almost certainly go into deficit with all this flinging about of much money. And will that deficit be deemed acceptable when we are facing up to the next election? Of course not! It will have to be paid for somehow. Can't all the people who are celebrating these rate cuts see there must be more taxes and charges in the future to save the political skin of the Labor Party whose history of running deficits will very quickly be jumped on by the Opposition.

So, despite all the G20 meetings, summits, serious vows by politicians to "make real changes", nothing has changed, nor can we expect that it will.
Just so depressing to have such short sighted leadership.

So, where did all the gov't surpluses go? In less than a year Rudd gov't it is all gone? Where is the infrastructure? Where are the better schools? Better health-care? Was the money spent bailing out the greedy CEOs and financing their Christmas parties?

 

[white_crane]

What Julia said. Great post

 

[Julia]

So, where did all the gov't surpluses go? In less than a year Rudd gov't it is all gone? Where is the infrastructure? Where are the better schools? Better health-care? Was the money spent bailing out the greedy CEOs and financing their Christmas parties?

Gee whiz trinity, don't you listen to, read, watch the news? Aren't you feeling hugely grateful that your government wants you to understand the value of huge credit and continued spending?

Yep some bailing out has certainly happened. God forbid that failed business should see the consequences of their incompetence.


Then about half the surplus will be landing in the bank accounts of the poorest Australians next week, i.e. welfare recipients and families in receipt of Tax Benefit something or other, with the government's best wishes and hopes for a big pre-Christmas spend up on anything, just anything at all. They don't want these people to do anything constructive with this largesse, just as they have declined to channel this money into useful infrastructure where we'd see some lasting benefit and more durable jobs.

And why not? Because, dear Trinity and all other faithful taxpayers, the government is desperate for a quick spurt in the economy, so that the next quarter's figures look a bit less ghastly and they can say "Hey people, we're still not actually in recession, aren't we just the best?"

And presumably they also want you to completely ignore that it has been the irresponsible overuse of credit that - along with some very dubious practices on Wall Street, plus of course let's not forget the role of the ratings agencies - has brought the world to this current debacle. Heaven forbid that any lessons might be learned from all this. No, just go forth and rack up more credit, dear people, spend, spend, spend, and those figures just might look good enough to let the government claim they have even a faint idea what they are doing.

 

[Temjin]

Gee whiz trinity, don't you listen to, read, watch the news? Aren't you feeling hugely grateful that your government wants you to understand the value of huge credit and continued spending?

Yep some bailing out has certainly happened. God forbid that failed business should see the consequences of their incompetence.


Then about half the surplus will be landing in the bank accounts of the poorest Australians next week, i.e. welfare recipients and families in receipt of Tax Benefit something or other, with the government's best wishes and hopes for a big pre-Christmas spend up on anything, just anything at all. They don't want these people to do anything constructive with this largesse, just as they have declined to channel this money into useful infrastructure where we'd see some lasting benefit and more durable jobs.

And why not? Because, dear Trinity and all other faithful taxpayers, the government is desperate for a quick spurt in the economy, so that the next quarter's figures look a bit less ghastly and they can say "Hey people, we're still not actually in recession, aren't we just the best?"

And presumably they also want you to completely ignore that it has been the irresponsible overuse of credit that - along with some very dubious practices on Wall Street, plus of course let's not forget the role of the ratings agencies - has brought the world to this current debacle. Heaven forbid that any lessons might be learned from all this. No, just go forth and rack up more credit, dear people, spend, spend, spend, and those figures just might look good enough to let the government claim they have even a faint idea what they are doing.

Nice post there Julie. I concur.

Our country is hopeless and I doubt anything would be done about it until something drastic happens. Great depression MKII of some kind.

And then in 50 years, I'm sure we will all back to square one again as humans never really learn their lessons between generations.

Now our economists are praising how our country is the only one to be in the black for this quarter GDP report. 0.1% growth compared to negative for most other countries. Now should we be celebrating and spend even more of our future wealth?

 

[Glen48]

Cash is King..how much would Bill Gates pay for a glass of water if he was stuck in the Sahara?
Some one needs money and you have the cash here today whats your price you have the whip hand.
Buy a bit of Gold...wait until you are sure the market has bottomed next yr and be ready trying to worry about 3-5 10% here and there is pointless.
There is a car auction some where in Vic. new cars no reserve think what you could do there with cash no trade.
A lumpy bed is the only worry.

 

[Calliope]

Now that those with mortgages have received their xmas presents, Mr Swan is concerned that the banks should be reducing interest on credit card loans. The credit card debt is of huge proportions and the lenders have no intention of reducing rates. The reason is of course is that people who spend money they don't have on things they don't need are very bad risks. The higher the risk, the higher the interest.

The solution is obvious. Throw away the credit card and get a debit card. That way you will live within your means. Of course this means keeping some money in the bank account, and that is anti-stimulus.