The Failure of Common Knowledge (LFB) by Douglas E. French

Author:Douglas E. French [French, Douglas E.]
Language: eng
Format: epub
ISBN: 9781621290483
Publisher: Laissez Faire Books
Published: 2013-01-20T00:00:00+00:00

3.

DEPRESSION BABIES LEARNED early that “saving for a rainy day” was not something one hopes to do but a requirement. The saying originated when most people worked on the farm. And when it rained, the fields were too wet to plow, and the farmer not to mention the hired hands made no money.

Of course, my 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 piece of mind that, when the weather doesn’t cooperate, the saver has a little stash to tide him over.

Of course, the vast majority of us don’t have to worry about the weather.But an economic storm hit a couple years ago and plenty of people have not had work, rain or shine. Those who took heed of that old saw have no doubt weathered the storm better than those who didn’t. Most financial advisors recommend that a person have three months’ worth of living expenses saved and some say six months’ worth, just in case. But how many people heed that advice?

There is no caveat to the counsel that says, “Keep six months of savings around if the money is earning at least six percent.” Even if the money sits there all shiny, not earning a thing, it’s the liquidity and insurance against the unknown that’s the issue.

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.”

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.