… I do not think that trying to save-up for retirement is a viable plan since it does not address the loss of buying power of the currency that is being saved. Understanding that fiat currency is inherently unstable and does not hold any intrinsic value leads me to conclude that currency should not be used as a medium within which to store your wealth – which is definition of saving. Rather, currency should be traded for something that possesses intrinsic value which can not be eroded by inflation – which is the domain of investing. In fact, investing should be thought of as simply a trade of dollars (or another currency) for assets, with three main objectives: to generate passive income, to protect buying power of wealth from erosion due to inflation, and to grow wealth by generating investment returns outpacing the inflation.
In simple terms, in order to pay for the expense of war, the German government decoupled its’ currency from gold and began to print obscene amount of marks. According to Maloney, by 1923, a loaf of bread went from half a mark to 200 million marks. The currency had become virtually worthless due to hyper-inflation.
Now, this is an extreme example of inflation which is unlikely to happen in America in my opinion. However, I would rather err on the side of caution. As such, I do not think that trying to save-up for retirement is a viable plan since it does not address the loss of buying power of the currency that is being saved. Understanding that fiat currency is inherently unstable and does not hold any intrinsic value leads me to conclude that currency should not be used as a medium within which to store your wealth – which is definition of saving. Rather, currency should be traded for something that possesses intrinsic value which can not be eroded by inflation – which is the domain of investing. In fact, investing should be thought of as simply a trade of dollars (or another currency) for assets, with three main objectives: to generate passive income, to protect buying power of wealth from erosion due to inflation, and to grow wealth by generating investment returns outpacing the inflation.
I have barely scratched the surface of the subjects of money, currency, and inflation in this chapter. I encourage you to do further research on the subject and pay attention when you hear it being discussed. Governments are not about to stop printing fiat currency any time soon. Therefore, it pays to be educated as to the matters of inflation so that you are better equipped to formulate a strategy which will allow you to benefit from it!