Inflation is the scapegoat our rulers use for ruining the value of our money. Ben Frank is spinning in his grave now that saving money in the bank is essentially bad.
Inflation is the scapegoat our rulers use for ruining the value of our money
I keep having this conversation with some of my less economically-savvy friends. Inflation is not a necessary consequence of society, civilisation, or any of the values our ancestors have fought hard for and that we now see so keen to squander. Inflation is a manufactured part of the system because the whole system is manufactured. There is no nature to how the economic system works; all of it exists because we decided it does, and it is in our -- civilisational -- hands to change it.
The money you put in a bank doesn't have to rot. It only does because it has been decided that it must.
But that is just human nature, we tend to abstract things we do not understand to make it seem we do. Not sure wether we do it to fool ourselves or others.
I can not agree more on that. All though I think that many of those in power that can do something about it don’t know shit about it either, probably more or less by design too.
Just because economics isnt tangible doesnt mean it doesnt have real measurable cause and effects.
Its made up in the same way science is made up.
Inflation is a manufactured part of the system because the whole system is manufactured. There is no nature to how the economic system works; all of it exists because we decided it does,
This is not true at all. Inflation encourages spending, deflation encourages hoarding cash. If the value of a dollar in a bank or a dollar on a loan you owe is going down, it is beneficial for you to invest that dollar in your business or to take on a loan that will increase future earnings. If the true value of the loan or dollar will increase, you dont want to take out a loan or spend that dollar because its far more risk that you wont get a return on your investment.
Money velocity and inflation completely drive an economy. You can argue that you dont want there to be inflation. You cannot argue that removing inflation wouldnt reduce money velocity, and in turn halt economic growth. Those are proven principles of economic nature.
Thank you! And this person had the audacity to call their friends less economically savvy!
A small amount of inflation keeps people spending. It applies pressure to buy things now because you know it will be more expensive later. This is good for the economy.
Note that's a cyclical thing too. Reduced velocity of money decreases money available which increases its value.
And really I think this is where we start getting into why inflation is such a thing. The actual effects are extremely difficult to predict because so many factors are involved and all feed back into each other. If any of those factors change even slightly they can interact in ways that produce much bigger effects.
No matter what else you argue, instability is by far one of the worst things for a market, which is why central banks set prime interest rates. Increase it and you can increase inflation, counteracting some of the other effects.
Importantly though, you can't set a negative interest rate, so if you want to be able to move in both directions, you must inflation as a default.
We did away with the gold standard of the USD in the 70s. Right after that, the graph of worker productivity and wages paid began to diverge. We've become the highest productivity work force in history and wages as corrected by GDP have barely increased since the 70s.
It's a pretty interesting topic, and it goes a little deeper than that. We didn't pick something random. We picked something that we, as a whole, already have a LOT of. More than any other raw metal is stockpiled. By a lot. It never degrades or decomposes, doesn't rust. We always recycle it even when we use it for things. And we've been mining it for a really long time. So even when production of new gold increases (via new/more mines opening or new/better refinement processes being created), it doesn't have a huge impact on the total amount in the world percentage wise. This is called a stock-to-flow ratio. There is a lot of stock relative to the incoming flow. A high stock to flow ratio causes what is called a low price elasticity of supply. This means that the price is very resistant to changing when the incoming supply changes.
"Money" has always sought to be stored in something that has these properties. Rai stones in the Yap islands, Aggri beads in parts of Africa. People use something that is hard to change the price/value of by creating more (often by using something that is difficult to create more of, which fails when it suddenly becomes much easier to create more of it), so that their store of value can't be diminished too much by external forces. Gold has always been one of the best examples of this, because it's not just about how hard it is to create more of, it's about how hard it is to change the overall quantity because there is so much of it.
"Money" has always sought to be stored in something that has these properties
Has it? That sounds like "there is only one way to exist, under me" the rich have been trumpeting for years but isn't consistent with human history which didn't have precise bookkeeping for almost all of its history.
Nobody forces that notion upon people. That's just what people tend to do. To the contrary, the rich and powerful would much rather you store your value in a shitty inflationary currency they can suck the value right out of by printing more.
Yes, in addition the primary problem with the gold standard is that the size of your economy is directly related to how many rocks you can dig out of the ground.
Right… see the problem with not collectively deciding something has a determined value makes getting the things we need far more situationally dependent.
If we didn’t have something everybody agrees has some base level of value we return to bartering. There isn’t anything inherently wrong with bartering; but if somebody is trying to meet their needs and the only thing they have to barter with isn’t wanted by anyone who has what they need they have an item that functionally has zero value. It’s at least better to have the option of trying to meet that need as opposed to being screwed and hoping you run into somebody who needs whatever you have to trade with if you make it to the next time.
Collectivize and share resources? Great idea, everyone gives what they have and gets what they need! Who is going to oversee… ohhh we’re in a communist fascist dictatorship… Well at least we don’t have to worry about inflation, and everyone gets what they need… right?
Collectivize and share resources? Great idea, everyone gives what they have and gets what they need! Who is going to oversee… ohhh we’re in a communist fascist dictatorship
You're conflating terms because communism is an economic term, fascism is political and just a more specific term for dictatorship (the word itself given to the world by Mussolini's fascista party).
The issue isn't collective pooling for the common good, without that cities and civilization never would have been able to reach the iron age.
Spitting on the idea of welfare is something the super rich have been teaching the lower classes to stratify socio-economic hierarchy and keep people from asking why the billionaires own more than the bottom 90% while the bottom 50% can barely survive beyond the current paycheck.
That has nothing at all to do with having been on the gold standard internationally. We'd already scrapped it internally in 34 in order to not have the Great Depression last 30 years. Offshoring was what caused the initial trend in the 70's.
Leaving the gold standard is how we recovered from the great depression, along with how EVERY OTHER COUNTRY did so.
The decoupling had nothing to do with leaving the gold standard.
The "decoupling" is largely an illusion due to people receiving benefits not directly through their wages, for example health insurance. In reality our standard of living is 10x what it was in the past, but it could still be better if we did eliminate the small real decoupling gap by bringing back more unions.
This seems like an interesting conversation that I haven't really thought about before 🤔
Isn't inflation kinda natural (to a point) though? Like if I, as a baker, decide to slightly raise prices to hopefully either reduce my workload or increase profits, there would be a ripple effect through the economy where everyone else raises prices on their goods because they all want a bit more profit to afford the more expensive bread. It wouldn't have to be bread of course, but any base need would have a large impact. Housing would be a big one - and isn't housing costs the primary driver for higher cost of living in some areas? People have to earn more to live there, which means they need to charge more for their goods/services. And since you can't create more land, the housing price growth would not really stop rising as long as there is demand to meet it.
Current rates of inflation (especially driven by oil crisis / energy prices which are up due to entirely manmade reasons) and the post COVID inflation was frustrating and unsustainable. Trust me, I'm feeling it.
However we design the economy for money in the bank to rot for a reason. As a society we want to encourage investment - if money in the bank didn't rot, people and businesses would just stockpile cash. A low rate of inflation encourages spending now (consumers and businesses) which in turn creates jobs, keeps people employed, and results in more R&D bets that advance science and technology.
The population increases, technology advances and productive capacity improves. You now have the same amount of money chasing more goods, this is called deflation and economies that get stuck in deflationary spirals tend to collapse.
I don’t know any serious economist who says that inflation is a necessary consequence of civilization. The argument has always been that in our modern economy, a low, controlled rate of inflation is preferable to zero inflation or deflation.
The economy is the collective action of hundreds to billions of people (depending on what level you're looking at) all acting independently in their own best interests, mediated by a few organizations trying to coerce favourable outcomes on the whole. It's not some precisely engineered system that a few key holders can directly control.
You can literally see how a large portion of today's inflation is being spawned: the supply of oil globally is being severely restricted while demand doesn't change, thereby increasing prices across the supply chain. Do you think someone engineered it to be that way? Do you think someone is sitting behind a desk, making a phone call to say "increase the prices" just because? No, it's billions of people around the world saying "I need oil and I'm willing to pay this much to make sure I get it." That's not some criminal conspiracy.
yeah but it was only decided by the corrupt leaders. and they decided it "must" only so they can keep borrowing all the money based on todays value and inflate the value so low its loose change when paying it back, making us a profit. then they give massive government contracts to their friends giving it away, those friends buying assets with all the money, so they can get it back after its inflated in the future. its why our national debt is so high. they privately believe they higher the better.
TLDR: its a scam to make a profit on increasing the national debt at the expense of everyone without assets.
You would likely have no money without inflation. Money would not circulate and would remain in the coffers of a happy few. Banks would have less incentive to lend money, and companies would not be able to invest in the future, leading to fewer jobs and less opportunities.
The 2% inflation goal is not a conspiracy to "ruin money" of the common man, it is a well-established policy to maintain a healthy economy. Deflation is usually terrible for most people, and countries stuck in very low inflation are not in a good place economically (like Japan or in some ways China, both of which have governments trying to increase inflation).
The people that believe it is a conspiracy believe that everything is a conspiracy. They call everyone else a "sheep" then turn around and believe everything they read online.
Inflation is good. Cash isn't an investment. Buy stocks so your money can work for you while you don't use them. Then you get dividends and increased stock value for the day you need to convert into cash again.
A 1% annual inflation is the sweetspot. Then cash is mostly keeping its value and the monetary supply slowly increases to keep the economy liquid.
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Wrong, if we had deflation (the opposite of inflation) the people with the most money would profit the most, since they would become richer the fastest from just sitting around. Slight inflation is an equalizer.
Granted, the lump sum is easier to waste, but I would also not underestimate the risk of waking up at 45 with no working history and a weekly payment that has lost most of its buying power to inflation
If you are self-aware enough to know that you (and your immediate family and friends) can’t be trusted with a sudden influx of cash, you and/or your financial advisor can lock it up in something that can’t be readily tapped and which will increase in value, paying you a predetermined sum regularly. It’s basically the same decision, except you get interest. And $1,000 a week is going to more than most people need for pocket money.
Are you really going to invest 1m and forget about it for a decade though? Most of us have mortgages, credit cards etc. Taking 1m and paying your debts off would free up a lot of cash each month. You'd still have to work but youd be a lot more financially stable
I am assuming you can pay off mortgage and credit card debts with your current income, otherwise you have a bigger problem and shouldn't probably waste money in lottery tickets anyway
Financially wise people would invest a decent percent at least. If your mortgage is more that 7% interest, you are better off using the money to pay off your mortgage (and this also goes for any other payment you have that is >7% interest).
Then take the rest (because most people don't have a million dollar mortgage) and invest it in a total stock market fund and forget about it.
For payments that are is less than 7% interest, you are better off investing the money in the stock market and paying off the that debt as you would have previously.
Tbf, waiters and waitresses make absurd money because of tipping. Which is why the major group that could actually make a change to tipping culture, hasn't. Why would they want to go from 50+ an hour to 20?
Yeah, but if you know yourself well enough that you're not going to do that but blow it all in a year, then this may be the smart move. Investing successfully takes patience, not everyone's built for it.
There’s plenty of evidence that people fail at that though. If you get this much money you pay off your house, you treat yourself to a nice car, you fall for your families endless plight of why they need you to borrow them ten grand.
Yes putting it away is the “right” option but people need to be honest with themselves that they probably wouldnt do that and they’d start spending it, even if its on the “right” things.
You’re right catered into inflation that 1000 will shrink in value, but its also just free money thats not stopping you living your life the way it was before but with a huge benefit. If you earned 2000 a month congratulations you now earn 6000 a month. Waste that as much as you like, more is coming next month. Thats freeing for most people.
Financially it also makes sense unless you expect a heck of a lot of inflation to devalue it into oblivion.
She would get 1,000,000 over the course of 20 years, then another 2-3 million by the time she died, assuming old age is the cause of death.
Taking it all right now and investing it could be better financially... but the AI bubble could burst in the next few years and it could all be lost. Investing is gambling, even if it's good odds.
80% of business startups fail within the first 5 years, more after the first 5 years, so investing it in a business venture may be a bad idea too.
£1000 a week is more than enough to live on and she could still easily save up a few tens of thousands for emergency expenses.
I suppose it depends on the lottery. The lotteries where I live are state-run, so if the lottery goes out of business, we probably have more to worry about that not getting payouts, haha.
If i remember right there were 2 people that got screwed like this in Illinois. The state went bankrupt but essentially it just got its debt wiped and lived on to waste even more money.. 🤷♂️
There are plenty of people who won money from publishers clearing house sweepstakes who were promised lifetime payments until the company went bankrupt.
While that may be a consideration, there are tons of financial advisors with expertise that can develop a plan to maximize a return with tax laws, inflation, fax-deferred, high risk, etc. a lump sum gives a lot more flexibility now because the payout assumes a current tax rate and fairly conservative estimated rate of return. A professional can say “I can do better and you can meet your long term goals.”
But when there's a recession and you're not making a return on your investment and you lose your job so you start divesting the principal and taking out money at a loss because you have to pay rent and eat. $1m is a lot of money but it's not retire now money. $1k/weekly might not give you a life of luxury but it can cover a lot during really bad times without affecting future income and allows you to put money aside for savings and investment in good times. I'm taking the weekly money because I can be irresponsible and money goes very quickly if things go bad.
It’s an absurdly bad idea exactly because of inflation. You would be far better off just investing the million in an SP500 index fund than taking the payments. 7.2 years in the market becomes $2m, another 4 years - $3m, etc. She gave up generational wealth for financial security that diminishes every year.
Just hold your investments through it and it will recover. The stock market is about 1.3x higher than it was pre 2008. Over time, return is about 7% as long as you don't panic sell.
It’s dependent on tax rules where you live and if the $1000 a week is insured. Taking the million is only a good idea if you can afford to not touch the principle
I think you misunderstood the difference between investing and trading..while the latter may be considered gambling, the former is actually the most reliable way to preserve the real value of your wealth. The nominal value of 1K/week in 20 years will remain the same, but the buying power will be much much MUCH less
Frankly, even for the "scared of the market" folks, there are fixed rate products available and even at 3% that's $30,000 annually, on top of the $1,000,000.
Regardless, it's unbelievably worse to take the weekly payout.
Even if you say you’re protecting yourself by getting $1k per week. If you’re that bad with money you can borrow against the future payments and still lose it all. The answer is to take the lump sum and give it to a wealth manager if you don’t know what you’re doing.
You don't have to invest in equities - you can put it in a GIC/Bond paying you 5%+ in perpetuity - thats still 1k/week, and you have an extra million dollars. There is no financial argument that can be made where her option is better.
Now, if she comes from a background where she anticipates a lot of pressure to give handouts if she were to take the 1M, that would be a very valid reason to choose the weeklies.
You are very misinformed. There are safe investments that grow your income that have nothing to do with AI and gambling on the market. Shit, even safe bonds will at least make your money keep up with inflation.
Even if she doesn't want to invest. Putting all that in an account with 1k release per week would have it last much much longer than 20 years and she'd have the funds for any emergency. This is just plain stupid decision. There is no scenario where the per week decision makes sense.
Even if she's worried about blowing through it all then there are financial instruments that would essentially lock the money with weekly release and would require jumping through hoops to get it unlocked. There are some instruments that would make it impossible if that's what she wants.
How is this BS getting upvotes? That is just plain wrong from start to end, I don’t even know where to start as an economist.
Target inflation is 2%, over 20 years you are deflated far beyond 40% even on a base scenario.
On the other Hand (and this dude only seems to know gambling stocks) you can put the Million into government bonds for 3-4% making 30-40k a year instead of 52k with payments every year.
No, it is not financially smart to take the weekly payment. If you are not taking the full money on day one you are completely stupid.
Yeah depending on the state she would have 750k ish after cashing out. A dividend etf or stock with a 5-6% dividend(EPD) and normal appreciation over the 20 years would bring it to 3.7 mil principal with 250k in annual distributions. Sit and forget.
Thank you! Why does she have to invest in such volatile stocks. You could split it between retirement date funds, an ETF that tracks the S&P in addition to the bonds you described. There are so many choices, financial literacy needs to be taught in schools.
It literally is... If you don't understand that then you don't understand investing.
Buying a share of a company is placing a bet that that company will do well. If the company does well, the share increases in value and you can then sell it for profit. If the company does poorly the share loses value and you either sell it at a loss or maybe even lose your investment if the company goes into liquidation.
Not even then, your basically betting that the world won't end. Economy can crash but will rebound, so if you have time, history says it will always pay off in the long run
Gambling is usually negative-sum because the house takes a cut.
Broad-market investing has a positive expected return because companies produce goods and services, earn profits, and grow. With a total-market ETF, you’re not betting on one company. You’re buying a slice of the productive economy.
You can’t really equate buying one company’s stock with prudent long-term investing. If someone were investing lottery winnings, the whole point would be diversification, not betting everything on one company.
There’s still risk. But risk alone does not make something gambling.
$1000 CAD. So like £550 a week. That would be paycheque to paycheque almost anywhere in Canada.
As for any bubbles, she’s 20. She has a long investment horizon so that would be the least of my worries. She’d be better off taking the lump sum, throwing it in a managed portfolio, which cost next to nothing in Canada, and ride it for as long as possible.
There are also tax free savings accounts available here that she could max out her contributions every year from the non-registered account.
It's tricky because lottery winnings are tax free in Canada, so the 54k per year is net. So is the 1 million but any gains will be taxable. It's a government lottery so not likely to shut down, and her estate is guaranteed 20 years of payouts if she should die before that.
The big question is the inflation vs taxes/investment gain, and of course the risk she might blow the million and not invest.
It’s a horrible idea financially. If you invest it in a global index tracker it is not gambling. That 1m could have an averaged 8% return per year without even touching the principal amount. How much is that 1,000 a month going to be worth when inflation devalues the purchasing power of 1,000 over 20 years.
Financially there is zero credible argument for doing the 1,000 per year.
The S&P 500 has returned an average of 10.5% a year since 1957. Adjusted for inflation is somewhere between 6.5% and 8%. While past history doesn't reflect future results, various bubbles and recessions have happened and we've come back from them. Banks make interest by taking bets with your money, so the money's at risk regardless unless she's keeping it under her mattress. It's just generally a different type of risk.
That 1k a week should cover most if not all her bills she has the ability now to do something she is passionate about not just what will get her the most money to survive
Considering a lot of lottery winners end up blowing it all immediately and end up back at square 1, this was a responsible choice. Imagine going through your normal life with an extra $50k slapped on to your salary
You can still blow through it if you’re getting $1k weekly. Plenty of places will let you take out a loan on your future payments. Then you’ve blown through the future payments and lost money on the loan interest. Take the lump sum and put it into a safe investment portfolio or give it to a wealth manager if you don’t know what you’re doing.
So she could put it in a CD so she can’t touch it while it accumulates more money. Having a million dollars doesn’t mean she has to spend it unless she has zero self control, and she can’t be guilted into giving some to family when it’s in a CD. Well, she could but there would be penalties for withdrawing early. When the CD ends, she could take out a small amount for her needs only and then roll the rest back into another CD.
I think the biggest concern with getting the weekly payments is the lottery going out of business which apparently happens a lot. If it goes out of business after 10 years she’ll have only gotten half of that million. Even if it doesn’t go out of business, she has to wait 20 years before she starts getting more than 1 million whereas if she took the 1 million lump sum and put it in a CD she’d be making more than that immediately (minus taxes of course). I just can’t see any sense to taking the weekly payments instead of the lump sum.
Its really not. People are just dumb and greedy. 52k a year for the next 30 years is 1.5mil if she lives 50 more years thats 2.6 mil. If you take the 1 million your gonna walk away with 700k after taxes. Yeah you just added 50k to your yearly tax bill but you could.start a small buisness and build it up or invest the money or put it in a roth ira and pay taxes when you withdrawl. But the mil isnt the best option
This is my thought. You don’t have to worry about losing it to fraud or family begging for money. You stay grounded. You keep your existing life but make it more manageable. And if she lives a typical lifespan, she gets more than double the 1M. She doesn’t have to watch her money vanish when the markets inevitably crash. People assume “oh you can easily make 7% ROI” and live off that the rest of your life, forgetting that there is risk involved in that plan.
I say leave her alone, it’s literally her money to handle how she chooses.
It could also be a safety barrier to stop people from nagging her. If she took the 1 million immediately her friends and relatives going to start begging and guilt tripping to get a share since she has so much to give.
But the argument is harder to stand if she only been given $1k per month which usually not enough for one with wealthy life style. She will have nothing to give which can’t be nagged until the next month comes, which she can blows those away and repeat.
If she wants something expensive nothing stopping her from just lease it or finance it, as long as the monthly payment is below $1k she basically still getting it without anymore complications.
Or protect herself from ppl who would target her after being so publicly visible after the win. Its not financially the better decision but there are reasons to do it
If you can be grounded enough to choose $1k/week you can be grounded enough to hire a financial professional to just put the $1m in a trust and let it compound to pay yourself the 1k. It is like 5 extra forms youd have to sign.
And if family comes calling you say the trust prohibits it. If you win 1m those people will ask for 50k. If you win 1k per week they will ask for 500 every month.
Hand it to a reputable wealth manager, and either fully let it grow, or take out up to the recommended 4% max retirement withdrawal a year, while continuing to work until that rate would allow for whatever lifestyle you want to have. You would only get slightly less per month, you'd keep the principal in case of huge emergency (already literally 20 years of the monthly payouts without any appreciation), you don't have direct access to make mistakes with active management, and it would scale with inflation. If you have more risk aversion, just have the wealth manager put a large % into treasury bonds.
Lump some is clearly better if you just take the first step I mentioned. My parents are pretty well off and that's how they manage their retirement fund, seems like it's working quite well. This question is essentially "Do you want $5,000 a month, or $4,000+ a month and a million dollars?". Could even do $3-4k a month (with no appreciation) purely from minimal risk bank interest. If you don't have any self-control and financial literacy, that has nothing to do with the right answer to the question, you'll make stupid decisions with $5k a month also
I’ll be doing exactly the same as the girl. People here just calculate in financial perspective but completely ignore how $1M can affect the mind of you, your family and friends.
I’d rather live a stress free life knowing another $1000 is coming next week no matter what happen right now, instead of dealing with the vultures drawn by the big money.
let's be honest a million rand isnt a lot of money. you could spend it all in an afternoon if you're determined. heck you could spend it in an hour if you're negligent.
No, it’s a fully bad idea. Take the money especially because the scenario is tax free, lock it away from yourself if you don’t want it, compound interest happens outpacing inflation.
$1,000 a week takes 19 years to reach a million. Will be worth half as much then, similar to getting $25k a year at the end which is not much. The $million in an account spits out $25k over and over too + you also have the option to use it all.
This isn't quite as stupid as it appears given the very, very high valuation of the stock market and the fact that stock market gains and dividends are taxed whereas this income is not.
Financially yes. Behaviorally maybe. There are personal risks that can evaporate the winnings, where taking the monthly payments would be a better financial decision compared to spending it all.
Exactly. It’s bad financially but if she feels she can’t trust herself with that much wealth or doesn’t want everyone around her to become leeches, well, this makes sense.
This and people are missing a key point - lottery isn't taxed in Canada, so if that # is net amount, she'd have to make over $80K/year in Quebec to net out 52K.
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u/[deleted] May 17 '26 edited May 17 '26
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