Earning interest in the bank during high inflation scenario?

[TheEnd]

O.k as far as I can tell at the moment anyway is we may not see hyperinflation for a few years yet especially while QE3 seems to actually be working.... but IF we do see increases in inflation it maybe a good time to have some cash in a term deposit and earn some interest on it....IF we see say 20% inflation that would pay some good money at the end of the term.... Anyone agree?

 

[Agnostic]

The interest earned will only keep pace with inflation...BUT...you will lose a third or more of the interest through income tax. Any interest earned will be taxed at your marginal tax rate.

Remember that any money people place on deposit will actually be lend out to other people who can make better use of it than the depositors.

Those borrowers of the money will be investing it in income-earning assets, particularly those whose sales are rapidly adjustable, like selected retail products and services.

 

[TheEnd]

O.k great thanks for that reply.....My strategy changes everyday!

 

[petey]

TheEnd I highly suggest you read the Alpha Strategy. It will help explain a lot to you. Although with that said, Agnostic hit the nail on it's head.

 

[Argentum]

even without a tax the interest earned is less than real inflation; in those situations paper money becomes worthless so even if they gave you 10 % daily(not yearly) you end up being a zimbabwean trilionaire pretty quickly

Edit: Btw they are all at least trilionaires there

 

[Pirocco]

You produce 50 ounces silver and sells them for $1000.
You save the $1000 on a bank account.
Price inflation 10%
Intrest 6%
Next year you have $1060 on your bank account
The 50 ounces silver cost now $1100.
Despite the $60 'earnings', you can't buy them back anymore.
Of course, you can always try to work harder so that at the same cost you produce 52 instead of 50 ounces, and compensated for this loss.

 

[TheEnd]

You produce 50 ounces silver and sells them for $1000.
You save the $1000 on a bank account.
Price inflation 10%
Intrest 6%
Next year you have $1060 on your bank account
The 50 ounces silver cost now $1100.
Despite the $60 'earnings', you can't buy them back anymore.
Of course, you can always try to work harder so that at the same cost you produce 52 instead of 50 ounces, and compensated for this loss.

I see what you mean Pirocco..... Gees its getting harder and harder to 'preserve' your wealth isn't it?

 

[Midnight Man]

...maybe a good time to have some cash in a term deposit and earn some interest on it....IF we see say 20% inflation that would pay some good money at the end of the term.... Anyone agree?

I agree only if the entire fiat system remains undamaged (and incorporating the comments of others with regard to taxation on those earnings).

If, on the other hand, the system becomes unstable and a Cyprus style "bail in" takes place, then your holdings in the bank partly, largely or fully become someone else's property, and this idea suddenly doesn't look so hot.

I don't hold a great deal of trust in the banking system any more, and am actively monitoring the amount I leave in there, making alternative arrangements for any excess.

 

[TheEnd]

Ye you are very right about a possible bail in...... Managing your money is just as important as working for it these days it seems....

 

[TheEnd]

the big boys will be all over it, Paulsen et al, you don't even stand a chance

they play with money with less compunction than you would play with mud, they build and short currencies just like the housing market.

stack the phys and hope yu live long enough to hear the bang.

I hear you man...... A couple of months to go and I will be STACKED quite well!

 

[Court Jester]

You produce 50 ounces silver and sells them for $1000.
You save the $1000 on a bank account.
Price inflation 10%
Intrest 6%
Next year you have $1060 on your bank account
The 50 ounces silver cost now $1100.
Despite the $60 'earnings', you can't buy them back anymore.
Of course, you can always try to work harder so that at the same cost you produce 52 instead of 50 ounces, and compensated for this loss.

If I had of sold in December last year and rebought Now I could buy a lot more ounces than I had

your Theory is flawed

Sares is where you should be investing while QE is in place the dividends on many shares is higher than most term deposits now.

 

[TheEnd]

You produce 50 ounces silver and sells them for $1000.
You save the $1000 on a bank account.
Price inflation 10%
Intrest 6%
Next year you have $1060 on your bank account
The 50 ounces silver cost now $1100.
Despite the $60 'earnings', you can't buy them back anymore.
Of course, you can always try to work harder so that at the same cost you produce 52 instead of 50 ounces, and compensated for this loss.

If I had of sold in December last year and rebought Now I could buy a lot more ounces than I had

your Theory is flawed

Sares is where you should be investing while QE is in place the dividends on many shares is higher than most term deposits now.

The bloody stock market is rigged and manipulated man....You cannot win!

 

[Court Jester]

You produce 50 ounces silver and sells them for $1000.
You save the $1000 on a bank account.
Price inflation 10%
Intrest 6%
Next year you have $1060 on your bank account
The 50 ounces silver cost now $1100.
Despite the $60 'earnings', you can't buy them back anymore.
Of course, you can always try to work harder so that at the same cost you produce 52 instead of 50 ounces, and compensated for this loss.

If I had of sold in December last year and rebought Now I could buy a lot more ounces than I had

your Theory is flawed

Sares is where you should be investing while QE is in place the dividends on many shares is higher than most term deposits now.

The bloody stock market is rigged and manipulated man....You cannot win!

some would say the same thing about the silver market

or gold market

or just about any market on the planet

 

[Earthjade]

You produce 50 ounces silver and sells them for $1000.
You save the $1000 on a bank account.
Price inflation 10%
Intrest 6%
Next year you have $1060 on your bank account
The 50 ounces silver cost now $1100.
Despite the $60 'earnings', you can't buy them back anymore.
Of course, you can always try to work harder so that at the same cost you produce 52 instead of 50 ounces, and compensated for this loss.

I see what you mean Pirocco..... Gees its getting harder and harder to 'preserve' your wealth isn't it?

Yes, that's why I'm lucky to have invested in gold and silver in 2011, dodging that measly 4% return from a term deposit.

 

[Pirocco]

You produce 50 ounces silver and sells them for $1000.
You save the $1000 on a bank account.
Price inflation 10%
Intrest 6%
Next year you have $1060 on your bank account
The 50 ounces silver cost now $1100.
Despite the $60 'earnings', you can't buy them back anymore.
Of course, you can always try to work harder so that at the same cost you produce 52 instead of 50 ounces, and compensated for this loss.

If I had of sold in December last year and rebought Now I could buy a lot more ounces than I had

your Theory is flawed

Sares is where you should be investing while QE is in place the dividends on many shares is higher than most term deposits now.

My post isn't about what parasites do, it's about what producers have to do in order to avoid general price increasings, seen from a macro economical perspective.
Those that produce the things that your 'If' tries to shift to some1 else.
A shift changes nothing from the macro economical perspective.
you Failed to place the post in the context of the topic.

 

[Pirocco]

I know some won't like to read this:
http://mises.org/daily/6488/The-Libertarian-Paradox

But what if they can? What if there really is another way to live? What if the sphere of freedom need not be so confined after all, but may expand without limit? What if the general presumption against monopoly applies to government just as much as it does to anything else? What if the free market, the most extraordinary creator of wealth and innovation ever known, and the most reliable and efficient allocation mechanism of scarce resources, is also better at producing the goods for which we have been told we must rely on government? And what if the state, the greatest mass-murderer in history, the great drag on economic progress, and the institution that pits us against each other in a zero-sum game of mutual plunder, is retarding rather than advancing human welfare?

That is what that 'shift' in my previous post refers to.