smart people don’t like to keep their savings in a currency (even the most stable, best currency in the world, like the us dollar).
why is that?
to answer it, it helps to understand what “money” actually is at a deep level. money has two main functions:
- currency: a medium of exchange (you use it to buy a coffee).
- store of value: it preserves purchasing power for later (you use it to save the extra value you generated at work).
the dollar and the euro work well as currencies, because they’re widely accepted for everyday transactions. but smart people don’t think they’re great for long-term savings: they’re not a good store of value.
why? because even the best and luckiest currencies lose 99% of their value over a long enough period (say, a hundred years).
example: in the 1930s you could buy a mansion in miami beach for $100k. ninety-five years later, the same property costs $30m. so even the strongest, luckiest currency in the world, the us dollar (lucky because the us won all the important wars, was never invaded, and never fell into the hands of dictators), lost more than 99% of its value in less than a century.
the reason is simple. the value of anything is largely set by supply and demand: if supply grows faster than demand, the price falls.
with the dollar, the government can print more money at the push of a button, so the supply can rise at the push of a button. and it pushes that button every time it needs to fund some idea, project, or war, increasing supply without any meaningful increase in demand. it keeps pushing, because printing is an easy way to raise money with no painful consequences in the short term.
the long-term consequence? the dollar losing 99% of its value over the last century.
so we’ve established why smart people don’t like holding their savings in a currency, even the strongest one in the world.
in part 2, we’ll look at why they put their savings into stocks, real estate, or gold, and why, based on what i see coming, that isn’t the best way to invest from here.