Speculating is not Saving

Coleman: My life savings, sir. Try not to lose it.
Billy Ray Valentine: Lose it? In a couple of hours, you're gonna be the richest butler that ever lived.
Ophelia: I worked real hard for this, Louie. I hope you know what you're doing.
--Trading Places

A local investment advisor who advertises on the radio frequently states that people can't afford NOT to be in the stock market. He argues that stocks, with their combined capital gains and dividend payouts, protects savings against inflation.

What he doesn't mention is what Ron Paul and his FB link quoting Tom Woods, note here. Buying stocks involves speculation. Speculation puts economic resources at risk. Those saving for the future should not be speculating.

Most people do not belong in the stock market.

They speculate because Federal Reserve Notes are constantly losing value. Need to make up for it somehow, right?

This wasn't always the case, nor does it have to remain this way.

More here:https://t.co/SkLyjkkdLH pic.twitter.com/kSbCnrQ0RQ

— Ron Paul (@RonPaul) October 28, 2018

By definition, saving means setting aside resources for future use. As RP and TW observe, in the days of hard money, savers could merely set aside gold and silver coins. There was no need to worry about these coins losing their value in terms of how much economic resources they represented.

The age of fiat money has changes that mindset. People know that saving by setting aside Federal Reserve notes is a losing proposition. Even by the vastly understated official statistics on inflation, paper money loses purchasing power to the tune of 2-3% per year. Do the math. How long does it take your dollar-denominated saving hoard to lose 10%, 25%, 50% of its value at that rate?

Destruction of the purchasing power of paper money via inflation has forced savers into risky markets. When they do so, these people are no longer savers. They are speculators. They are putting capital at risk.

Unless they get lucky, these savers-turned-speculators are likely to lose a large portion of true savings that way.

position in gold, silver